Deficit-reduction numbers from the White House don't add up
The Obama administration's proposed $3.8-trillion budget for fiscal 2013 claims to cut future deficits and debt by more than $3.5 trillion over the coming 10 years. That's not including about $1.7 trillion in savings from the spending restraints imposed by Congress over the last two years. But the administration's figure doesn't represent a real cut, at least not in the sense that most people would understand it.
If Congress and the administration kept current laws in place, the deficit would shrink from about $1 trillion in fiscal 2012 to $585 billion in fiscal 2013, then fall to about $200 billion in 2018 before climbing again, according to the Congressional Budget Office. President Obama's proposal has the deficit increasing to $1.3 trillion this year, then dropping to $575 billion in 2018 before heading back up.
So how does Obama claim $3.5 trillion in deficit reduction? By assuming a different baseline for the federal budget, one that involves several expensive changes in law. These include assumptions that all of the Bush-era tax cuts are extended, that the payroll tax holiday ends this month, that doctors and hospitals don't take a huge cut in their Medicare fees and that the Alternative Minimum Tax threshold keeps pace with inflation.
That's a more realistic starting point. Nevertheless, it stretches the truth to call it "deficit reduction" when the budget extends most, but not all, of the tax cuts that are due to expire. Similarly, it's (ahem) creative accounting to claim that the government is saving $741 billion by pulling troops out of Afghanistan and Iraq as scheduled. Not that all $741 billion would be "saved"; about one-sixth of those dollars would be spent on transportation projects. As the White House put it in its proposal for reauthorizing the surface transportation program at a higher funding level:
[T]he reauthorization proposal will not add to the deficit as the budget proposes to use the "peace dividend" from ramping down military operations overseas to offset all costs.
It's also worth noting that Obama's proposal would eliminate the $1.2 trillion in savings from discretionary programs over the coming 10 years that Congress ordered last year as part of the debt-ceiling deal.
I'm not arguing that the White House is ignoring the deficit. Its proposals -- including $1.7 trillion in higher taxes and almost $450 billion in cuts to Medicare, farm subsidies and other mandatory programs -- are neither trivial nor pain-free. They just don't add up to $3.5 trillion in new deficit reduction, at least not when measured against the status quo.
-- Jon Healey
Photo: National Economic Council Director Gene Sperling, left, and Council of Economic Advisers Chairman Alan Krueger discuss the Obama administration's proposed budget for fiscal 2013. Credit: Chip Somodevilla / Getty Images