No Runny Eggs

The following statement from the House leadership and Rep. Paul Ryan sure makes it sound like at least elements of Ryan’s Roadmap for America’s Future will be part of the FY2012 budget process:

The American people are ready to get serious about tackling our fiscal challenges, but President Obama’s budget fails to lead. The President’s budget punts on entitlement reform and actually makes matters worse by spending too much, taxing too much, and borrowing too much – stifling job growth today and threatening our economic future.

The President says that he wants to win the future, but we can’t win the future by repeating the mistakes of the past or putting off our responsibilities in the present. Our budget will lead where the President has failed, and it will include real entitlement reforms so that we can have a conversation with the American people about the challenges we face and the need to chart a new path to prosperity. Our reforms will focus both on saving these programs for current and future generations of Americans and on getting our debt under control and our economy growing. By taking critical steps forward now, we can fulfill the mission of health and retirement security for all Americans without making changes for those in or near retirement. We hope the President and Democratic leaders in Congress will demonstrate leadership and join us in working toward responsible solutions to confront the fiscal and economic challenges before us.

Stephen Hayes notes that this inclusion in the FY2012 budget, due out of Ryan’s committee near the end of March, is a victory for Ryan and the freshmen. Even better, there’s rumors that the Senate Republicans will follow suit. Of course, Senate Democrat/Majority leader Harry Reid won’t let that see the light of day, but that will just show the difference between the off-the-cliff Democrats and the stop-the-madness Republicans.

As for the timing, need I remind people that, at least on a combined basis, Social Security will never run a cash surplus on its current trajectory again, or that the only reason the remainder of Medicare isn’t following the Hospital Insurance (Part A) into the black hole is that their funding mechanisms automatically increase the taxes, fees, and draws from the Treasury?

Byron York reports NPR has thanked Obama for increasing the FY2014 advance appropriation for the Corporation for Public Broadcasting. That’s right; not only does public broadcasting, a major arm of which has shown it is nothing more than a bought-and-paid-for subsidary of $oro$ Inc., get an increase, but it gets guaranteed funding two years in advance.

Rep. Ryan, appropriators; if you’re looking for a cheap 3-year/$1 billion-plus cut, here it is.

…a whole heap of the editorial board members on a wide cross-section of newspapers nationwide, both right-leaning and left-leaning. House Budget Committee communications director Conor Sweeney sent over the list this morning, and some of the commentary is extremely surprising:

• The Washington Post editorial board – They noted that the Office of Budget and Management assumes a far-rosier rate of growth in the economy in the middle years than the Congressional Budget Office just a month ago, with a warning that if it’s closer to the 3.4% the CBO is assuming than the 3.9% the OMB assumes, that will blow a rather large hole in the revenue projections, much like the recession did for 2008 through the present. They also note the OMB used PlaceboCare math, assuming 10 years of revenues to offset 2 years of the Medicare “doc fix” and 3 years of the AMT fix. Their most-devastating words, however, are reserved for the end, when they call Obama out for punting on the lions’ share of the budget hole.
• The USA Today editorial board – They pointed out that the $1.1 billion in “deficit savings” (note; that’s not exactly happening versus the CBO baseline) over the next decade is wiped out by just the $1.1 billion FY2012 budget deficit. The money quote – “It’s becoming hard not to conclude that Obama doesn’t much care about the debt threat or has decided to wait until after the 2012 elections. Either would be a shame, and economically risky.”
• The Detroit News editorial board – They point out that not only does Obama have an open-ended committment on “high-speed” rail and a notion that he can socialize the private-sector economy, but that the third of his “deficit reduction” that is dependent on new taxes isn’t exactly going to bring in the full $1.6 billion in new taxes he thinks it will. The money quote – “Something more along the order of gastric bypass surgery is called for if the United States is to stabilize its fiscal health.”
• The Chicago Tribune editorial board – They really hit on the complete lack of entitlement reform. The close, addressed to Congress:
  

  Here’s what they really need to do. They need to grab each other’s arms, hold each other up, tell the American people what it will really take to return the federal government to fiscal balance.

  And do it. Then they can — all together now — make a grand bipartisan shudder as the public screams. But they have to do it. They have to.

