The number the Obama team wants you to hear is $1.25 trillion, as in, there is $1.25 trillion worth of deficit reduction in this budget over the next 10 years. It comes largely from letting the upper-income Bush tax cuts expire ($700 billion in savings), the terribly framed non-security discretionary spending freeze ($250 billion in savings), the new bank tax ($90 billion), and various other tax and spending adjustments. The administration's goal is to get the budget down to a fiscally sustainable "primary balance" by 2015, a situation where taxes and spending are equal and the only deficit is caused by interest rates on the national debt -- in this scenario, the deficit would be about 3 percent of GDP. Currently, the deficits are about 10 percent of GDP. The administration is counting on economic recovery -- which brings higher tax receipts and lower spending on automatic stabilizers like unemployment insurance -- to bring the deficit down to 5 percent of GDP. Then, the deficit-reduction measures discussed above take a further 1 percent off the deficit, getting to 4 percent of GDP. How do you get it down to the 3 percent target?An independent deficit commission. Yes, the commission the president is creating with an executive order after the Senate voted it down will be tasked with getting the budget to primary balance by 2015. While the specific instructions are helpful, the record of commissions getting anything done on these issues is at best shaky, though some, like CAP's Michael Ettlinger, are optimistic about the commission's potential. But given the bipartisan opposition to having the commission at all, it's hard to imagine that there will be a bipartisan embrace of its conclusions. -- Tim FernholzRelated:"It's 2011 Budget Day!""The Hidden Stimulus in the Budget."
