Opinion

A legacy of budget trickery

No more budget gimmicks? That’s what outgoing White House budget director Peter Orszag promised as the Obama team prepared to take control of the White House. “The president prefers to tell the truth, rather than make the numbers look better by pretending,” he told The New York Times.

But numbers games turned out to be Orszag’s specialty. He’s set to step down at the end of July, but for the last 18 months, he’s presided over a wave of fiscal trickery.

This year’s White House budget, which Orszag played a key role in preparing, is a prime example.

When fiscal planners make a budget, they have to create what’s known as a “baseline scenario.” It’s an assumption about what the future holds without budgetary changes — in essence, “here’s what will happen if we do nothing.” Budget wonks then measure their proposed changes in comparison to what would have happened if we’d stuck to the baseline.

In the federal budget process, the baseline scenario is typically based on current law. But the Obama administration has argued that it should be able to work from “current policy.” That way, they can stuff all sorts of expensive future changes into the baseline.

Changing the baseline doesn’t generate any actual savings. But it allows the administration to ignore certain policies and only measure the changes that produce favorable results.

So this year, the White House decided to assume the cost of several provisions from its stimulus bill — expansions of the child tax credit, the Earned Income Tax Credit, and Pell Grants — into its baseline. Those policies were all explicitly created to be temporary. But by quietly assuming they’ll continue on, the administration avoids accounting for $216 billion.

Congress has its own trickery. There’s a pay-as-you-go requirement that says every spending hike must be accompanied by a tax increase or cut somewhere else. But Congress disregards these rules all the time. Since 2007, Democrats in Congress have violated PAYGO requirements to the tune of nearly $1 trillion.

One of the ways they’ve done this is by labeling new outlays “emergency” spending, which allows Congress to skirt offset requirements. This week’s extension of unemployment benefits, for example, was passed as an “emergency” spending bill — despite the fact that it was known well in advance that unemployment benefits would run out.

And then there are the airy promises to somehow eliminate operational waste. The 2010 budget, for example, includes $132 billion in “program integrity” savings. But it’s not a real spending cut in the sense that it’s actually attached to anything. Instead, it’s a vague assurance that the White House hopes to make the government more efficient — allowing them to claim big, impossibly precise savings claims.

Under Orszag’s watch, budget gimmicks weren’t merely used as a way of cleaning up the federal budget. The biggest entitlement expansion in decades — ObamaCare — was packed full of accounting legerdemain.

After initial drafts of the law proved far too expensive, ObamaCare’s authors knew they had to meet two criteria: Keep total spending for the first decade below a trillion dollars, and make sure the Congressional Budget Office reports the law will reduce the deficit.

The White House and its allies in Congress succeeded, but only by piling on the gimmicks. So, for example, in order to keep the total first-decade cost down, ObamaCare delayed the bulk of the spending in the bill until 2014 — meaning that the 2010-2019 10-year score only accounted for six years of spending.

The official estimates also conveniently omitted hundreds of billions in additional spending that will be necessary to implement the law. According to an estimate by former CBO director Douglas Holtz-Eakin, running ObamaCare will eventually require $274 billion in extra spending.

Indeed, in a paper published in the June issue of the journal Health Affairs, Holtz-Eakin estimated that, once all the budget gimmickry is removed, the law will increase the deficit by more than half a trillion dollars — and that’s just in the first 10 years.

Under Orszag’s watch, budget gimmicks became a way of life for the Obama White House. Both he and Obama may want to pretend their budget numbers tell the truth, but at this point, it’s tough to see their constant fiscal fakery as anything other than a long exercise in make believe.

Peter Suderman is an associate editor at Reason magazine.