Smoke and mirrors in Obama's budget? Five examples of creative accounting.
President Obama's proposed $3.7 trillion dollar federal government budget works some economic magic, from disappearing programs to mystery funding sources.
Here’s a look at five key head-scratchers in the 2012 budget:
1. Disappearing–reappearing funding
Uncertain financing for parts of the budget will ultimately add to the deficit.
For years, the government has assumed in every budget that it will reduce Medicaid payments to doctors by 1 percent to 2 percent – but it never does. By last year, there was a 21 percent gap between what Congress assumed it would pay and what it did pay, says Pete Davis of Davis Capital Investment Ideas, in Washington.
In the budget, Obama funds that gap – for two years. By 2014, it reappears as a $24 billion hole in the budget. By the following year, it's up to $32 billion.
“I think they are just assuming that the way to pay for it will emerge,” says Mr. Davis.
That's also true for two other major programs: the annual effort to keep middle class individuals from having to pay the Alternative Minimum Tax (AMT) and the Highway Trust Fund.
The budget funds the AMT patch for three years, but only two years for the highway spending, says Davis.