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Posted at 6:00 AM ET, 02/21/2011

A guide to gimmicks in the fiscal 2012 budget

By Glenn Kessler

To quote H.L. Mencken, there are lies, damn lies and statistics. And then there are federal budgets.

When it comes to the federal budget, President Obama and congressional Republicans are miles apart. When it comes to talking about budget numbers, they are peas in a pod.

Both sides inflate numbers, exaggerate facts, and twist meanings, making the reality almost incomprehensible to ordinary Americans. They spend most of their time arguing about the minor--a relatively tiny slice of the budget known as nondefense discretionary spending--and largely leave untouched the real culprits of the budget deficit, such as Medicare.

The president's fiscal 2012 budget blueprint was released last week, so the material to draw from is richer. But Republicans play their own budget tricks, and more likely will be revealed when the House Budget Committee unveils its own budget blueprint.

Here is a Baedeker's guide to some of the most common tricks, used by Democratic and Republican administrations in the past--and sure to be used in the future.

Inflate the 'baseline'

The baseline is a budgetary term that describes what would happen to the budget over time under current policy. This way, people can reasonably compare what is expected to happen to spending, revenues, deficit and so forth--and then how the proposed policies might impact the results.

The deficit baseline--what deficits will look like in the future--is greatly affected by estimates of economic growth. Higher growth means more tax revenues, which means lower deficits and less pressure to cut spending.

Lo and behold, the president's budget has more optimistic economic assumptions than the Congressional Budget Office and the Blue Chip consensus economic forecast. For 2013, for instance, the president's budget predicts 4.4 percent real economic growth, compared to 3.1 percent by CBO and 3.0 percent by the Blue Chip consensus. The result is the deficit is lower--to the tune of $1.5 trillion over 10 years--and the road to a balanced budget is easier.

This technique is often called the "rosy scenario," a term first used in a Washington Post headline to describe assumptions in Ronald Reagan's budgets.

The magic asterisk

This was a phrase coined by Reagan budget director David Stockman, which meant that future deficit problems were to be eliminated through future policies, to be announced at a later date.

Obama's budget is replete with magic asterisks, totaling more than $600 billion. The administration proposes to permanently fix a persistent problem with doctors' payments in Medicare, but only comes up with two years to pay for it, even though it is supposed to be a 10-year budget. The budget simply assumes the money for the next eight years--some $300 billion--will be found, and thus will not add to the deficit.

Similarly, the budget assumes that plans for highway spending will be fully funded--at a cost of $328 billion over 10 years--but provides no way to pay for them. The budget simply asserts that some kind of unspecified "bipartisan" funding mechanism will be enacted. That kind of money could be raised through a 25-cent-a-gallon gas tax but such a proposal is unlikely to be embraced by Republicans in Congress. So it is unclear what kind of bipartisan deal would raise these funds.

Proposals sure to be rejected

The budget claims to fix another perennial problem--the alternative minimum tax. Decades ago, this tax--which is aimed at the very rich--was put in the tax code but never indexed to inflation. As a result, every year more of the middle class is ensnared by it and have to pay extra taxes. Every year, Congress patches the problem but never permanently fixes it.

But not only does Obama just come up with three years of money ($320 billion) to fix a problem that would cost $1.5 trillion, he proposes to do so with an idea that Congress has rejected before--cutting the value of charitable deductions for wealthy Americans. So, he takes credit for proposing a way to resolve a serious budget issue, knowing full well Congress will not accept it.

The bottom line

On paper, these simple budget gimmicks save Obama almost $4 trillion over 10 years. They are essential to helping the president assert that he is making deep cuts and tough choices on the way to restoring budget sanity. He only claimed to save $1 trillion over 10 years, which means the illusionary savings outlined above have dramatically helped improve the bottom line.

It was ever thus.

UPDATE, 8:45 AM

A reader correctly points out that H.L. Menken did not coin the "lies, damn lies" quote. (My excuse is that The Washington Post in the past has attributed this quote to him, but that's no excuse--I should have checked.) However, it appears not to be Benjamin Disraeli either, though Mark Twain is reputed to have attributed to the British politician. Hello, readers, do you have any other clues on where this priceless phrase came from?

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By Glenn Kessler  | February 21, 2011; 6:00 AM ET
Categories:  Barack Obama, Economy, issue context  
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Comments

The "Fact Checker" needs to do some fact checking: H. L. Mencken didn't say the "lies, damned lies" line. Nor did Mark Twain. It was Benjamin Disraeli who, I would note, was British and so was most surely not talking about anything to do with the insanity that is American politics in the 21st century.

