One more post to round out this thrilling week of new budget projections. You've probably noticed that the storyline has been entirely about how the Obama administration has increased the deficit and whether the president can still pursue his aggressive policy agenda. But the first part of that sentence isn't true. Since he was inaugurated, Barack Obama has decreased the deficit. How's that work?
When the budget offices in Congress and the White House release their projections, they use different assumptions. The Congressional Budget Office has to assume that any law on the books will stay that way; that means they assume all the Bush tax codes will expire, even though the administration only wants to repeal some of them, that the annual Alternate Minimum Tax fix will not be used to exempt middle-class people from the tax, even though it passes every year, and that Congress will not pass the annual Medicare reimbursement fix, even though that passes ever year, etc.
The OMB is under no such compunction, and in this administration, tries to make the most realistic assumptions possible, hence their higher deficit number over the long term ($9.1 trillion versus $7.1 trillion over the next ten years). But comparing those two numbers would be like comparing apples and oranges.
Luckily the Center for Budget and Policy Priorities has a wonky analysis of the latest information that tries to reconcile the two approaches. They found that after adjusting CBO's numbers to more realistic assumptions and then comparing it to the president's budget proposals, reflected in the OMB projections, the long-term deficit would actually be lower than current laws, most of which hang over from the Bush administration, by $600 billion to $900 billion. That's obviously not enough to solve our deficit problem, but remember as well that a majority of the new deficit comes from the economic collapse or policies related to it, not the president's agenda.
It's obviously important to realize that no matter who caused the deficit, the current White House incumbent has to deal with it. But that's no excuse for getting the facts wrong and blaming him, especially when his premiere agenda-item, health care, would actually work to decrease the long-term deficit.
-- Tim Fernholz
Don't panic about the deficit.