The Now-You-See-It-Now-You-Don’t Deficit

Adapted from my op-ed in today’s Washington Times:

President Obama talked a good game in his budget speech Wednesday, promising to close the budget gap by $4 trillion over the next 12 years – matching the $4 trillion in spending cuts proposed by Rep. Paul Ryan of Wisconsin in the Republican Party’s proposed overhaul of the federal budget. The number was identical to Mr. Ryan‘s, but very little else about the competing plans was the same.

The president stated that he offers a very different vision of “the kind of country we want to live in.” In essence, he claimed that his plan would save as much money as Mr. Ryan’s but do so without the cruel cuts to the poor, the elderly, autistic children, the mentally handicapped and other unfortunates who cannot fend for themselves.

But Mr. Obama is a master of misdirection. Don’t follow his patter and stagecraft – watch his hands. There is very little fiscal discipline in Mr. Obama’s plan at all. Much of his plan consists of unverifiable claims and promises. Indeed, Mr. Obama appears to be doing his utmost, given the reality of the nation’s fiscally unsustainable course, to defend the entitlements and domestic spending programs so beloved of big-government liberals.

Just last week, Mr. Obama characterized his fiscal 2011 budget compromise with Republicans as providing “the biggest annual spending cut in history.” Only after reporters and analysts had an opportunity to comb through the details did it emerge that most of the $38 billion in so-called cuts were one-time economies and accounting gimmicks, at most yielding fewer than $15 billion in ongoing savings. (More recently, a Congressional Budget Office analysis determined that, after increases to defense spending, the budget cuts amounted to just $350 million this year (million, with an “m,” reports the Washington Post. – JAB)

Likewise, a close look at Mr. Obama’s plan to match Rep. Ryan’s $4 trillion in budget closing reveals that the president is engaging in more budgetary hocus pocus.

As Mr. Obama summarized the budget plan in his speech, he expects to make $2 trillion in spending cuts, raise $1 trillion by eliminating tax breaks for the rich, and $1 trillion in interest-payments savings.

The most obvious budgetary trick is that the $4 trillion in savings will come over 12 years, not Mr. Ryan’s yardstick of 10 years. That’s two extra years to count his modest spending cuts, tax hikes and savings in interest payments on the debt – or roughly 20 percent of his total.

Mr. Obama proposes to capture $750 billion in savings by building on the budget compromise fashioned with Republicans last week. Locking in domestic spending at fiscal 2011 levels – there’s no talk of retrenching to 2008, pre-recession levels – will give him plenty of boodle to “invest” in green energy, infrastructure, schools, broadband, medical R&D and all the other big-government solutions he proposes.

The president’s budget plan also expects to find additional savings in the defense budget, but he offered no details. He promised only to conduct a “fundamental review of America’s role in the world” that, presumably, would redefine America’s military and national security posture to match its diminished fiscal capacity.

Mr. Obama promises another $500 billion of cuts in health care spending by 2023 – not by restructuring Medicare and Medicaid and creating conditions for market discipline, as Mr. Ryan proposes – but by counting on the Affordable Care Act to institute already-promised cost controls. We will see reductions in erroneous payments, cuts in payments to pharmaceutical companies and new incentives for doctors and hospitals to operate more efficiently and improve outcomes, among other measures, he suggests. But the promised savings are based on blind faith that empowering a command-and-control bureaucracy will bring about gains in productivity and improved medical outcomes.

“If we’re wrong about the savings,” he added, an independent Medicare commission will order the cuts needed to meet budgetary goals. Somehow, those cuts would be less inhumane than anything that Mr. Ryan might propose.

Finally, Mr. Obama made an argument for “shared sacrifice” in which “the rich” would do most of the sacrificing. This the president proposed to accomplish by limiting itemized tax deductions to the wealthiest 2 percent of Americans, netting $320 billion over 10 years. He was less than forthcoming how he would raise the other $680 billion, however, alluding vaguely to eliminating tax loopholes sufficiently to both lower tax rates (not for the rich, one would expect) and increase the tax take. These proposals, we can be assured reflect the long-standing liberal conviction that you can raise rates on the rich and, despite their access to the world’s best CPAs, tax attorneys and tax shelter advisers, they will not redeploy their assets or adjust their income in any way to minimize their tax exposure.

“We do not have to sacrifice the America we believe in,” Mr. Obama promised. No, we just have to sacrifice our common sense and believe the president really can pull doves and scarfs out of his sleeve.

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