• The Los Angeles Times editorial board – Even though they think that $1.5-$1.65 trillion of deficit spending is appropriate for FY2011, they think $1.1 trillion is far too high for 2012. Their close – “White House officials have said that the budget is just a down payment on more significant, bipartisan deficit-reduction efforts to come. But as the housing crisis showed, a down payment that’s too small can leave borrowers with a debt they cannot afford.”
• The New York Times editorial board – Even though they like the budget, they slammed the lack of a long-term vision – “What Mr. Obama’s budget is most definitely not is a blueprint for dealing with the real long-term problems that feed the budget deficit: rising health care costs, an aging population and a refusal by lawmakers to face the inescapable need to raise taxes at some point.”
• The Investor’s Business Daily editorial board – They were bright enough to use the scare quotes around “deficit cuts” (which, as I’ll point out again and again, are not cuts at all against “doing nothing”), and point out why Obama was “gutless” – he wants to blame the Republicans for the pain from the necessary hard work.
• The Wall Street Journal editorial board – They point out that the White House-claimed “deficit reduction” happens only in the “out” years, with 95% happening after Obama’s first term is over and nearly 2/3rds happening after a potential second term. Like their upstart West Coast competitors, they see the real reason for the punting – to ambush the Republicans who will (hopefully) do the heavy lifting.

During the bloggers’ call held with House Budget Chair Paul Ryan (WI-01, and my Congressman) and House Republican Conference Vice Chair Cathy McMorris Rodgers (WA-05), it was briefly mentioned, and noted by Ed Morrissey, that the latest Obama budget was worse than doing nothing. Unfortunately, that wasn’t explored in the limited time available in the call. Allow me to rectify that.

Last month, the Congressional Budget Office released their Budget and Economic Outlook for FY2011-FY2021. That pretty much assumes things continue on auto-pilot, with no new laws being passed, taxes and “mandatory” spending increasing (or in some cases, decreasing) as specified while laws affecting them are allowed to expire on schedule, and “discretionary” spending increasing at the rate of inflation. Hence, one can fairly use it as the “do nothing” case.

First, let’s take a look at the top-line numbers for FY2012…

The “do-nothing” case assumes $3,655 billion of spending on $2,555 billion of revenues, for a deficit of $1,100 billion. For reference, the FY2010 numbers were $3,456 billion of spending on $2,162 billion of revenues and a deficit of $1,294 billion. It also assumes the debt held by the public at $11,598 billion (73.91% of GDP) and gross debt of $16,389 billlion (104.44% of GDP). Obama’s budget would jack up spending to $3,729 billion, while revenues would only increase to $2,627 billion, for a deficit of $1,102 billion. Meanwhile, the debt held by the public would increase to $11,881 billion (75.13% of a higher GDP estimate) and gross debt would increase to $16,654 billion (105.32% of GDP).

Next, let’s take things out to FY2016 (click for the full-size chart)…

By the end of FY2016, Obama’s budget would spend $18 billion more than leaving things on “auto-pilot”, while reducing revenues by $205 billion and resulting in a 5-year deficit of $3,770 billion ($223 billion more than “doing nothing”).

On the debt end, while the gross debt would be just slighly less at the end of 2016 in terms of GDP than it would be at the end of FY2012 (105.22% of GDP), it would still be significantly higher than at the end of FY2012 ($20,825 billion). Worse, the publicly-held debt would increase to $15,064 billion, or 76.12% of GDP. All of those are higher than the “do-nothing” scenario.

You might have noticed the deficit for FY2016 in the Obama budget would be $10 billion less than the “do-nothing” scenario. With that in mind, let’s take a look at the second half-decade, from FY2017-FY2021 to see whether that continues to hold true (once again, click for the full-sized chart)…

There isn’t exactly austerity in the second half of the decade either. While spending over the full decade would decrease somewhat over the “do-nothing” scenario ($102 billion, to a “mere” $45,953 billion), a larger drop in revenue ($338 billion) would leave a 10-year deficit of $7,207 billion, $236 billion more than “doing nothing”). Specifically for FY2017-FY2021, the 5-year deficit would increase by $13 billion versus “doing nothing” to $3,437 billion.

On the debt end, things aren’t rosy either. Debt held by the public would increase to $18,967 billion ($714 billion more than “doing nothing”), while gross debt would increase to $26,346 billion ($1,290 billion more than “doing nothing”). Once again, the projected increase in GDP doesn’t cover the increased debt, as debt held by the public would increase from 76.66% of GDP to 77.00% of GDP, and gross debt would increase from 105.23% of GDP to 106.95% of GDP.

