The Rosy Scenario System

Optimism won't fix America's fiscal problems.

President Barack Obama is a budgetary optimist. When he announced his budget proposal last month, he framed it hopefully, as a welcome return to fiscal sanity and a path towards a better tomorrow. It was time that Washington acted “responsibly,” he said. “After a decade of rising deficits, this budget asks Washington to live within its means, while at the same time investing in our future. It cuts what we can’t afford to pay for what we cannot do without.”

If you ask me, what we could do without is misleading presidential rhetoric on the budget. Obama’s spending plan makes minor adjustments but leaves the country on an unsustainable debt trajectory. It’s like swerving an inch to avoid a pebble when you’re speeding toward a concrete wall.

Even under the rosy scenarios cooked up by the White House economic team, the national debt is projected to rise by more than $7 trillion over the next decade—hardly a model of fiscal responsibility. But should we actually believe the president's projections? Just as it’s worth checking into a manufacturer’s product claims before swiping your credit card, it’s worth verifying what the administration claims about its own budget.

That’s where the Congressional Budget Office (CBO) comes in. Think of it as Consumer Reports for economic policy. And according to a report released by the office last week, the president’s proposal doesn’t even meet the measly goals the president claimed.

For example, the president’s economic team argues that the White House budget proposal would put the federal government into “primary balance.” It’s a weasely term to begin with: It means that tax revenues are high enough to cover the current year’s spending on things like staff and programs. But as always, there’s a loophole. A budget that’s in “primary balance” ignores the money spent paying interest on the ever-rising national debt.

That’s sort of like saying that a car is in “primary working order” because all the parts are in good shape aside from the engine. America will spend $207 billion simply paying interest on the federal government’s debt this year alone. By 2021, that figure is projected to rise to $844 billion. At the same time, the CBO projects we'll add almost $9.5 trillion in new debt. Yet somehow this is what passes the president’s test for “living within our means.”

Worse, according to the CBO, the president’s budget fails even that pathetic standard. In 2018, when the government comes closest to achieving balance, the CBO still predicts a budget that’s $177 billion short of the president’s stated goal of "primary balance."

The rest of the report reveals similar discrepancies. For example, the president proposes to spend $300 billion on what’s known as the “doc fix,” and thus avoid cutting Medicare reimbursements to physicians. Obama’s budget says the spending will be paid for through spending reductions, and therefore doesn’t count the spending towards the deficit.

But what spending, exactly, will be cut in order to pay doctors? As the CBO explains in a revealing footnote, the White House proposal doesn’t actually say how the White House will pay for the cuts beyond the first two years. It’s a magic asterisk, and so the CBO gives the administration no credit. It's a telling sign. The White House knows precisely what it wants to spend, but not what it wants to cut.

Overall, the CBO projects that total debt will rise by $2.3 trillion more than the president’s projections. The discrepancy is largely a result of differing expectations for the country's future economic performance. The White House projects a more optimistic scenario, with an economic engine humming far more powerfully than the CBO thinks is likely.

It’s true, of course, that the CBO’s growth projections may well be wrong. The CBO has been wrong before. Predictions, as they say, are hard—especially about the future. But it’s also worth remembering that the administration has a clear political incentive to project higher growth and thus inflate its numbers. Indeed, when the CBO was created in 1974, part of the intent was to provide an unbiased check on the administration’s politically-motivated projections.

What the discrepancy means, though, is that the president’s budget is, at best, a risky bet on brisk economic growth. His profligate spending plan is built around a best-case scenario, like a job-hunter signing up for a new car loan on the basis of a good feeling about a job interview. Maybe it works out. Maybe it doesn’t. But it’s not a responsible way to plan for the future. In the end, no amount of optimism will pay down America’s debts.

“Families across this country understand what it takes to manage a budget,” Obama said in February. Sadly, it’s all too clear that the president of the United States doesn’t.

Peter Suderman is an associate editor at Reason magazine. 

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  • ||

    You just have to have enough faith.

