Deficit plans are never set in stone and often more a statement of policy values than a fiscal blueprint. President Obama's is no different. But digging into it offers interesting insight.
Does President Obama have a plan to cut the deficit by $4 trillion over the next 10 years? That’s an assertion he makes constantly on the stump. It’s one of the bullet points in the economic manifesto his campaign issued this week, too. The slim blue booklet calls the plan a “balanced approach” to reducing Uncle Sam’s flow of red ink, with $2.50 of spending cuts for every $1 in additional tax revenue from wealthy families and corporations.
Are these figures solid or notional, meat and potatoes or pie in the sky? Let’s unpack them a bit so we can gain some understanding of where Mr. Obama might steer the ship USS Federal Budget if he wins reelection on Nov. 6.
We’ll start by making a point obvious to those of us who consider Congressional Budget Office reports bedtime reading. When Obama says he’ll cut the deficit by $4 trillion over a decade, he’s not saying the US will be $4 trillion in the black over that period. What he’s insisting is that the US will accumulate $4 trillion less in red ink than it would have otherwise if it follows his outline.
So the debt, which is the accumulation of annual deficits, would still go up. Just not so fast. (Yes, the debt would go up under President Romney as well. He talks about putting the US on a “pathway” to balanced budgets, as opposed to balancing the budget right away.)
This raises a question: So Obama is saving $4 trillion compared to what? That’s a lot harder to answer than you might think. It involves budget baselines, and current law, and potential future changes, and what happens to the Bush tax cuts, and all sorts of trend lines that can change faster than a teenager’s phone bill. We won’t get into it.