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A Phantom Budget—and a Phantom $4 Trillion

8:55 AM, May 5, 2011 • By JEFFREY H. ANDERSON
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Ever since President Obama gave his speech on deficit reduction last month, in response to the Paul Ryan-authored 2012 House Republican budget, press accounts have suggested that he has released an actual budget that would reduce deficit spending by $4 trillion. This claim is wrong on both counts: Obama has not released a second budget, and the proposals he outlined in his speech and its corresponding "framework" would not reduce deficit spending by anywhere near $4 trillion.

Obama hand thinking

The president’s framework fails to rise to the level of an actual budget in essentially every way, but its most glaring oversight is its failure to say what number the $4 trillion would be saved from. There are three possibilities: the Congressional Budget Office (CBO) current law baseline, the White House Office of Management and Budget (OMB) baseline, and Obama’s own budget.   

The first possibility can be quickly dismissed: Obama is not using the CBO baseline. The Ryan budget, the framework of which has since passed the House by 42 votes, would cut $4.4 trillion in deficit spending from Obama’s budget and $1.6 trillion from the CBO baseline. If Obama’s $4 trillion in claimed deficit savings were in relation to the CBO baseline, he would not have forgotten to tell us that his savings would more than double Ryan’s.   

Perhaps Obama is instead using his own budget as the starting point. Obama says that his $4 trillion in savings — over 12 years, not the usual ten — would come from cutting “about $2 trillion in spending” across the budget, cutting “about $1 trillion in spending from the tax code” (that’s how Obama now refers to tax hikes), and lowering our interest payments on the debt “by $1 trillion.” Prorated over ten years, that $4 trillion would be $3.3 trillion. In truth, it would likely be a lot less, as Obama’s framework says that deficit reduction “should be phased in over time to ensure that fiscal policy does not undermine the momentum of our economic recovery.” 

But let’s assume the full $3.3 trillion. In his speech and framework, Obama asserts that $400 billion of his proposed cuts in non-security discretionary spending are already contained in his budget, along with $320 billion of his proposed tax hikes. His proposed health care savings likewise include the Obamacare “savings” that are already in his budget, which are listed at $200 billion. Obama’s budget also claims $78 billion in defense cuts. 

All told, that’s $1 trillion in savings already included in Obama’s 10-year budget, leaving just $2.3 trillion in additional savings over a decade. The CBO, however, says that Obama’s budget would actually increase deficit spending by $2.7 trillion versus current law. So reducing that tally by $2.3 trillion would still mean increasing deficit spending by $400 billion even in relation to current law — a far cry from reducing it by $4 trillion.

That leaves only one other potential starting point: the baseline generated by the White House OMB. The OMB says that Obama’s preexisting budget would save $2.2 trillion over ten years versus current law. So, if Obama is using that baseline to calculate his $4 trillion figure, his framework offers only $1.8 trillion in new savings. But since the CBO says that Obama’s budget would actually add $2.7 trillion to deficit spending versus current law, reducing that tally by $1.8 trillion would still mean adding $900 billion in deficit spending.

It appears that the OMB baseline is, in fact, what Obama is using. This fits with his otherwise bizarre claim that his proposal “builds on the roughly $1 trillion in deficit reduction I already proposed in my 2012 budget.” The only entity that thinks Obama’s budget would reduce deficit spending is the OMB, and $1 trillion is essentially equal to the $1.1 trillion in deficit savings that Obama has claimed all along. Never mind that the CBO says that this scoring is off by nearly $4 trillion. 

The key fact is this: No matter which of the three starting points Obama is actually using, his framework — like his actual budget — would actually increase deficit spending versus current law. 

Perhaps the press corps, which has dutifully and supinely accepted the president’s number, should take a closer look at his “framework.” It specifies that “The President is setting a goal of reducing our deficit by $4 trillion in 12 years” (italics added).  But setting a goal is a far cry from showing how to achieve it.

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