In short, that wasn’t a chainsaw, an axe, or even a dull, rusted butter knife Obama used on the budget. It was a heaping of lard.

Revisions/extensions (11:48 am 2/15/2011) – Thanks to Bruce McQuain, Memeorandum, Ed Morrissey for the links. Hopefully my host won’t kill me because you fine folks are swamping the server so much I couldn’t get this update up.

Related (H/T – Mitch Berg) – I’m not the only one to catch the sham. The Heritage Foundation’s J.D. Foster has a longer explanation of why the numbers above don’t match up to the claimed “cuts”. To wit, for this year, Pell grants and some surface transportation spending are reclassified as “mandatory” spending, while the Iraq/Afghanistan operations (freshly re-classified to “regular discretionary” spending), get cut. Meanwhile, the 10-year increase in total spending is 30% above inflation (49% total).

ABC News reports that the Senate Democrats, specifically a staffer for Senate Appropriations Labor, Health and Human Services, and Education subcommittee chair Tom Harkin (D-IA), arranged for a 1/24 rally of lobbyists and interest groups to call for even more federal tax dollars to be spent on things the federal government has no business spending mone…er, labor, health and human services, and education (wait a minute; I was on the right track). The staffer even misapproprated a Reaganomics quote by saying a rising tide raises all boats. Point of order – that’s a rising tide in the private sector; one focused on raising the public sector tide necessarily swamps the private sector and ultimately sinks all boats.

A side note; thanks in no small part to No Child Left Behind, that particular item on the budget trails only defense in discretionary federal spending.

Yesterday, House Budget Committee chair Paul Ryan (R-WI) set the overall FY2011 House discretionary budget authority level at $1,054.7 billion (or if you prefer, $1.05 trillion), with “non-security” at a claimed “FY2008-for-the-rest-of-the-year” $419.8 billion. Meanwhile, House Appropriations Committee chair Hal Rogers (R-KY) set the levels of the 12 individual components of said authority. I do have good news, bad news, and ugly news, which I’ll summarize after the revealing chart (side note; it was a beast to actually find the FY2008 budget authority amounts). Portions of the chart should look familiar – the FY2010, the Obama proposed numbers, and the House FY2011 numbers were included in Rep. Rogers’ release. I cobbled together the FY2008 numbers from the final House Reports on the 2008 Defense appropriations bill and the 2008 omnibus bill, then crunched together a final column which I’ll explain in a bit.

Click for the full-sized graphic

The good news is, outside of the parts of government that are under the purview of the Defense subcommittee, those are actual cuts from what was spent last year. Specifically on the “non-security” end, that’s a $42.6 billion cut from FY2010 levels, and a $58.0 billion reduction from what Obama wanted to spend this year.

That’s where the good news ends. Despite it being, in some cases, quite significant in percentage terms, the overall cut is but a drop in the $1,480 billion ocean of deficit projected for FY2011 if nothing at all changes.

On a policy level, that isn’t exactly a full-on return to FY2008 levels for FY2011 to which the House Republican Conference sure seemed to pledge, and which a significant portion of the Republican Study Committee wants for the entire fiscal year. Depending on whether one measures from the FY2010 numbers as the RSC did or the Obama proposal as the HRC did, that would have been an $82.9 billion cut (an undersell by the RSC, which estimated an $80 billion cut) or a $98.3 billion reduction (an oversell by the HRC, which estimated a $100 billion reduction). It still wouldn’t move the deficit off of a new record, but it would be a second drop.

Now, for the ugly news. I also included a column showing what discretionary spending would be if one were to assume the first 5 months at pro-rated FY2010 levels (which the government is supposedly limited to under the various continuing resoultions) and the last 7 at pro-rated FY2008 levels. It looks like they missed the mark by $5.7 billion.

Revisions/extensions (2:01 am 2/4/2011) – With that said, it is important to note this is just for FY2011, and that comprises, depending on whether one counts from the day the Republicans retook the House or the last day of the current continuing resolution, 9 months or 7 months respectively. Neither President Obama nor Rep. Ryan have put together a FY2012 budget yet. I haven’t taken a look at what knocking spending down to FY2006 levels starting in FY2012 will do on a 12-month basis (it’s quite late), though I strongly suspect that it would bring a 12-month actual cut to over $100 billion.

