Obama’s first budget fails to match his rhetoric

Anything as mammoth as the $3.6 trillion federal budget President Obama unveiled Thursday is bound to have its strong and weak points. Let’s start with a few of the things the president did right.

In an important symbol of budgetary truth-telling, Obama put spending for the wars in Iraq and Afghanistan in the budget instead of pretending, as President Bush did for years, that these were temporary emergencies that didn’t have to be counted as ordinary spending. More substantively, the president took a potentially useful step toward making sure every American has health coverage by carving out a reserve fund to help pay for it, though critical details are still to come. Obama also made room for an additional $250 billion in bank bailout money. There’s no more pressing problem for the survival of the economy. And in a continuation of one of Bush’s best if most quixotic anti-spending crusades, Obama proposed ending subsidies for farmers who make more than $500,000 a year. Given the support for wealthy farmers in Congress, good luck on that one.

If only all the news were good. The $634 billion reserve fund for health care sounds impressive, but it’s just half the projected cost of extending medical insurance to everyone. And the honesty on Iraq and Afghanistan seems to go only so far: After asking for $130 billion for the wars in 2010, Obama sets aside just $50 billion a year after that, which seems unrealistically low, even as many U.S. troops pull out of Iraq.

But the biggest disappointment is Obama’s deficit reduction targets. A flood of red ink is unavoidable for a year or two to save the economy from collapse. This would produce the largest deficits in inflation-adjusted terms since World War II. But after that, the president had a chance to live up to his rhetoric and set ambitious targets for getting the budget on track. He failed.

By the last year of his term in 2012, Obama projects a deficit of $581 billion, a staggering number bigger than any of Bush’s deficits. True, it’s less than half the stupendous $1.8 trillion deficit projected for this year, and compared with the size of the economy — the way economists prefer to compare budget numbers over the years — it’s 3.5%, way down from the 12.3% for 2009. In those same comparative terms, though, it and deficits projected through 2019 are no better than the Bush-era deficits, which means that Obama’s ambition for fiscal responsibility is no better than Bush’s. Since Bush holds the record for running up debt, Obama could hardly have aimed lower.

Worse, the Obama administration’s budget gets those uninspiring deficit targets with rosy economic projections. The White House projects a much healthier economy than most economists. It sees a downturn much less severe this year and a recovery sharply better in 2010 compared with benchmark forecasts. Even Obama’s own “stress tests” for troubled banks use worse economic projections than his budget does.

Obama calls this honest accounting. At best, it’s optimistic accounting, and if it proves starry-eyed, the credibility of Obama’s far-reaching agenda will be in doubt.
Posted at 12:22 AM/ET, February 27, 2009 in Politics, Government – Editorial, USA TODAY editorial | Permalink