A tale of two budgets

Understandably, President Obama wants to blame his predecessor for the horrifying state of the Federal budget.  Two days ago, the President’s chief of staff claimed to have inherited a $1.7 trillion deficit:

“First, this is a $1.7 trillion deficit he inherited. Let’s be clear about that. We inherited this deficit and we inherited $4 trillion of new debt,” Emanuel said. “That is the facts.”

Emanuel is claiming that President Obama’s entire proposed 2009 deficit was inherited from President Bush.  “That is the facts.”  The actual numbers tell a somewhat different story.

Washington operates on a bizarre system in which budgets are projected using a moving baseline.  Budget increases are assumed to take place automatically. (Any budget freeze is therefore a cut.)  The Congressional Budget Office’s official projection (pdf) of the 2009 baseline indicates a $1.19 trillion deficit, up from $455 billion in 2008 (actual).  That was in January.  A week ago, numerous news articles were referring to a $1.3 trillion deficit.  I’m not sure what that’s based on (I’m unable to find any CBO estimates more recent than January 2009), but it’s plausible that the budget picture has worsened $100 billion in the last two months.

The White House, through the Office of Management and Budget, does its own calculations.  The OMB’s own calculation (pdf, page 5) puts the baseline 2009 deficit at $1.51 trillion.  So where is Emanuel getting his 1.7 figure?  That’s the deficit in President Obama’s proposed 2009 budget (pdf, page 2) , or $1.752 trillion to be precise.  Blaming President Bush for automatic spending increases might be fair (that’s how Washington operates), but trying to blame him for President Obama’s budget choices is a bit much.

In fact, for 2009 we have a rare opportunity to compare two budgets. President Bush, after all, submitted a 2009 budget to Congress last year.  The Democratic Congress dropped it on the floor, hoping that a Democrat would win the election and propose a new budget more to their liking.  So how do the two budgets compare?

The 2009 Bush budget proposed a $400 billion deficit, but that was based on revenue estimates calculated before the financial crisis.  The situation now is much worse, but we can do a back-of-the-envelope calculation to see where the Bush budget would be today, had it been enacted.

Bush’s budget — which the Washington Post called “austere” — proposed $3.1 trillion in spending.  That figure didn’t include full funding for the War on Terror, so we need to adjust it.  Let’s assume that the war in 2009 costs what it did in 2008 (with the Surge over, that’s probably high), so that’s $200 billion where the budget only provides $70 billion.  An extra $130 billion bumps the Bush budget up to about $3.2 trillion.

On the revenue side, we’ll throw out the Bush numbers and start from the latest CBO estimate (pdf) of $2.36 trillion.  The Bush budget included a $146 billion stimulus plan (remember when that seemed big?), and if we assume that it was mostly tax rebates, that cuts revenue to $2.21 trillion.  Subtract revenue from spending, and we get a $1 trillion deficit.  That’s a bit more than half of the $1.75 trillion deficit in the Obama budget.

There’s one more interesting calculation we can perform, which I think best expresses the reckless spending we are rushing into.  That’s the deficit as a percentage of revenue.

The Bush budget proposed spending 15% more than revenue, but our calculation shows that it would have come in closer to 46%.  No one can survive for long, spending half-again their income, and severe adjustments would have been required.

The Obama budget proposes $3.9 trillion in spending against $2.2 trillion in revenue.  That’s a staggering overspending ratio of 80%, without even the justification of a world war.

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One Response to A tale of two budgets

  1. impala96 says:

    FIRST GOOD LOOKING BLOG

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