Obama’s $4 Trillion in Deficit Savings: Checking the Fact Checkers

October 7th, 2012 at 10:22 am

Had a rousing debate with Doug Holtz-Eakin the other night on the NewsHour and wanted to highlight an important factual disagreement.

Toward the end, Doug argues that the $4 trillion dollars of deficit reduction over 10 years in the President’s budget is smoke and mirrors.  He’s wrong, but to be fair, he’s not alone.  Influential fact checkers have gotten this one wrong too.

Here’s my colleague Paul Van de Water’s explanation, and it’s pretty straightforward.  First, Doug’s just wrong, as I stressed in the segment, that the $4 trillion includes war savings.  Those are not counted here.  He’s right that $1.7 trillion in spending cuts (including interest savings) over ten years have already been enacted.  But he and some of the fact checkers apparently, and IMHO very weirdly, object to counting them because Congress and the administration have already agreed on them.

Huh?

There’s every reason to count those savings.  Imagine you began a diet six months ago and, with great effort, self-control, and exercise, you’d lost 20 pounds since then.  If someone asks you now today how much you’d lost on your diet, you don’t start counting yesterday and respond, “Um…seven ounces.”  You take credit for the savings weight loss that’s occurred since your diet began.

The President’s budget reduces discretionary spending by $1.5 trillion (not including $250 billion in interest savings), largely reflecting spending caps from last year’s Budget Control Act.  It is important to recognize that these spending reductions are relative to the Congressional Budget Office baseline used by the Bowles-Simpson commission.  In fact, as Richard Kogan shows here, these cuts account for 70% of the deficit commission’s discretionary cuts.

To bemoan, as many do, the President’s alleged rejection of Bowles-Simpson and at the same time, refuse to give him credit for working with Congress to implement $1.5 trillion of those cuts makes zero sense.  It’s like refusing to give a dieter credit for all the weight she lost since she went on the weight-loss plan that you insisted she go on.

The rest of the President’s deficit savings ($2.2 trillion; 1.7+2.2=3.9) come from other proposals in his budget that have yet to be enacted.  By the critics’ logic, somehow these savings are more real even though they haven’t occurred.  So now our dieter gets no credit for the weight she’s lost but does get credit for pounds she promises to lose in coming years.  Is it any wonder the public tunes out this stuff?

It seems clear that the refusal to accept the $4 trillion in deficit savings in President’s budget is politically motivated…I know…you’re shocked.  To admit that Obama’s been party to significant deficit reduction is as painful as admitting the unemployment rate went down last month.

Also, you’ll notice our little dust up at the beginning, where Doug mistakenly claimed that Gov. Romney plans to partially pay for his tax cut by letting the Bush tax cuts expire.  For budget wonks, this would imply that Mitt’s working off of current law vs. current policy.  The reason that matters, as Doug pointed out, is because it means Gov. R would have a lot more revenue from the full sunset of the Bush cuts with which to offset the $5 trillion 10-year cost of his big tax cut.

Problem is, as I asserted in the segment, that’s false, as Doug himself realized the next day (and was mensch enough to correct himself (right before the transcript)—don’t see too much of that in these here parts).   Both Romney and Ryan have of course constantly pledged to extend the Bush cuts.  The implication is that Romney still has fundamental math problems.  He can’t cut taxes 20% across the board, protect the middle class from any tax increases, and achieve revenue neutrality (i.e., not increase the budget deficit).

Them’s the facts.  They may not win the day everyday on TV.  They may not even survive the election cycle.  But here at OTE, they will continue to rule.

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8 comments in reply to "Obama’s $4 Trillion in Deficit Savings: Checking the Fact Checkers"

  1. foosion says:

    How does cutting the deficit, let alone figuring how to count it, address any of the real problems facing this country? The spending cuts that are part of every widely circulated plan just make the problems worse.

    We have high unemployment, slow growth and stagnant middle class wages. Cutting spending reduces employment, reduces growth and does nothing to help middle class wages. It reduces employment both directly (fewer teachers, police, firemen, etc.) and indirectly (fewer others needed to provide goods and services to them). An effect is reduced employee bargaining power, holding down wages.

    Our entire long-term deficit is due to healthcare costs that are about double those of the next most expensive country. These extra costs don’t lead to better healthcare.

    We have rising inequality, which is exacerbated by spending cuts (cutting spending that benefits the middle class).

    We’re at a time of record low interest rates. The government’s real (after inflation) cost of borrowing is about 0.4%. The market is not worried about deficits.

    It’s yet more evidence that government serves the most fortunate (who benefit from these policies, e.g., corporate share of national income is high and rising) at the expense of the rest of the population.


    • Jess says:

      That’s true, this is not the time for cuts but to follow FDR plan & create jobs. once below 6% unemployment we can start cutting the debt.


  2. tarheeldad says:

    Since the Right claims that unless the National Debt is reduced and the Deficit trimmed dire things will happen, why are their fixes always claimed to be revenue neutral?

    Seems to me just a subterfuge to shift costs to the Middle and Working classes while at the same time reducing services.

    THD


  3. wendy beck says:

    Keep using analogies like this:

    “It’s like refusing to give a dieter credit for all the weight she lost since she went on the weight-loss plan that you insisted she go on.”

    You make economics and politics more easily understandable to those who aren’t wonks. If I were Pres. Obama, in fact, I’d have an “analogist-in-chief”. You and Robert Reich are the best communicators we liberals have. Keep up the good work.


  4. Fred Donaldson says:

    Years ago, I ran a campaign to elect a state representative and the cost was borne almost entirely by the candidate, who had moderate means, and he received about $20,000 from the party.

    That same post today might go for hundreds of thousands of dollars, even a million – far more than the job’s pay, and likely even more than one could collect with modest bribes received and saved for the elected term.

    The result is that todsa candidates are bought before they even take office, not by bribes to pass legislation, but by legal contributions of immense sums that are the only path to election – a path strewn with television ads in a media that seldom condemns unlimited electioneering spending.

    The result: only folks who take the money in advance are elected. We no longer have to wonder if our officials will be crooks after they take office.

    Anyone bought by donors with money will rarely oppose the path to their next election. It’s “Upstairs, Downstairs” without a benevolent upper class, just a greedy class demanding austerity for the public and gluttony for themselves.

    Campaign finance reform? Did voters think this would occur under the current WH leadership, and so they refused to vote for a John McCain, who championed that fundamental first step in government reform? (McCain had this one great virtue.)

    Or did the Wall Street geniuses slickly decide to support a Democratic Party candidate with their money and cut much support to that GOP nominee – a Republican candidate who would have fought to reduce their campaign finance influence with politicians.

    What is the likelihood of honest folks in office, making budget decisions to benefit the public, not their (financial) supporters? It seems a thin hope, when you imagine thousands of lobbyists in D.C., tossing coins and corrupting, a modern version of the moneylenders Christ tossed from the Temple in exasperation?


  5. bakho says:

    If unemployment is lower than expected, the budget deficit will be even lower.
    If unemployment is higher than expected or if we slip into another recession, the budget deficit will be even higher.

    Clinton proved that budget surplus or deficit is a matter of having the right combination of tax rates and FULL EMPLOYMENT.

    It is silly to focus on the deficit when unemployment is too high. The best way to fix the deficit would be, Put more people to work & paying taxes. The Obama focus on deficit reduction is Misguided. Voters don’t give a RatsAss about the deficit. Voters want jobs.


  6. Michael says:

    10 year projections are made of stupid.


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