Senate Budget Committee Chairman Kent Conrad just released his take on the new CBO numbers:“CBO’s new deficit estimates are further evidence of the mess that has been handed the Obama administration. They show the continuing weakening of the economy has significantly worsened our budget outlook. CBO now believes the ten-year deficits under the President’s budget will be $2.3 trillion worse than originally projected. This will make it more challenging for Congress as we craft a budget resolution.“The reality is we are going to have to make adjustments to the President’s budget if we want to keep the deficit on a downward trajectory. But despite these new numbers, we will adopt a budget resolution that reflects the key priorities of the President and the nation of reducing our dependence on foreign energy, striving for excellence in education, reforming our health care system, and cutting the deficit by more than half over the next five years. “Those are the priorities of the American people. We can meet those priorities and still take the difficult steps that will be needed to dig out of the fiscal and economic mess this administration has inherited.”
The devil's in the details, as they say. One note: Deficits are not the same as spending. Deficits are only impacted by unpaid for spending. If you make $10, and you buy $10 in peanut brittle, you're not $10 in debt. Similarly, the $634 billion set aside for health reform doesn't contribute to the deficit at all. It's entirely offset by capping itemized deductions for the rich and squeezing private insurers in Medicare and a couple other policies. The cap and trade proposal is actually revenue-positive. The stimulus package, by contrast, sharply increased the deficit, because there were no immediate offsets to pay for it. So too with Bush's tax cuts. But the big new initiatives in Obama's budget don't necessarily affect the deficit at all. They're entirely paid for. There may be a political impact in which the size of the deficit saps political will for new initiatives and gives Ben Nelson a preening opportunity he can't pass on, but there's no debt-related reason that these numbers should affect those priorities. Indeed, quite the opposite: Cap and trade would raise revenue and health reform will cut the long-term deficit by about $3 trillion. It's only in the weird world that is Washington that budget projections showing the current fiscal path is unsustainable would be used to argue against policy changes that better the long-term outlook.
