Obama's misleading language on debt reduction in the 2012 budget
"What my budget does is to put forward some tough choices, some significant spending cuts, so that by the middle of this decade, our annual spending will match our annual revenues. We will not be adding more to the national debt. To use a sort of an analogy that families are familiar with, we're not going to be running up the credit card anymore. That's important, and that's hard to do, but it's necessary to do."
--President Obama, Feb. 15, 2011
A president has a difficult job trying to explain the federal budget to ordinary Americans. The numbers are large, the concepts are obscure, the details mind-numbingly boring.
President Obama's 2012 budget, which he says begins to attack the deficit problem in a responsible way, has been attacked for relying on the usual bag of budget gimmicks to appear to cut spending. To some extent, this is a time-honored tradition by both parties. President George W. Bush produced budgets, even as late as 2008, that predicted the elimination of the budget deficit some time in the future. It never happened.
Obama's statement above, made at his news conference Tuesday, relies on another time-honored cliché -- the family credit card. How good a job did he do in explaining what's in his budget?
By any common-sense standard, the president is saying that by the "middle of the decade" -- 2015 -- there will no longer be a deficit. The key phrase is that "we will not adding more to the national debt."
But then turn to Table S-1 of the budget. The deficit in 2015 is $607 billion. In 2016, $649 billion. It keeps going up and up until 2021, the last year of the budget blueprint, when it shows a deficit of $774 billion.
Endless deficits mean more debt. And indeed, the debt climbs and climbs. In 2012, the total national debt would be $16.6 trillion. In several years -- 2015 -- it would be $19.8 trillion. By 2021, it would be $26.3 trillion. (This is the combined debt -- debt carried by the public and also that held by other government agencies, such as the Social Security Administration's Treasury securities, held to redeem promises of years of Social Security benefits.)
The president's answer seemed so out of sorts with reality that a reporter, Chip Reid of CBS News, called him on it and started reading out the annual deficit numbers. He asked: "How can you say that we're living within our means?"
In response, the president did a better job of explaining himself.
"We still have all this accumulated debt, as a consequence of the recession and as a consequence of a series of decisions that were made over the last decade. We've racked up a whole bunch of debt, and there's a lot of interest on that debt," the president said. "So in the same way that if you've got a credit card and you've got a big balance, you may not be adding to principal, you've still got all that interest that you've got to pay, well, we've got a big problem in terms of accumulated interest that we're paying. And that's why we're going to have to whittle down further the debt."
In other words, the president admitted he was excluding the interest on the debt when he declared "we will not be adding more to the national debt." He was talking about a budgetary concept known as "primary balance," in which the government spends no more than it collects, not counting interest payments.
A table in the budget, S-4, purports to show how this figure eliminates the "primary deficit" -- or what might be called the operating deficit -- by 2017 and then moves into surplus. (That's actually a bit further in the future than "middle of the decade," but okay.) Table S-1 also shows that debt held by the public, as a percentage of the gross domestic product, remains stable at about 76 to 77 percent starting in 2015. That's another way to measure whether the deficit is getting under control.
Senior administration officials, in interviews, pointed to Obama's second statement as the most definitive explanation of the administration's thinking. They noted that speech writers refused to let the president use terms such as "primary balance" because it would confuse people rather than clarify matters, and they claimed that achieving primary balance would be a significant fiscal achievement. They also argued that one should not focus on just one isolated statement, but the full explanation from the whole news conference.
We will note that it took a follow-up question from a diligent reporter to yield that right answer. The president's first explanation was not so clear -- and in fact was fairly misleading.
As for the president's claim of "significant spending cuts," we have discussed the problem with ten-year estimates as a guide to what will happen in the future. The administration's economic assumptions are more optimistic than many private forecasts, allowing it to claim additional government revenue that may not materialize. The administration is also counting on winding down the wars in Iraq and Afghanistan, saving hundreds of billions of dollars. Those assumptions, more than any real cost-cutting, are responsible for eliminating the predicted "primary deficit."
The Pinocchio Test
A president has a responsibility to be straight with American people, especially when talking about the budget. The money used to pay interest on the debt by 2012 will amount to about 13 percent of the overall budget -- almost double the amount spent on nondefense discretionary spending that year. In fact, interest expense in 2021 would only be somewhat less than the money spent on national security.
We agree that the president's fuller explanation began to acknowledge that he was not counting interest on the debt. But his initial statement -- "We will not be adding more to the national debt" -- was not correct. The president kind of hinted that he was talking about primary balance when he said "our annual spending will match our annual revenues." But he should have gone further and added the words, "not counting interest on the debt."
We are not expecting perfection in public statements by politicians. This came close to being a three-Pinocchio ruling, but the president's second attempt somewhat mitigated the problems with his initial statement.
Follow The Fact Checker on Twitter @GlennKesslerWP
| February 17, 2011; 6:00 AM ET
Categories: 2 Pinocchios, Barack Obama, Economy
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