Thanks to a late-Friday “leak” from the White House (note the 6:50 pm date stamp on the article), we now know the bottomlines of what will be in the mid-session budget review the Office of Management and Budget will release on Tuesday. The deficit will be lower than expected in 2009 and, as Pete correctly predicted, higher than previously forecast in 2010 and beyond.
This will lead to the three almost-always-most-likely-to-be-asked deficit-related questions being asked when the OMB and CBO mid-session reviews are actually released.
1. Whose fault is it?
The usual partisan divide will immediately occur with this question: Democrats will blame George W. Bush and Republicans will blame Barack Obama.
Most of the deficits that will be projected to occur from 2009 to 2019 by both OMB and CBO will be the result of policies already in place when Obama arrived and would have been continued regardless of who was elected. The vast majority of the changes, for example, are the result of revised economic forecasts and not new policies enacted since Inaguration Day.
In addition, John McCain strongly supported continuing all of the tax cuts now scheduled to expire at the end of 2010 (As Diane Rogers continues to point out, Obama wants to continue most of them) and continuing the patch the alternative minimum tax that Obama agreed to as part of the stimulus plan. He also would have supported the additional funds for activities in Iraq and Afghanistan that have been provided. And while it’s a safe bet that an economic stimulus proposed by a McCain administration would have included somewhat different policies, the bottomline impact on the deficit would have been similar to what was adopted earlier this year.
2. Who’s responsible for dealing with it?
This one is simple: Obama. He may not like the budget hand he was dealt, but he’s the president. He shoudl be held responsible for dealing with it when the time comes.
3. What needs to be done about it?
There will be an immediate call by some for the White House to abandon all of its plans on everything from health care to energy. Some will demand that any parts of the stimulus spending not yet spent and the taxes not yet cut be abandoned. There will be a call for a summit, a commission, changes in the administration’s economic team, and for the White House to submit a new budget with a deficit reduction plan.
All of this will be nonsense and premature.
First, nothing that has yet happened with the economy indicates that there is any justification for the stimulus to be abandoned. In fact, just the opposite is true.
Second, summits and commissions — especially those dealing with spending and taxes — don’t work and aren’t worth the time and money needed to make them happen. As someone who has served as a member of a budget-related commission, I know from personal experience that, no matter how much you might want it to be otherwise, the politics cannot be taken out of spending and taxing decisions.
Third, this is not the time for the administration to propose deficit reductions. Assuming that the current economic forecasts are as correct as they increasingly seem to be, that should happen when the president sends his fiscal 2011 budget to Congress next January or February. Proposing them now would unnecessarily complicate the politics of every issue being dealt with currently and that is likely the primary motivation for those who call for a deficit reduction effort between now and the end of the the year.