Posted by: S1VA | February 21, 2011 7:46 AM | Report abuse

I would also add "ten year projections", whether they be increases or decreases, to the slop that comes out of the mouths of our Administration and Congress.

Posted by: abc1 | February 21, 2011 8:13 AM | Report abuse

Thanks S1VA, please see my update comment above.

Posted by: glennkessler | February 21, 2011 8:53 AM | Report abuse

There's a Wikipedia article that posits English politician Sir Charles Wentworth Dilke as the most likely source. But they're far from certain.

http://en.wikipedia.org/wiki/Lies,_damned_lies,_and_statistics

Posted by: luridone | February 21, 2011 9:18 AM | Report abuse

Economics 101:

Taxes reduce job creation, retard economic growth, and stifle innovation.
Government regulations reduce job creation, retard economic growth, and stifle innovation.
Unions reduce job creation, retard economic growth, and stifle innovation.

Obama, Pelosi, Reid, and the rest of the Democrats believe in big government and intrusive regulation. They believe in taking from the people who work hard and get educated to achieve and give it to the people who do not try to better themselves.

We need to end all of the wasteful and inefficient government programs to make it easier for people to live off the system than to be productive members of the economy. I am tired of paying taxes to pay for the person in the checkout line in front of me using food stamps to buy food only to follow that up with using a large amount of cash to by cigarettes. I am tired of paying taxes so government workers can get salaries and benefits far beyond what I get in the private sector. I am tired of paying taxes to support people who have little incentive to work and achieve. Our government is dysfunctional, inefficient, and to big. It is our huge, dysfunctional, and wasteful government that is holding back our economy and job growth.

Our representatives vote on legislation they do not understand or have not read. They add unrelated PORK to bills that are mainly concerned with issues where it would be political suicide to vote against. Why not have every elected official sign-off that they have read and UNDERSTOOD an issue before they are permitted to vote? Those sign-offs could be scanned into the public record and put on a public website. Our representatives have a sense of entitlement that must be eliminated. If a law applies to the American People, it should apply to our elected officials and that includes things like social security, pension, and healthcare. Our government is wasteful and dysfunctional.

We must continue to VOTE THEM OUT!!!

Posted by: AngryMobVoter | February 21, 2011 9:46 AM | Report abuse

Will the Senate translate the new budget into SWAHILI for the benefit of Obama who is more facile in his birth language.

By the way! How come I can Google up Teddy Roosevelt's Birth Certificate, but not Obama's? Is that because Google does not support Swahili?

Posted by: fregameeate | February 21, 2011 10:57 AM | Report abuse

Stockman admitted his policies and the current GOPs by inference were wrong. We should start a petition to lock these bums in congress, both houses, into the house assembly without media coverage (no drama queen speeches for the rubes that put them there) so they can compromise and hammer out a budget. Both put bandaids on a gaping wound requiring a tourniquet. Neither are sensible with the GOP firing the cashiers at IRS, SEC, Dept. of Interior and Dems holding higher their sacred cows. Neither will raise medicare taxes with Dems killing a few grandmas with administrator cuts and the GOP many with Ryan's vouchers. Putting medicare/medicaid on a realtime payment auditing like banks with credit cards alone would save 75 billion in fraud. We must stop doing insane things like oil/gas self reporting for royalties, keeping thiefs on gov't contractor lists, buying useless unneeded military hardware (xtra F35 engines, never to be used landing craft), random IRS audits instead of former cheats and millionaire incomes. Sutton robbed banks because that was where the money is and we should do same when addressing budget cuts.

Posted by: jameschirico | February 21, 2011 12:28 PM | Report abuse

Check out:

http://www.york.ac.uk/depts/maths/histstat/lies.htm

Thanks for all you do -

Mike Berke
Rochester, NY

Posted by: mberke | February 21, 2011 1:17 PM | Report abuse

Since the House has sent the check to the senate to run the Gov for the remainder of the year, does anyone REALLY think the Senate Dems and/or Obama will shut down the government?

Posted by: illogicbuster | February 21, 2011 2:36 PM | Report abuse

I've got news for the extremist Republican party:


Now that you have some actual power again (the House) you won't be able to get away with spending all of your time throwing verbal bombs at the Dems, going golfing and then hitting the DC cocktail circuit at night every day.


You either CREATE JOBS or you will be gone in 2012 so fast that your heads will spin!


Chop chop Repugs!


You've got two years!


Time's a wastin'!

.

Posted by: DrainYou | February 21, 2011 2:45 PM | Report abuse

AngryMobVoter, where did you go to school? You may want to retake Economics 101.

