President Obama’s proposed medium-term deficits

Keith Hennessey Blog ^ | 3/19/2012 | Keith Hennessey

[PhxRising]

This is the first in a three part post.

The business of Washington, DC is changing policy. Almost everyone in Washington is trying either to change some element of policy or to prevent someone else’s changes.

As a result the public debate centers almost entirely on the fight over how and how much policy would change rather than on what the absolute results would be. Both are important, but public debate usually ignores the results and only argues about the proposed change. That’s bad.

In fiscal policy this often leads to endless debates in which both sides agree on what the result of a proposed policy would be, but disagree on whether that result is an increase or a decrease because of disagreements about the baseline, the starting point for measuring a change. It also leads to poorly informed decisions in which policymakers ignore whether the results are acceptable relative to an objective standard.

I care a lot about whether a proposal increases or reduces the deficit. I care a lot more about these changes, and about deficits in general, when the resulting deficits are 7-10 percent of GDP than when they are 1 or 2 percent.

I am therefore going to do something a bit unusual with today’s chart. I’m going to show you the deficits proposed by President Obama in his budget without telling you whether they are increases or reductions relative to some (easily disputed) future baseline. By doing this I hope to focus your attention on a different way of thinking about the deficit that may be more important than the way Washington traditionally looks at a budget. Instead we’re going to compare the President’s proposed deficits to two results standards that are difficult to gimmick.

[PhxRising]

At no point will President Obama's proposed budget get deficits below their historic average. If the President's budget is passed, deficits will briefly stop getting worse for a few years before entitlement spending drives deficits up BIG TIME.

[JoeProBono]

[PhxRising]

Part two http://www.freerepublic.com/focus/f-news/2861397/posts

Part three http://www.freerepublic.com/focus/f-news/2861398/posts