Accounting Gimmicks

President Obama’s performance has earned much of the current criticism.  So what I write here is not praise or condemnation.  It is information that could be useful in forming our opinions.  Most of it comes from an article titled, Obama Bans Gimmicks, and Deficit Will Rise, written by Jackie Calmes back in 2009. 

“For his first annual budget next week, President Obama has banned four accounting gimmicks that President George W. Bush used to make deficit projections look smaller. The price of more honest bookkeeping: A budget that is $2.7 trillion deeper in the red over the next decade than it would otherwise appear, according to administration officials.  The new accounting involves spending on the wars in Iraq and Afghanistan, Medicare reimbursements to physicians and the cost of disaster responses.  But the biggest adjustment will deal with revenues from the alternative minimum tax, a parallel tax system enacted in 1969 to prevent the wealthy from using tax shelters to avoid paying any income tax. 

Recent presidents and Congresses were complicit in the ploy involving the alternative minimum tax.  The tax cuts of the Bush years have meant that it could affect millions of middle-class taxpayers.  If they paid it, the government would get billions of dollars more in tax revenues, which is what past budgets have projected. But it would also probably mean a taxpayer revolt. So each year the White House and Congress agree to “patch” the alternative tax for inflation, and the extra revenues never materialize.

The White House budget office calculates that over the next decade, the tax would add $1.2 trillion in revenues. But Mr. Obama is not counting those revenues, and he is adding $218 billion to the 10-year deficit projections to reflect the added interest the government would pay for its extra debt.”  That’s the debt that comes from the lost revenue that results from this gimmick.

As for war costs, Mr. Bush included little or none in his annual military budgets, instead routinely asking Congress for supplemental appropriations during the year. Mr. Obama will include cost projections for every year through the 2019 fiscal year to cover “overseas military contingencies” — nearly $500 billion over 10 years.

For Medicare, Mr. Bush routinely budgeted less than actual costs for payments to physicians, although he and Congress regularly waived a law mandating the lower reimbursements for fear that doctors would quit serving beneficiaries in protest.  

Obama will budget $273 billion in that period for natural disasters. Every year the government pays billions for disaster relief, but presidents and lawmakers have long ignored budget reformers’ calls for a contingency account to reflect that certainty.”

So now that we have a president who is willing to take the heat for telling the truth, he is blamed for all of our previous sins.  In this topsy turvy political cacophony, we’ve abandoned fixing problems for fixing blame.  “The $2.7 trillion in additional deficit spending, Mr. Orszag said, is “a huge amount of money that would just be kind of a magic asterisk in previous budgets.”  Which means that it was hidden in previous years and now we see it.  President Obama’s honesty is a part of the change that he promised.  But for some reason we don’t like the results of that change.  i.e., the honest recognition of the budget deficits. 

Now we are in the 2012 campaign cycle.  When you hear campaign rhetoric, listen for solutions or blame.  If you’re being fed the same tired line about Mr. Obama being the biggest deficit spender in history, that’s about fixing blame and not a solution.  I’m not asking you to love our President.  Nor am I asking you to praise his efforts.  I’m simply asking you to consider these facts before you buy the accusations being made by people who desperately want his job.  And no, I’m not being paid by the Democratic National Committee.     

Robert DeFilippis