Taxes and regulations only reduce job formation, etc. when they are excessive. On whole, taxes in the U.S. are not excessively high, just complicated. See http://financialedge.investopedia.com/financial-edge/0111/5-Countries-With-Low-Taxes.aspx. Additionally, most regulations result in a net benefit to the public.

Your theory pre-supposes that society can function under a libertarian system. However, this requires a massive amount of government in the form of a police and judicial system to enforce contracts and torts. Otherwise, how would you stop the cement plan from opening next door to your house or demand your business partner complete work/not steal from you?

Instead, the United States has adopted a model that utilizes regulations to prevent many contract and tort issues from reaching the judicial system. The regulatory system has been economically weighed against the judicial system with a determination that there are efficiencies to be obtained with the regulatory model.

However, if you prefer to the no tax-no regulation model, I hear Somalia is nice this time of year.

Posted by: AndrewS2 | February 21, 2011 2:47 PM | Report abuse

"Taxes reduce job creation, retard economic growth, and stifle innovation."

Funny how history teaches us otherwise. With all the tax reductions since Reagan, you'd expect a nation with virtually no unemployment growing at a most miraculous rate with a substantial private investment in innovation. Deregulation sure helped too, huh. Yeah, right.

Truth is, our federal income taxes are the lowest rate since the end of the 1050s. "Trickle down" economics has turned out - as many economists predicted - to be voodoo economics after all. Why conservatives refuse to see this as they bear witness to the havoc they've created in this nation leads me to the conclusion that the ignorant indeed are able to fool themselves over and over again.

Posted by: josh13 | February 21, 2011 4:30 PM | Report abuse

Everyone is doing exactly what Obama wants them to do. Obama is no more focused on his bogus budget bill then he was focused on jobs when he was forcing Obamacare down our throats. Know what happens when two foxes cross the same path. The hounds chase the second fox when they should have stay on the path of the first fox. That's Obama's bogus budget bill. His second social justice budget bill is the fox the Republicans should chase.

Posted by: houstonian | February 21, 2011 5:16 PM | Report abuse

Lotta silly ideas and pointless rhetoric and stupid accusations here. Even birthers still burbling. Goodness. As for the economy and government: Sure, there's a lot of waste. Needs fixing. Politicians can't bring themselves to vote for anything that imperils re-election. Won't happen. But letting the rich pay a fair share would help a lot, and so would meaningful reduction of health care expenses. The big bill mainly provided access to insurance to pay for lots of useless, yep, useless health care. An open secret. More care ain't better care.

Posted by: frodot | February 21, 2011 6:11 PM | Report abuse

Wikiquote says the phrase was first attributed to Leonard Courtney.
http://en.wikiquote.org/wiki/Leonard_H._Courtney

I've never heard of him either.

Posted by: arthackett | February 21, 2011 6:41 PM | Report abuse

Since the House has sent the check to the senate to run the Gov for the remainder of the year, does anyone REALLY think the Senate Dems and/or Obama will shut down the government?

Posted by: illogicbuster | February 21, 2011 7:00 PM | Report abuse

josh13 wrote:

Truth is, our federal income taxes are the lowest rate since the end of the 1050s.

No, not exactly. Our federal income tax base is narrower than it has been previously, with almost half of US households paying no federal income tax (but working households pay ss taxes, which are "borrowed" from the trust fund for the government's general use - call it the federal government's check kiting program). Marginal income tax rates in the highest income brackets are lower than they have been previously, but that doesn't mean that income taxes are low for those who pay them. If marginal income tax rates are increased for the upper brackets, tax deductions for the taxpayers in those brackets become more valuable. Increase the tax rates on the upper brackets and you will certainly see a commensurate increase in tax shelter opportunities - complaining about this inevitability won't make it less inevitable.

At the end of the day, we're not going to be able to tax our way out of the looming fiscal disaster. Nor can we inflate our way out of it. Spending has to be cut. Congress needs to do its main job -- prioritize and allocate the limited supply of money that is available to the federal government. Fixing the broken tax system will help, but that's a separate project altogether.

Posted by: MBP1 | February 21, 2011 9:00 PM | Report abuse

Our occupation of Afghanistan and Iraq, our subsidy of Israel's occupation of the West Bank and our unwinable war on drugs. The rest is smoke and mirrors.

Posted by: smi2le | February 21, 2011 9:47 PM | Report abuse

I've got a fix for the AMT:

Set it at 50% for all income over $1 million. Index it to the CPI and you will probably balance the budget.

Posted by: LeoNoVA | February 25, 2011 4:20 PM | Report abuse

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