Obama’s budget promises to be as underwhelming as it is overdue, the author writes. Obama budget's same old song

Exciting as watching paint dry — that’s the usual assessment of a budget document. And Wednesday’s release of President Barack Obama’s budget promises to be as underwhelming as it is overdue. Will there be anything of interest at all?

Not likely. However, if you believe in long shots — think of drawing three cards for a royal, straight flush while watching a 2013 Pirates World Series game seated next to Donald Trump, who does not use the word “I” for nine innings — there is the following. The U.S. has huge budget challenges. And for the first time in years, we will have three budget proposals to carefully consider — instead of speeches and talking points. Thus, the House, the Senate and the White House will all have plans on paper from which one could hope a serious grand bargain on the debt might emerge.


For that to happen, the president’s budget will have to be chock-full of detailed and serious entitlement reform proposals, tax reform specifics and mechanisms to enforce an agreement to keep the debt on a declining trajectory. Unfortunately, the administration’s pre-release spin notwithstanding, that is too far a break from history to bet on. Instead, look for a spending-heavy, gimmick-laden budget proposal that never balances and refuses to get to the heart of our debt crisis.

With past disappointing budgets as the guide, there are a few things one can anticipate:

Rosy economic assumptions. The faster the economy grows, the more taxes will be collected. At the same time, unemployment and low-income spending will decline. So good growth is a key to a better budget outlook. This administration projected growth of 3 percent in 2013, 3.6 percent in 2014 and more than 4 percent in 2015. Reality paints a different picture. Growth in 2012 was 2.2 percent and 2013 looks on track for another disappointing 2 percent. The gap between forecast and reality will not, however, stop another round of rosy assumptions.

More stimulus spending. Growth may be inadequate, but that doesn’t mean the president won’t keep repeating the same policy errors. It’s all but certain that the president will call for even more stimulus-style spending. This is a White House that has succumbed to Paul Krugman’s belief that debt and deficits now are a good thing. In fact, their rosy economic projections are built on this stimulus spending, just as their projections of a 2013 recession are because of the sequester. …. oops, never mind.

A healthy dose of gimmicks. The budget will be built on a misleading baseline, filled with gimmicks that allow for unrealistic assumptions about the future. As in past budgets, it has hidden spending on Medicare doctors and alternative minimum tax patches in the “adjusted baseline.” The new version may create new stories to tell, but we can be sure that the song will remain the same.

The debt and deficit will stabilize as a percentage of GDP. Relying heavily on those rosy economic projections and budgetary gimmicks, the calculators at the White House will get the debt and deficit to stabilize as a percentage of the gross domestic product. Two problems. First, this is a tribute to rosy glasses and gimmicks, as previously explained. Second, even if it were realistic, it stabilizes at too high a level. Research indicates that gross debt above 90 percent of GDP slows growth by 1 percentage point each year. That translates to 1 million jobs lost per year. But trapped by an economic dogma that deficits are not an immediate cause for concern, and that “balance for the sake of balance” is an unworthy goal, we can expect debt as a percent of GDP to remain dangerously high.

Tax increases. It’s a given that the president’s budget will be full of tax increases. It’s his definition of “balanced.” Unfortunately, that ignores the $600 billion in new taxes that went into effect at the start of this year. It also ignores the fact that we cannot tax our way to balance. We’re in a spending-driven debt crisis that the president’s budget proposals have only worsened.

All previous Obama White House spending proposals have baked into the cake future middle-class tax increases. Based on last year’s proposal, in order to achieve primary balance by at least 2022, taxing only those making more than $500,000 would require a rate of 95.5 percent. Of course, the $600 billion in new tax revenue that kicked off 2013 puts off the day of reckoning — but not for long.

From its tardiness to its refusal to balance, the president’s budget will once again encapsulate the fiscally reckless habits of his administration.

Douglas Holtz-Eakin is president of the American Action Forum and most recently was a commissioner on the Financial Crisis Inquiry Commission. He was the sixth director of the Congressional Budget Office and served as chief economist of the president’s Council of Economic Advisers (2001-2002).He also served as the director of domestic and economic policy for the John McCain 2008 presidential campaign.

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Budget

Barack Obama