In one of the odder headlines passing through the National Review RSS feed on my Reader comes this: “The 2012 Budget Surplus that Disappeared.” Taking a break from studying for finals yesterday it piqued my interest enough to click on and read. National Review can really be hit and miss sometimes, but they rarely have boring pieces, and Jeff Rosen does not disappoint:
As the nation’s federal budget problem comes back into the spotlight, it has unfortunately been forgotten that as recently as 2008, the White House Office of Management and Budget and the Congressional Budget Office both issued spending forecasts that determined that the federal government would have a budget surplus in 2012 and continuing thereafter.
I was particularly interested in this information, mainly because I didn’t remember such a fact splashing the headlines in ’08. However, Rosen is correct that the CBO predicted budget surpluses starting in 2012:
And that’s where Rosen’s flirtation with being right ends:
Instead, while a recession and some temporary tax relief reduced the government’s revenues, federal spending soared, the surplus disappeared, and the federal debt increased by trillions of dollars.
During the Obama administration, instead of moving towards the projected surpluses, the federal deficit exploded to a record $1.4 trillion in 2009, $1.3 trillion in 2010, and $1.3 trillion in 2011 — a level nearly triple the highest deficit ever recorded previously. The key role of the Obama administration’s ongoing spending increases demands more attention[…]
Sorter Rosen: So we had an itty-bitty recession thingie but it’s the Obama administration’s fault for not moving towards the projected surpluses! Except that those surplus projections had two heavy caveats, something Rosen choses to ignore the significance of and instead skips to the second paragraph (my emphasis in bold):
Economic performance worse than that suggested in CBO’s forecast could significantly decrease projected revenues and increase projected spending. Furthermore, policy changes intended to mitigate the economic slowdown would, by design, tend to increase the budget deficit in the short term.
CBO expects the economy to rebound after 2008, as the negative effects of the turmoil in the housing and financial markets fade. Under the assumptions that govern CBO’s baseline, the budget deficit will amount to 1.5 percent of GDP or less each year from 2009 to 2011. Subsequently, the budget will show a small surplus of 0.5 percent of GDP in 2012 and remain near that level each year through 2018 (the end of the current 10-year projection period).
The CBO lays down two caveats, then proceeds with two points that those caveats were meant to address. Ignoring the first means you completely miss the point of what the CBO was trying to say on the first page of the report. Which is a fancy way of saying two things:
1. If something worse happens to the economy, such as worldwide economic catastrophe, then our budget outlook is wrong.
2. The assumptions that govern the CBO baseline is one that assumes no policy changes, which never happens.
Essentially, in order to blame President Obama for failing to fulfill a fantasy 2008 projected CBO surplus, you have to ignore the effects of the worst economic collapse since the Great Depression, assume zero increased war spending (and the end of BOTH wars), AND assume the expiration of the Bush tax cuts. The Cirque-du-Soleil-like mental leaps and omissions required to get the point where you can solely blame the President is painful to read. Trying to place the recession’s role in the deficit in the “besides-the-point” category is ridiculously dishonest:
The red line represents federal government receipts and the blue line is federal government spending (the gap represents the deficit). If I was wholly incapable of basic reasoning and only read Rosen, I would think that this graph couldn’t exist. Spending has soared! It’s not a revenue problem, it’s a spending problem! Yet unless my eyes deceive me, that spending trend looks a lot more similar to pre-recession times that revenue.
It is realistic and fair to say that spending is up over what might have otherwise happened without a recession. Government spending responds to downturns, much of it through automatic stabilizers, but so does government revenues. It’s much more clear that the recession blew the deficit gap wide-open, not just “spending” (which is, of course, is ridiculous to solely attribute to the President anyway).
What could possibly make Rosen’s hilariously wrong analysis of our current budget situation more bitterly ironic? How about this:
— Jeff Rosen served as general counsel and senior policy advisor at the White House Office of Management and Budget during 2006–2009, and is now a lawyer in Washington, D.C.
*Update: I belatedly noticed this Jonathan Chait piece generally eviscerating Rosen, with a much better headline to boot.