Spinning Obama’s Budget

Both parties are putting political spin on the deficit reduction contained in President Obama’s $3.78 trillion budget plan.

  • Obama said his budget would cut deficits by “nearly another $2 trillion” over 10 years. Two prominent Republicans said it would only reduce deficits by about $600 billion. The question is: compared with what? The budget provides for $600 billion in additional deficit reduction. Obama arrives at a higher figure by replacing about $1.1 trillion in sequester cuts that have begun to take effect.
  • The president repeated the exaggerated claim that his budget brings deficit reduction to a level that “independent economists believe we need to stabilize our finances.” Independent economists say it’s not enough to stabilize the debt.

President Obama announced his budget plan in the White House Rose Garden on April 10. With a mix of spending cuts and new taxes, Obama claimed it was a “fiscally responsible blueprint for middle-class jobs and growth.” But many Republicans quickly assailed the plan for not cutting deficits deeply or quickly enough. We’ll sort through some of the spin.

How Much Deficit Reduction?

Obama said his budget would cut deficits by nearly $2 trillion over 10 years. Sens. Mitch McConnell and Orrin Hatch said it’s more like $600 billion. At the crux of the issue is whether or not you count the roughly $1.1 trillion worth of deficit cuts from the sequester or not. So it’s a disagreement about baselines. Aside from that, there’s not as much disagreement as the rhetoric might suggest.

Here’s what Obama said when he formally released his budget plan on April 10:

Obama, April 10: My budget will reduce our deficits by nearly another $2 trillion, so that all told we will have surpassed the goal of $4 trillion in deficit reduction that independent economists believe we need to stabilize our finances.

Obama says nearly $2 trillion, and the actual figure in his budget is $1.8 trillion over 10 years.

In a press release pushing back against Obama’s proposal, Hatch called the claim of a $1.8 trillion reduction in deficits “false.”

Hatch, April 10: Falsely claiming $1.8 trillion in deficit reduction, as the President proposes, isn’t the kind of leadership the people of Utah and America deserve.

Earlier in the day, McConnell similarly criticized the outline of the plan that had been released before Obama’s formal unveiling.

McConnell, April 10: Now, the White House initially made some fantastic claims about the amount of deficit reduction supposedly contained in its budget. But when you cut through the spin and get to the facts, it looks like there’s less than $600 billion worth of reduction in there – and that’s over a decade – all of it coming from tax increases.

The disagreement is mostly about whether or not you assume a budget baseline that includes the sequester. As Hatch spokesman Matthew Harakal explained to us, “$1.2 trillion of the White House’s claimed $1.8 trillion in deficit reduction is already is going to occur regardless of the President’s budget (sequester, cuts already in current law, etc.) – the $600 billion is the remainder. So how can the White House claim that its budget will result in $1.8 trillion in deficit reduction when $1.2 trillion of those reductions are already happening? It’s misleading and just plain false for them to claim that.”

The sequester was part of the Budget Control Act of 2011, a negotiated compromise to raise the debt ceiling. Its intent was to encourage deeply divided lawmakers to forge a compromise that would result in savings of $1.5 trillion over 10 years. That compromise never came to pass, and the sequester was ultimately activated March 1.

The sequester — if it remains in place — will reduce federal spending in the 2013 fiscal year by $85 billion (and by a total of about $1.1 trillion over 10 years, according to the nonpartisan Congressional Budget Office).

White House economic adviser Jason Furman told FactCheck.org in a phone interview that it makes no sense to assume as a baseline sequester cuts that were never intended to be enacted, let alone kept in place over time.

“The rationale for that (the $1.8 trillion figure cited by Obama) is that the sequester was never a policy designed to stay in effect, but to motivate us to act,” Furman said. “And that’s exactly what we are engaged in right now.”

CBO considers the sequester as current law — and it is. But if opponents want to be sticklers on that point, Furman notes that the CBO also assumes that war spending and emergency Sandy relief will continue at current levels year after year — even though those expenses are expected to drop.