If Paul Ryan’s and Michele Bachmann’s warning-klaxons’ responses weren’t enough to scare you, Tom Blumer took apart in his latest Pajamas Media column the 2010 Financial Report of the United States Government. I could focus on the after-TARP-tricks (explained in the column) cash deficit of $1.41 trillion in 2010 (with 2009’s adjusted downward by a like amount to $1.30 trillion), or the $2.08 trillion (after a $0.13 trillion worsening adjustment in changes of assumptions related to long-term assumptions on federal employee retirement benefits) net operating cost (GAAP) deficit, or the fact that, for each of the 14 years the report was to be produced to GAAP standards, the Government Accountability Office could not sign off on it. However, since I’ve somehow become a SocSecurity “watcher”, I’ll focus on that:

How about Social Security and Medicare? Well, there’s bad news and, as is often the case with this bunch, pretend good news. The bad news, as seen here, is that the government’s actuarial liability for Social Security jumped by $270 billion in fiscal 2010 to almost $8 trillion. The program now runs at a deficit during most months. Without changes, Social Security will hemorrhage cash at an ever-increasing rate in the coming years.

But, but, but I thought the Trustees said SocSecurity’s position was “improved” relative to taxable payroll because PlaceboCare will force employers to offer more wages instead of health insurance. That leads me to the Medicare part…

As to Medicare, the government claims at that same link that its actuarial liability for that program decreased by $15.3 trillion, a stunning turnaround it attributes to the passage of ObamaCare. Here what the GAO had to say about that assertion:

Significant uncertainties […] primarily related to the achievement of projected reductions in Medicare cost growth reflected in the 2010 Statement of Social Insurance, prevented us from expressing an opinion on that statement.

That’s polite accounting-speak for: “Though we can’t prove it, we think it’s a load of rubbish.”

Which raises the question of whether the 75-year actuarial deficit in Social Security should only have gone up by $270 billion. I should note that the GAO actuarial deficit does not include any “trust fund” operations as the money does not exist (yet).

As for the cash deficits, the latest CBO “The Budget and Economic Outlook” (released today) now projects that the combined OASDI funds will not return to anything approaching cash surpluses, though the OASI fund will have a very-minimal (under $10 billion) cash surplus between 2012 (or perhaps 2013; the chart is unclear) and 2015.

I’m still digesting the larger report, but there’s two more things to note right now – if current laws, levels of taxation and levels of spending continue/increase/decrease/end as scheduled, the FY2009-FY2012 deficits will be $5.3 trillion (with $1.5 trillion projected for this fiscal year and $1.1 trillion projected for FY2012), and total debt will eclipse the Gross Domestic Product no later than 2017.

Tomorrow evening, President Obama will address a joint session of Congress and present the annual State of the Union Address.  We here at NRE will be joining the festivities and Drunkblog the event live, or as close to “live” as several Tanqueray martinis will allow me to be.

You can watch the SOTU address and determine for yourself, whether Obama has become the centrist that the MSM claims he has been reincarnated as or whether he remains the hard leftist that brought us Placebocare, stimulus and bail outs for all of his leftist friends.

As a public service, NRE brings you the following preview of the SOTU address:

Do you remember the Godzilla movies? Do you remember how the sound tracks were never in sync with the video?

Exactly two weeks prior to the SOTU address, President Obama went to Arizona to address the memorial for those killed in the assassination attempt on Representative Giffords. In that address, Obama lectured us about civility. He did so even though he himself, and those advisers like Rahm Emanuel, who have been closest to him, have rarely had a second thought about using graphic, violent language to describe a political opponent or policy they don’t agree with.

It was as I watched the Arizona address that the visual of the old Godzilla films hit me. Like them, the words that come from Obama’s mouth rarely match the actions of his administration or himself.

Tuesday night you will hear Obama talk about our need for fiscal responsibility. You’ll hear Obama give a nod to things like smart and efficient oversight that is somehow intended to be different than the ever increasing excesses that all administration agencies have lorded over their subjects. You may also hear Obama talk about corporate tax reform but don’t be fooled. Regardless of what you hear from his lips that may have you saying “Clintonesque,” ignore it. There is no “center” or “movement to the center” with Obama.

The Godzilla movies were fairly formulaic: monster arrives, monster destroys everything in sight, monster is subdued by a resilient people. Our national Godzilla movie has seen the first two acts. Will we see the resilient people subdue Godzilla?

Revisions/extensions (6:54 am 1/25/2011, steveegg) – I’m just adding a little reminder widget from Cover It Live so you guys will know where to head tonight.