  • Faith||

    How much can you afford?

  • ||

    Less than the left I guess.

  • ||

    It’s true, of course, that the CBO’s growth projections may well be wrong.

    Yeah. They could have overstated growth, too. (But the chances that a major earthquake in one of the US's main trading partners, an oil price shock brought on by an unnecessary war in the Middle East and a fiscal crisis in Europe could slow the economy are just too remote to consider.)

  • Fiscal Meth||

    "Why Optimism Won't Fix America's Fiscal Problems"

    OOH, I know! Because consciousness doesn't have the power to create or alter reality, only to perceive it.

  • Realist||

    "OOH, I know! Because consciousness doesn't have the power to create or alter reality, only to perceive it."
    And then in only a very few!

  • Old Mexican||

    Optimism won't fix America's fiscal problems.


    You also need pixie dust, cinnamon... and love.

  • ||

    Unicorn shit helps, too.

  • Realist||

    Lots and lots of Unicorn shit!

  • ||

    Well, then, let's call Tony. He has a herd of unicorns.

  • ||

    And he has piles of shit to spare...

  • Rich||

    It’s like swerving an inch to avoid a pebble when you’re speeding toward a concrete wall.

    We're OK as long as we don't drive into the ditch or off a cliff.

  • Luap Leiht||

    So you're cool with hitting the wall?

    Could you pull over so I can get out please?

  • Old Mexican||

    It's true, of course, that the CBO's growth projections may well be wrong.


    Especially now that the USA is fighting another war with expensive weapon systems and port-a-potties...

  • Realist||

    "Especially now that the USA is fighting another war with expensive weapon systems and port-a-potties..."
    May find some Unicorn shit there.

  • Luap Leiht||

    It's possible. The ADA requires that all port-a-potties be accessible by all Americans, including unicorn-americans.

  • ||

    1- Bush leaves $1.3 trillion annual deficit after Clinton leaves surplus.

    2- CBO projects $9.5 trillion debt over next decade including 3x today's interest payments on debt.

    3- Reason -- What the fuck, Obama? Why can't you fix the budget?

  • Old Mexican||

    4.- You can't fix stupid, and stupid can't fix budget.

    Stupid.

  • Old Mexican||

    Re: shrike,

    1- Bush leaves $1.3 trillion annual deficit after Clinton leaves surplus.


    There was no surplus, only an accounting "trick."

  • Combaticus||

    I believe in the budget surplus.

    I also believe in Santa Claus, the Tooth Fairy...

  • sevo||

    shrike|3.23.11 @ 4:55PM|#
    "More lame excuses for obamaboy with fuck thrown in"

    You never disappoint; stupidity on display daily.

  • Bill||

    The one thing about Reason is that they are consistent and berated Bush for many, many things including the budget.

    But you know that, Shreek.

  • BigRed||

    Please lets get some facts straight. There was no "surplus" under Clinton, it was a paper game. Just like the one the annointed one is trying to pass with the help of his minions in the MSM.

    Can someone send some Adults to the White House, Congress and the rest of the gov't and let the kids go home. They have made enough of a mess already.

  • Luap Leiht||

    I'm not sure we could find any adults who would actually want the job.

  • Vermont Gun Owner||

    Obama voted for TARP, which is the majority of the $1.3 trillion you mentioned, so he's on the hook for it too.

  • Bob||

    One of the more damaging legacies of the dot bomb bubble is that people like you somehow assume we quickly return to it as a state of normalcy.

  • ||

    I find it funny on any private prospectus the CEO has to prepend his statements with massive legaleasogasm about 'forward looking statements' and a million qualifiers. Because he might be liable for what he says if its not true by some measure.

    Yet politicos can run their mouths and run their mouths and sunshine comes out their assholes and mouths at the same time. Not liable for any of it.

    Only other place where speeches about money or 'forward looking statements' that need infusions of your money are so protected (no matter how outlandish or bizarre) is religion. Isn't a funny coincidence? What a joke.

