Does It Matter If the President's War Savings Are Fake?
Yesterday, I described the war savings proposed in the president's debt plan as "Washington's favorite budget gimmick." The administration is artifically boosting its plan's total deficit reduction figures by a little more than $1 trillion by telling the Congressional Budget Office to factor in savings that would likely occur even if the plan didn't pass.
At The Washington Post, Ezra Klein argues that it's not very important whether the Obama administration's $1.1 trillion in war savings are "fake." After all, the issue with the savings isn't that they won't happen at all. It's that they'll happen no matter what.
Instead, Klein suggests, the plan should be judged based on whether or not it effectively stabilizes the federal debt:
The real question for the president's plan — or any plan — is whether it stabilizes the debt-to-GDP ratio at an acceptable level. If so, then it's good enough. If not, then it's not. That's what the market cares about, and that's what we should care about. According to the White House's projections, their plan will leave debt-to-GDP at slightly above 70 percent in 2012.
Long-term debt stabilization is important. By that measure, though, the president's plan still isn't up to spec. In general, a stable federal debt is one that holds steady at less 60 percent of GDP. In the long term, that's going to require substantially slowing the projected growth of entitlement spending. The $320 billion in Medicare and Medicaid cuts the plan offers don't even come close. That's why the debt wonks at the Committee for a Responsible Federal Budget (CRFB) had this to say about the plan:
[The president's plan] would not be big enough to bring down the debt to sustainable levels. Also, the plan does not make the kind of changes to entitlement programs that are needed to stabilize the debt over the long-term, and completely avoids offering solutions for Social Security reform.
Yesterday, CRFB President Maya MacGuineas told The Washington Post that the administration's plan "doesn't produce any more in realistic savings than the plan they offered in April." The White House, MacGuineas said, "filled in details, repackaged it and replaced one gimmick with another. They don't even stabilize the debt. This is just not enough."
Of course, when it comes to debt and deficit reduction, the Obama administration has never offered enough. Back in 2010, then-budget director Peter Orszag admitted to Rep. Paul Ryan that the president's budget didn't actually hit the administration's own deficit targets without the aid of the president's deficit commission—a commission whose eventual recommendations the president has essentially ignored.
The larger problem with the war-savings claim is that it gives the sense, yet again, that the administration is intentionally trying to mislead the public about its budgeting, especially since the Obama team ran on a promise to eliminate budgeting BS and be straight with the public about the deficit. I doubt most people hear that the president has a proposal to cut the deficit by $4 trillion and immediately think, "Ah! So the president has a proposal to reduce the deficit by $3 trillion through taxes and other reductions from baseline spending projections, plus tell the CBO to account for $1 trillion or so in war savings that were already expected to happen."
