Does President Obama have a plan to cut the deficit by $4 trillion over the next 10 years? That’s an assertion he makes constantly on the stump. It’s one of the bullet points in the economic manifesto his campaign issued this week, too. The slim blue booklet calls the plan a “balanced approach” to reducing Uncle Sam’s flow of red ink, with $2.50 of spending cuts for every $1 in additional tax revenue from wealthy families and corporations.
Are these figures solid or notional, meat and potatoes or pie in the sky? Let’s unpack them a bit so we can gain some understanding of where Mr. Obama might steer the ship USS Federal Budget if he wins reelection on Nov. 6.
We’ll start by making a point obvious to those of us who consider Congressional Budget Office reports bedtime reading. When Obama says he’ll cut the deficit by $4 trillion over a decade, he’s not saying the US will be $4 trillion in the black over that period. What he’s insisting is that the US will accumulate $4 trillion less in red ink than it would have otherwise if it follows his outline.
So the debt, which is the accumulation of annual deficits, would still go up. Just not so fast. (Yes, the debt would go up under President Romney as well. He talks about putting the US on a “pathway” to balanced budgets, as opposed to balancing the budget right away.)
This raises a question: So Obama is saving $4 trillion compared to what? That’s a lot harder to answer than you might think. It involves budget baselines, and current law, and potential future changes, and what happens to the Bush tax cuts, and all sorts of trend lines that can change faster than a teenager’s phone bill. We won’t get into it.
Let’s just say that CBO judges the $4 trillion number to be within reason. Compared with CBO’s best guess as to where fiscal policy really stands otherwise, the Obama fiscal outline cuts the deficit over 10 years by $4.3 trillion, according to a March analysis of the president’s 2013 budget submission.
However, this doesn’t mean that the $4 trillion is not ... well, “squishy” might be too strong a word. “Flexible,” maybe, or “creative.” Let’s just say it’s not as solid as Miguel Cabrera’s bat.
First of all, it includes about $1 trillion in cuts that have already occurred, pursuant to last year’s budget deal with Congress. The administration doesn’t hide this – the new campaign economic booklet notes that “The President has already signed $1 trillion in spending cuts into law.” But “signed into law” does not equal “due only to me.” Congress, specifically congressional Republicans, had something to do with those reductions as well.
Washington Post fact checker Glenn Kessler judges this to be “phantom savings,” akin to claiming credit for a tuition-size reduction in your household budget the year after your child graduates from college. Other experts aren’t so sure, noting that Obama campaigned in 2008 on winding down US military forces in the Middle East. You can judge this yourself, keeping in mind that Obama (and a President Romney) would have left at least a token force in Iraq if the Iraqi government had signed a status of forces agreement.
Third, another large portion of savings comes from interest savings. The administration calculates that its reductions in other areas would result in the government paying about $800 billion less in interest on the debt over the decade. While this may be accurate, it does not exactly reflect a tough budget choice per se.
The administration figures that allowing the Bush tax cuts to expire for the wealthy would raise $1.4 trillion over the decade. That’s the biggest change the president’s budget plan posits on the revenue side of the equation. If you subtract the war savings and predicted lower interest costs, the ratio of proposed budget cuts to tax increases is not $2.50 for every $1. It’s about 54 cents in cuts for every 46 cents in new revenue, according to the liberal-leaning Center on Budget and Policy Priorities.
Ten years is a long time in terms of government policy, and Congress changes to the federal budget every year. The chance that Obama’s $4 trillion deficit reduction plan as currently outlined would survive over a decade is vanishingly small. Think back 10 years – how would a Bush-era 2002 fiscal projection look today, given all the fiscal turmoil that has struck the nation?
Obama’s plans, like Mitt Romney’s, are thus not so much blueprints as expressions of values. They reflect how the candidates want the voters to see them. Voters should weigh the numbers both men submit to the public in that light.