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February 22, 2009
Obama's New Budget Deficit Math
President Obama is preparing to walk federal deficit calculations through Alice’s looking glass and into his Wonderland of New Budget Deficit Math.
Here’s the lead paragraph in the Washington Post’s article entitled “Obama to Unveil an Ambitious Budget Plan”:
President Obama is putting the finishing touches on an ambitious first budget that seeks to cut the federal deficit in half over the next four years, primarily by raising taxes on business and the wealthy and by slashing spending on the wars in Iraq and Afghanistan, administration officials said.
Sounds promising, yes? Ambitious. Slashing spending. (Less spending on Afghanistan? How do you send more troops there and do that? Nevermind for now.) A few paragraphs later we learn,
Even before Congress approved the stimulus package earlier this month, this year's deficit was projected by Congressional budget analysts to approach $1.2 trillion, or 8.3 percent of the overall economy, the highest since World War II. With the stimulus and other expenses, some analysts say the annual gap between federal spending and income could approach $2 trillion when the fiscal year ends in September.
Obama proposes to dramatically reduce those numbers by the end of his first term, cutting the deficit he inherited in half, said administration officials, speaking on condition of anonymity because the budget has yet to be released. His budget plan would keep the deficit hovering near $1 trillion in 2010 and 2011, but shows it dropping to $533 billion in 2013 -- still high in dollar terms, but a more manageable 3 percent of the overall economy.
So, President Obama is folding his $1 trillion stimulus package (when you roll in interest) into the ’09 budget deficit and hanging it around the previous administration’s neck. No surprise there. It’ll be positioned as his inheritance.
Let’s look back. Here’s the litany of Bush deficits from 2004-2008:
2004: $412.5 billion
Source – The Government Accounting Office (GAO) document, “A Citizens Guide to the 2008 Financial Report of the United States of America: The Federal Government’s Financial Health”
In old math calculations, the total deficit spending from 2004-2008 (the last 5 years of Bush’s second term in office) was $1.596 trillion and change.
At this point, approximately half of the expected (noted in the WaPo article) ’09 deficit of, at least, $2 trillion is additional spending passed under Obama’s watch. If there’s a second stimulus bill and another TARP, that deficit number will grow. A total $3 trillion deficit is not out of the question.
So, being fair (a concept important to the Obama administration), at least half of the eventual ’09 deficit will be owned by President Obama’s administration. So for comparative purposes between administrations’ deficits, ’09, as a bridge year, is a wash. So it’s,
2009: $1 trillion (Obama’s stimulus package with interest), plus $1.2 (Bush’s original deficit)
According to the Washington Post piece, Obama “proposes” to cut the deficit he inherited in half. Let’s add up the numbers for 4 years, as compared to Bush’s 5 years. Fair to the max.
2010: $1 trillion (“hovering near” – isn’t “hovering” almost always above?)
2011: $1 trillion
2012: (No number mentioned, so let’s do blue sky and assume $533 billion)
2013: $533 billion
That’s a total deficit increase during the Obama term of approximately $3.066 trillion.
So help me here. How does that represent, as the WaPo article suggests, “an ambitious first budget that seeks to cut the federal deficit in half over the next four years?” In the old math, 3.06 was a larger number than 1.59. (And if you insist on adding in each president’s contribution to the minimum ’09 budget deficit to date, it’s $2.79 trillion for Bush, and $4.07 for Obama.)
It’s like when I go to the grocery story and the clerk says, “You saved $14.32 cents today by shopping here.”
And I say, “Wow! I thought I just spent $196.39. What a country!”