Obama budget charades

Charles Krauthammer


February 18, 2011 12:00 A.M.

Barack Obama's Louis XV Budget
Unlike the French monarch, Obama is in denial of the coming deluge.

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Five days before his inauguration, President-elect Barack Obama told the
Washington Post that entitlement reform could no longer be kicked down the
road. He then spent the next two years kicking - racking up $3 trillion in
new debt along the way - on the grounds that massive temporary deficit
spending was necessary to prevent another Great Depression.

To prove his bona fides, he later appointed a deficit-reduction commission.
It made its report last December, when the economy was well past recession,
solemnly declaring that "the era of debt denial is over."

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That lasted all of two months. The president's first post-commission budget,
submitted Monday, marks a return to obliviousness. Even Erskine Bowles,
Obama's Democratic debt-commission co-chair, says it goes "nowhere near
where they will have to go to resolve our fiscal nightmare."

The budget touts a deficit reduction of $1.1 trillion over the next decade.

Where to begin? Even if you buy this number, Obama's budget adds $7.2
trillion in new debt over that same decade.

But there's a catch. The administration assumes economic-growth levels
higher than private economists and the Congressional Budget Office predict.
Without this rosy scenario - using CBO growth estimates - $1.7 trillion of
revenue disappears and U.S. debt increases $9 trillion over the next decade.
This is almost $1 trillion every year.

Assume you buy the rosy scenario. Of what does this $1.1 trillion in deficit
reduction consist? Painful cuts? Think again. It consists of $1.6 trillion
in tax hikes, plus an odd $328 billion of some mysterious bipartisan funding
for a transportation trust fund (gas taxes, one supposes) - for a grand
total of nearly $2 trillion in new taxes.

Classic Obama debt reduction: Add $2 trillion in new taxes, then add another
$1 trillion in new spending and, presto, you've got $1 trillion of debt
reduction. It's the same kind of mad deficit accounting in Obamacare: It
reduces debt by adding $540 billion in new spending, then adding $770
billion in new taxes. Presto: $230 billion of "debt reduction." Bialystock &
Bloom accounting.

And what of those "painful cuts" Obama is making to programs he really cares
about? The catch is that these "cuts" are from a hugely inflated new
baseline created by the orgy of spending in Obama's first two years. These
were supposedly catastrophe-averting, anti-Depression emergency measures.
But post-recession they remain in place. As a result, discretionary
non-defense budget levels today are 24 percent higher than before Obama - 84
percent higher if you add in the stimulus money.

Which is why the supposedly painful cuts yield spending still at
stratospheric levels. After all the cuts, Department of Education funding
for 2012 remains 35 percent higher than in the last pre-emergency pre-Obama
year, 2008. Environmental Protection Agency: 18 percent higher. Department
of Energy: 22 percent higher. Consider even the biggest "painful cut"
headline of all, the 50 percent cut in fuel subsidies for the poor.
Barbaric, is it not? Except for the fact that the subsidies had been doubled
from 2008 levels. The draconian cut is nothing but a return to normal
pre-recession levels.

Yet all this is penny-ante stuff. The real money is in entitlements. And the
real scandal of this budget is that Obama doesn't touch them. Not Social
Security. Not Medicaid. Not Medicare.

What about tax reform, the other major recommendation of the deficit
commission? Nothing.

How about just a subset of that - corporate tax reform, on which Republicans
have signaled they are eager to collaborate? The formula is simple:
Eliminate the loopholes to broaden the tax base, then lower the rates for
everyone, promoting both fairness and economic efficiency. What does the
Obama budget do? Removes tax breaks - and then keeps the rate at 35 percent,
among the highest in the industrialized world (more than twice Canada's, for
example).

Yet for all its gimmicks, this budget leaves the country at decade's end
saddled with publicly held debt triple what Obama inherited.

A more cynical budget is hard to imagine. This one ignores the looming debt
crisis, shifts all responsibility for serious budget-cutting to the
Republicans - for which Democrats are ready with a two-year, full-artillery
demagogic assault - and sets Obama up perfectly for re-election in 2012.

Obama fancies his happy talk, debt-denial optimism to be Reaganesque. It's
more Louis XV. Reagan begat a quarter-century of prosperity; Louis, the
deluge.

Moreover, unlike Obama, Louis had the decency to admit he was forfeiting the
future. He never pretended to be winning it.

- Charles Krauthammer is a nationally syndicated columnist. C 2011 the
Washington Post Writers Group.