Analyzing the Clinton-Obama ‘Arithmetic’

by Douglas Holtz-Eakin

President Clinton’s speech at the Democratic National Convention got rave reviews in some circles. As usual, however, the budget world looks at things differently than the media and political echo chambers. At a time when the fiscal outlook of the federal government is a looming economic threat and, according to the Joint Chiefs of Staff, the No. 1 national-security threat, he disappointingly repeated (with his finger wagging) the claim that “arithmetic” showed that President Obama has a plan to reduce the deficit by $4 trillion.

But that’s not what the “arithmetic” shows. A realistic look at data from the Office of Management and Budget (OMB), Congressional Budget Office (CBO), House Budget Committee, Senate Budget Committee, and non-partisan budget analysts reveals no support for this claim.

Let’s start with President Obama’s budget itself. Table S-2 shows that the “adjusted” baseline deficit is $8.663 and his proposals yield a deficit of $6.684 trillion. So, “arithmetic” says that President Obama has a plan to reduce the deficit by $1.979 trillion — less than half the claimed savings. Unfortunately, even that number is built upon two huge budget gimmicks.

One involves “adjusting” the baseline to include new spending that increases the deficit, pretending that the spending already exists. In this category are the cost of paying Medicare doctors ($429 billion) and outlays for Pell grants ($50 billion) and emergencies ($80 billion). That brings gimmick number 1 to a total of $559 billion. The second is to claim as “savings” reductions in war costs that would happen regardless. This totals $848 billion for a gimmick total of $1.407 trillion.

The upshot is that President Obama’s budget shows a plan that will reduce deficits by only $50 billion or so a year in an era of annual deficits exceeding $1 trillion.

Strike 1.

#more#There’s always the chance OMB just made a mistake, right? Turning to CBO’s analysis, the president’s budget concludes that it raises the deficit by $3.5 trillion over 10 years. That’s not promising. Unfortunately, the CBO uses a current-law baseline, so a lot of that increase is keeping large parts of the 2001 and 2003 tax laws from expiring. The House Budget Committee adjusts the CBO baseline to provide an apples-to-apples comparison, which reveals that the president’s budget reduces the deficit by $577 million.

Strike 2.

Finally, according to the Committee for a Responsible Federal Budget (CRFB), the president’s plan reduces the deficit by $2.4 trillion compared to a “plausible” baseline. (For perspective, CRFB says the House Republican budget would reduce the deficit by $5.6 trillion relative to this baseline.

Strike 3.

I could go on to make the same points using data from the Senate Budget Committee, the Bipartisan Policy Center, or others. But three strikes is enough, it works for America’s favorite pastime.

Bill Clinton provided a full-throated defense of President Obama’s economic and fiscal policies, the main ingredient of which is red ink. Unfortunately, the defense is built on claims that cannot be reconciled with the facts. It’s arithmetic. 

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