His remarks just now at the Federal Budget Summit featured two priorities and one glaring omission:
More honest accounting: Obama said the key to getting the deficit under control is to account honestly for money that the government spends each year off its books. Among other things, that means putting the wars in Iraq and Afghanistan into the regular budget, rather than funding them through emergency appropriations. This approach has potential benefits and drawbacks. On one hand, the war supplemental has become a vehicle for off-budget pork-barrel spending, and putting it into the regular defense budget will take away some opportunities for congressional mischief. On the other hand, the previous administration feared that if it put the war money into the DOD’s baseline, any attempt to reduce that inflated number would be attacked as a cut in defense spending — i.e., the wars would end, but the extra $150 billion a year would stay in the DOD’s budget. This possibility doesn’t concern me at this point. Obama is desperate to cut the budget somewhere, and his advisers have mentioned that they will pay for their new domestic spending in part by winding down the war in Iraq.
But for all of Obama’s talk about honest accounting, he said nothing in his speech about the government’s biggest accounting trick: its failure to correctly account for its long-term Social Security and Medicare liabilities the way a private company would account for similar liabilities. Former CBO economist Kent Smetters recently told NPR that if the present-value shortfalls in the funding for these two programs were properly accounted for, that would add $2 trillion to the deficit this year alone. I seriously doubt that Obama is going to start accounting for liabilities of that magnitude on the government’s books.
A line-by-line audit of government programs: Obama repeated his campaign pledge to go through the federal budget line by line looking for savings, and offered the recent streamlining of a few Department of Agriculture programs as evidence that he is serious about this promise. His claims would have more merit, of course, if he hadn’t voted for a monstrous $300 billion farm bill last year. He also stressed the importance of sticking with congressional PAYGO rules, even though his own party has thrown those rules out the window whenever convenient since reinstituting them two years ago.
No mention of tax increases: We’ve gotten wind of Obama’s planned tax increases through various news reports — so far as we know, he will let the Bush tax cuts on the top two brackets expire and keep the estate tax rather than letting it expire as planned — but he decided to downplay these tax hikes this afternoon. Maybe he will make his case for higher taxes during his State of the Union Address tomorrow. If so, it will be interesting to see how Congress reacts.