  • ||

    Businesses are scary! Government is pure, full of caring servants of the public. It can do no wrong. It's not like governments have ever killed or wrongly imprisoned people or misused money or anything.

  • Luap Leiht||

    Government is full of non-unicorn shit.

  • some guy||

    "“Families across this country understand what it takes to manage a budget,” Obama said in February. Sadly, it’s all too clear that the president of the United States doesn’t."

    Oh, he knows how to manage a budget. He also knows that he'll no longer be the head of household when the whole thing goes bankrupt.

  • db||

    I think a Rand Paul '16 campaign would have a much better chance, since he'd have 6 years of Senatorial experience. He's vulnerable to charges of lack thereof until (at least) he surpasses Obama's senatorial tenure milestone.

  • db||

    This was meant for a different thread. weird.

  • ||

    One of the big political problems is the total ignorance of the people regarding the federal budget. In a 2010 survey
    (http://www.worldpublicopinion.org/pipa/articles/brunitedstatescanadara/670.php?lb=btda&pnt=670&nid;=&id;=)
    when asked to estimate how much of the federal budget goes to foreign aid the median estimate was 25 percent. (The real percentage is approx 1 percent).
    No wonder so many people believe we can balance the budget without raising taxes nor cutting in social security, health care and defense.
    And since the political class has long ago abandoned the notion of political courage ...

  • ||

    "Even under the rosy scenarios cooked up by the White House economic team, the national debt is projected to rise by more than $7 trillion over the next decade—hardly a model of fiscal responsibility"

    And they believe that this is just fine because they "cooked" a few bowls while justifying it all.

  • ||

    I would say that the books are as overcooked as a Mickey Dee burger that's been on the heat tray for the last 3 weeks.

  • ||

    Fundamental delusion concerning human action dominates most political speech and 99% of politically-directed action. That delusion is simply this: "Any act I take has no consequences other than the one or two which I intended that it have. There are no such thing as 'unintended consequences', only the actions of other people who are trying to defeat my noble goals." That delusion prevents any rational discussion of potential solutions to perceived 'crises' or to any real or imaginary problems. I do not address the underlying reality, which is simply that 99%+ of politicians and political solutions are not intended to do anything about the supposed problem, but rather to reward the politicians' friends, punish their enemies and improve their chances of re-election.

  • ||

    Another prime example of what I have been saying for two years; you can't believe a word from anyone in this administration, especially Obama.

  • Luap Leiht||

    Especially if he starts by saying "now let me be clear"

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  • MRX||

    After Obama, the Deluge

  • ||

    It's about tax revenue.

    In 2000, GDP was 9.821 trillion and individual income tax revenue was 1.004 trillion while corporate tax receipts were 207.8 billion. In 2010, GDP was 14.508 trillion while individual income tax receipts were 898.549 billion and corporate tax receipts were 191.437 billion. The economy is 47% larger yet income tax receipts are more than 10% lower.

    Now let's look at economic growth under the Clinton tax rates and compare with the Bush tax rates.

    From Jan 1993 until Jan 2001, real per capita GDP grew at an annualized rate of 2.65%

    From Jan 1993 until Jan 2001, real per capita GDP grew at an annualized rate of 1.12%

    Simply go back to the Clinton rates where we had more revenue and higher per capita growth rates and get health care inflation in line with the rest of the industrialized world and our budget problems are solved.

    CASE CLOSED

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  • john||

    I would say that the books are as overcooked as a Mickey Dee burger that's been on the heat tray for the last 3 weeks.

  • Natsu||

    Even under the rosy scenarios cooked up by the White House economic team, the national debt is projected to rise by more than $7 trillion over the next decade—hardly a model of fiscal responsibility"

  • Games||

    The one thing about Reason is that they are consistent and berated Bush for many, many things including the budget.

    But you know that, Shreek.

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    The one thing about Reason is that they are consistent and berated Bush for many, many things including the budget.

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