Baselines make a big difference when it comes to touting benefits or shortcomings of one plan or another. The Committee for a Responsible Federal Budget plugged the president’s budget into five different baselines to show how various budgeting assumptions affect the projected savings from the plan.

Josh Gordon, policy director with the Concord Coalition, told us in a phone interview that ideally, the president would have said that his plan reduces deficits by $600 billion relative to where things stand right now with the sequester in place. But it’s also perfectly plausible to present the numbers as part of an ongoing deficit reduction effort that began with the  Budget Control Act.

“I think that’s a valid way to look at it,” Gordon said. “I don’t think there’s a big attempt to mislead here. The key is that even though the sequester is current law, it’s debatable whether it is possible to keep it up in its current form for 10 years. I would argue that it is not sustainable for 10 years in its current form.”

Obama cited the nearly $2 trillion worth of deficit reduction in his budget in the context of having previously reduced deficits by $2.5 trillion since 2011. If Republicans want to argue that Obama’s plan only includes $600 billion worth of cuts, then they should credit him with helping to trim deficits by $3.6 trillion already (instead of just $2.5 trillion).

“This debate about the number of dollars in deficit reduction in the plan is really a secondary discussion,” Gordon said. “The only thing that matters is where it ends up.”

Are Deficit Reductions Big Enough?

The president repeated the exaggerated claim that his budget brings deficit reduction to a level that “independent economists believe we need to stabilize our finances.” Independent economists say it’s not enough to stabilize the debt.

Obama, April 10: Over the past two years, I’ve signed legislation that will reduce our deficits by more than $2.5 trillion — more than two-thirds of it through spending cuts and the rest through asking the wealthiest Americans to begin paying their fair share. …  My budget will reduce our deficits by nearly another $2 trillion, so that all told we will have surpassed the goal of $4 trillion in deficit reduction that independent economists believe we need to stabilize our finances.

He made the same claim in his State of the Union address in February. And as we said then, both the nonpartisan Concord Coalition and the bipartisan Committee for a Responsible Federal Budget disagree with Obama’s statement.

The Concord Coalition said in January that $4 trillion in deficit reduction “would hardly mean the ‘job is finished.’ ” After Obama released his budget, the Concord Coalition said it was a “credible framework,” but called for a “more ambitious” bipartisan attempt to reduce the debt.

CRFB in February gave the president credit for “notable” progress so far, but said that “declaring victory” with a total of $4 trillion in deficit reduction “would be dangerous.” The budget watchdog group explained that “it would leave no margin for error, would result in slower economic growth, would leave little fiscal flexibility, and would have little chance of stabilizing the debt beyond the ten-year window.”

So, how does the president figure “independent economists” had given the $4 trillion reduction their stamp of approval? We asked the White House about that in late February, and we were referred to a report by the left-leaning Center on Budget and Policy Priorities and a statement made by Laura Tyson, a former chair of the White House’s Council of Economic Advisers, in an interview on CNBC. Not exactly the most “independent” sources.

The CBPP said in a Feb. 11 report that an additional $1.5 trillion in deficit reduction (on top of previous deficit reduction of about $2.5 trillion) “could stabilize the public debt over the coming decade.” The CBPP went on to say that “while stabilizing the debt during the decade ahead won’t permanently solve our fiscal problems, it would still represent an important accomplishment.”

As for the president’s $2.5 trillion in deficit reduction, which he said he had enacted in the past two years, those reductions depend on the actions of future Congresses. The figure is for deficit reduction through fiscal 2022, and it comes mainly from the Budget Control Act of 2011, which placed caps on discretionary spending beginning in 2012, and the American Taxpayer Relief Act of 2012, which increased taxes on the top 1 percent of taxpayers. Congress would have to adhere to the budget caps in the Budget Control Act in future years in order for the reductions to materialize.

– Robert Farley and Lori Robertson