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Jewish World Review
Feb. 21, 2011
/ 17 Adar I, 5771
Obama team uses slippery words to tout budget
"This budget stands for the principle that we have to get our fiscal house in order," OMB director Jack Lew told the House Budget Committee this week. "We've put a plan forward that would get us to primary balance by the middle of the decade."
You might ask yourself: What does that mean? Was Lew saying that the federal budget, which today is running a $1.65 trillion deficit, will be balanced in just a few years? Many listeners might take Lew's words to mean just that. But check again.
Lew did not say the budget will be "balanced." He said it will reach something called "primary balance." It turns out there's a huge difference.
A balanced budget means government revenues and spending are roughly equal. But a budget in "primary balance," according to the Obama administration, occurs when revenues and spending are equal -- excluding all the interest the government pays on its enormous debt.
President Obama projects the budget will reach "primary balance" in 2017, when government revenues and spending will both be about $4 trillion. Problem is, the White House predicts interest on the debt that year will be $627 billion. So even though the budget will be in "primary balance," there will in fact be a deficit of $627 billion. "Primary balance" is no balance at all.
By 2021, the White House projects interest payments will reach $844 billion, which is a lot of money to ignore.
"Primary balance is a figment of our imagination," freshman Republican Rep. Mick Mulvaney told Lew at the House hearing Tuesday. "Only in Washington could you run a deficit and claim it's balanced and somehow use the word ‘balance.' Mr. Lew, you couldn't do that anywhere else. They'd laugh you out of the room."
Where did the White House get the idea of "primary balance"? It wasn't a widely-used term until late 2009, when the influential liberal think tank Center for American Progress published a budget plan touting the idea. "We proposed that the president and Congress adopt an intermediate goal somewhere between where we are now and full balance," says Michael Linden, the Center's associate director for tax and budget policy. "It was something that could be accomplished in a faster time frame."
There's nothing wrong with that; the distance between a $1.65 trillion deficit and a balanced budget is very great, so getting even halfway there would be real progress. But Republicans strongly objected to the use of the word "balance."
"I believe any American that heard that would believe that this budget balances," Sen. Jeff Sessions, ranking Republican on the Senate Budget Committee, said when Lew appeared before the Senate. "It doesn't come close to doing so."
For his part, Linden concedes that "primary balance" is "not full balance and nobody should pretend that it is full balance." But he argues the term is still useful. The point at which the government can pay for all the services and benefits it provides, and is running a deficit only for its interest payments, Linden says, is also the point at which the debt as a share of gross domestic product begins to stabilize.*
That, too, would be a big improvement over today. But on Capitol Hill, Lew took things a step further, claiming that would mean "we stop adding to the debt." And President Obama himself, in his budget news conference Tuesday, said that by the middle of this decade, "We will not be adding more to the national debt."
Just for the record: The government cannot run budget deficits of, say, $627 billion, or $844 billion, and not add to the national debt. Interest payments have to be made. Obama's words were so egregiously wrong that the watchdog website PolitiFact quickly labeled them false. "We think the president's statement is likely to mislead a lot of Americans about what his budget would do," PolitiFact wrote.
The whole line of argument left Sessions amazed. "We add more under [the president's] plan to the national debt every single year," Sessions said Wednesday. "So how could this possibly be a position in which you will not be adding more to the debt? What world are we living in?"
The budget debate is just beginning, but the administration's attempt to sell the idea of "primary balance," plus the claim that in just a few years we'll no longer be adding to the debt, left Republicans questioning the president's good faith. Now, it will take a significant White House course correction to change GOP minds.
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