The president just announced his proposed budget for the coming fiscal year, which he described as a “good, solid budget”. The president went on from there to claim his proposal puts the federal government on the path to balancing its budget in the very near future―by 2012. All of this sounds quite good, actually. Who could be against solid budgets that get us closer to eliminating deficits? Unfortunately, after reviewing the proposal itself, the only verifiably good thing about it is the president’s description. The reality revealed by the numbers, however, make it impossible to characterize this budget as anything remotely sound or on its way to becoming balanced.

For instance, since when does increasing the “acknowledged” federal deficit from $162 billion in Fiscal Year 2007 to $410 billion in Fiscal Year 2008, constitute being either fiscally sound or movement towards reducing the overall deficit? Sure, the president’s proposal suggests the “acknowledged” deficit will drop, marginally, in Fiscal Year 2009 to $407 billion, but for that to happen, federal tax revenues have to increase by $180 billion next year. Time for a little reality check: federal tax revenue declined from 2007 to 2008, and the nation is entering a clear economic downturn, making the projection of significant revenue growth for next year somewhat, shall we say, optimistic.

You’ll note that in the preceding paragraph I kept referring to the “acknowledged” deficit. There’s a reason. See, the actual, operating deficit for the federal government is much greater than the number cited by the Administration. That’s because the surplus currently being generated by Social Security (no, that’s not a misprint, Social Security generates a huge surplus annually, and has for decades) is being raided to pay for current operations. This masks the true size of the federal deficit, that is, the shortfall between operating tax revenues and operating expenditures. So, while the Administration acknowledges a $410 billion deficit in 2008, the actual budget deficit is a whopping $602 billion. It’s just that the $192 billion Social Security surplus for 2008 is being spent, not on Social Security―but on current operations. Oh, for 2009, the “acknowledged” deficit of $407 billion balloons to $611 billion, after accounting for the Social Security boondoggle.

Moreover, those aren’t the only “funny” numbers in the president’s budget. In 2007, the feds dropped $173.6 billion on the wars in Iraq and Afghanistan. Since the U.S. is still engaged on both fronts, you’d assume, after the surge and inflation and all, the budgeted amount for the war effort in 2008 and 2009 would be more. And you’d be wrong. While the 2008 budgeted amount for the war on terror does increase, to $193 billion, it drops down by more than half in 2009, to just $70 billion.

The Administration’s budget projections also pretend that no fix will be implemented to the alternative minimum tax. Initially designed to ensure the wealthiest in our nation couldn’t use creative accounting to avoid paying a fair share of taxes, the AMT implements a second method for calculating income taxes that negates certain deductions available in the traditional calculation. The problem is, the AMT was never indexed to inflation. The result, now instead of hitting the wealthiest, the AMT has the potential to increase―substantially―the tax burden of folks in the middle class. Given that the middle class is being hit hard enough already, everyone in the beltway who’s not making budget projections for the president, assumes there’ll be a fix. Depending on the approach selected, fixing the AMT will cost anywhere from $20—$100 billion annually in lost revenue.

This irresponsible approach to stewardship of our nation’s fiscal system has consequences. By 2009, the Administration estimates that debt issued by the federal government will exceed $10 trillion. It also projects that our nation’s total gross domestic product will be just over $15 trillion that year, meaning federal debt will represent fully two-thirds of our nation’s GDP. Net interest payments on this massive debt will be over $260 billion in 2009 alone. That’s more than the projected federal discretionary spending on education, housing and urban development, health and human services and environmental protection, plus mandatory spending on welfare (currently called “Temporary Assistance for Needy Families” or “TANF”)―combined. Exactly which part of all this qualifies as a “good, sound” budget, moving the nation on the right path, is beyond me.
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Ralph Martire is executive director of the Center for Tax and Budget Accountability, a bipartisan fiscal policy think tank. rmartire@ctbaonline.org