The administration’s Mid-Session Review, scheduled for release next Tuesday (25 August 2009), will provide an update of budget and economic projections. Key issues to consider when evaluating the report include the following:
The 2009 Deficit. Because spending has been higher, and tax revenue lower, the deficit is rising this year to three times the previous record. But if the administration’s claims of deficit “reduction” appear to defy reality, consider its handling of its $250-billion “placeholder” for the Troubled Assets Relief Program: simply removing this “just-incase” padding from spending estimates does not equate a real reduction in the currentyear deficit.
Out-Year Deficits. The Congressional Budget Office [CBO] estimates the President’s budget will double the debt in slightly more than 5 years, and nearly triple it in 10 years. CBO also shows the administration’s deficits remaining greater than $600 billion for the duration of the President’s budget, with a $1.2-trillion deficit at the end of the decade. Should the administration continue its claims of “cutting the deficit in half,” note this has nothing to do with spending cuts, but rather is a natural reduction from an extraordinarily high starting point (recession, financial bailouts, and so on). Should the administration continue to claim $2 trillion in “savings,” be aware that most of these “savings” were actually a $1.5-trillion war funding gimmick.
The Long-Term Outlook. Less than 2 months ago, CBO submitted to Congress its report showing further deterioration in the Long-Term Budget Outlook – primarily due to unsustainable spending growth of Federal health care entitlements. It is worth noting whether the administration’s update includes anything concrete (reforms CBO says will actually save money in the long run) to address this worsening crisis.
The State of the Economy. The administration’s “stimulus” bill has not performed as advertised: the economy has worsened, the unemployment rate has far exceeded the 8-percent ceiling the administration promised, and most economists today predict a slow, shallow recovery – with future growth burdened by Washington’s unprecedented levels of government intervention, spending, deficits, and debt. Hence it is reasonable to view skeptically any exaggerated assessments of economic performance under the administration’s continued “stimulus” plan.