Obama vs. Bush on Halving the Deficit
As word of President Obama's proposed first budget leaked this weekend, his pledge to halve the federal budget deficit by 2013 quickly became the headline. Even after ending President Bush's practice of cooking the books to understate the red ink, Obama is targeting to slash the $1.3 trillion deficit he inherited to $533 billion by the end of his first term.
For their part, conservative mouthpieces like Commentary immediately proclaimed Obama's commitment "hocus pocus." Of course, Republicans in theory should know budgetary fraud when they see it. After all, President Bush famously made - and obviously failed to keep - a bogus 2004 promise to cut the deficit by 50% by 2009.
Whether Obama can deliver on his plan through the expiration of tax cuts for Americans earning over $250,000 a year, the maintenance of the estate tax, reduced spending on the wars in Iraq and Afghanistan, reforms in Medicare and other initiatives remains to be seen. The severity and duration of the economic downturn, not to mention the pace of the U.S. drawdown in Iraq and ramp up in Afghanistan make fiscal crystal ball gazing problematic, to say the least.
But as I noted yesterday, the Obama administration for openers is committed to ending George W. Bush's fuzzy math when it comes to fudging the deficit. As the New York Times noted:
A budget that is $2.7 trillion deeper in the red over the next decade than it would otherwise appear, according to administration officials.
The new accounting involves spending on the wars in Iraq and Afghanistan, Medicare reimbursements to physicians and the cost of disaster responses.
But the biggest adjustment will deal with revenues from the alternative minimum tax, a parallel tax system enacted in 1969 to prevent the wealthy from using tax shelters to avoid paying any income tax.
As Americans should recall, President Bush, too, pledged to halve the budget deficit. And thanks to those gimmicks and a host of others, that 2004 election year promise not only wasn't met, it was comically fraudulent at the time it was made.
As he faced reelection five year ago, George W. Bush famously committed to cut the deficit in half by 2009. But that promise, as the Washington Post, CNN and others noted at the time, was premised upon two parallel frauds.
First, Bush's pompous prediction used as its baseline a wildly inflated White House deficit forecast of $521 billion, well above the CBO's estimate and the actual figure of $413 billion. More importantly, President Bush conveniently chose 2009 as his finish line, the year before his tax cuts were set to expire. Making them permanent (which he and all of the GOP presidential candidates later endorsed) would have blown another $2.2 trillion hole in the federal budget by 2014. In addition, other required costs (such as the Medicare prescription drug plan) and likely federal tax code adjustments (most notably fixing the Alternative Minimum Tax) would add hundreds of billions more in red ink to the national ledger. And all of that is before the deluge of Social Security and Medicare expenditures looming with the retirement of the baby boom generation.
Nonetheless, when the budget deficit dipped in 2007 to $163 billion, the Bush administration proclaimed victory and vindication. On its web page titled, "Fiscal Discipline: Managing for Results," the White House crowed:
"The deficit has been cut in half three years ahead of the President's 2009 goal. Historic revenue growth and a continued commitment to spending restraint contributed to this reduction."
As it turns, not so much.
The Bush administration finally fell victim to its own rosy scenario, even before the collapse of the housing market and the Wall Street meltdown last fall. By February 2008, Peter Orzag, then head of the Congressional Budget Office (CBO) and now Barack Obama's director of the Office of Management and Budget (OMB), testified to Congress that the deficit would approach $400 billion. That projected shortfall already reflected reduced tax revenue from the economic slowdown, $70 billion in new funding for the conflicts in Iraq and Afghanistan, and $150 billion for the stimulus package just brokered by the President and Congress. As conditions worsened, by July 2008, Bush's own OMB was forecasting a $482 billion hemorrhage of red ink. And by January 2009, it became a torrent of $1.2 trillion.
So much for George W. Bush, promise keeper. Mission not accomplished.
The coming conservative attack on the Obama budget will be just the latest chapter in the history stunning hypocrisy from a GOP which laughably calls itself the party of fiscal discipline. The conservative amen corner will ignore the inconvenient truth that the national debt tripled under Ronald Reagan, only to double again under George W. Bush after the surpluses of the Clinton years. And while it was Reagan's OMB alchemist David Stockman who in the 1980's first resorted to the "magic asterisk" and the "rosy scenario," it was the Bush White House whose budgetary sleight of hand led to Dubya's broken 2004 promise to halve the budget deficit by 2009.
Hopefully, President Obama will fare better as he begins his quest to undo the tragic legacy of Republican fiscal recklessness. Regardless, telling the truth is a good place to start.