A Project of The Annenberg Public Policy Center

Budget Spin

Obama and Republicans give different -- and less-than-factual -- takes on the president's 2012 budget.


Summary

Democrats and Republicans disagree strongly about elements of President Obama’s 2012 budget, but they are alike in one respect: Both sides are misrepresenting important facts. 

  • Obama claimed that by the middle of this decade his budget “will not be adding more to the national debt.” But that’s not true. The debt will continue to grow by more than $600 billion even in 2015, the year with the least red ink projected.
  • The president also claims that the “discretionary” budget is only 12 percent of the total. It’s actually 36 percent. Obama, like President Bush before him, is referring to “non-security” spending that excludes not only the Pentagon but the Department of Homeland Security and veterans’ benefits.
  • Republican Rep. Paul Ryan, chairman of the Budget Committee, repeated a false claim that Obama has increased domestic discretionary spending by 84 percent over the last two years. He hasn’t. That spending went up 27 percent, even counting stimulus spending, according to the official tally from the nonpartisan Congressional Budget Office.
  • Ryan’s committee also claims that Obama’s budget contains $1.6 trillion in “new taxes.” Actually, 44 percent of that total is made up of increases scheduled under current law, not proposed in the budget. And one big proposed increase is offset by Obama holding down a scheduled rise in the Alternative Minimum Tax.

We found several other false claims, too. Speaker Boehner claimed Obama has added 200,000 federal workers, when official figures put the total at 58,000, and Sarah Palin claimed in a bogus Twitter message that Obama’s cuts are only 0.1 percent of the deficit, when the true figure is 20 times higher. For the full story on those and more, please read on to the Analysis section.

Analysis

The back-and-forth between President Barack Obama and Republicans over the $3.7 trillion budget proposal started with the release of the budget Feb. 14 and continued the next day when the president gave a press conference at the White House.

Obama’s Debt Claim Doesn’t Add Up

At his news conference, the president falsely claimed that his budget would "not be adding more to the national debt" by around 2015.

Obama, Feb. 15: [B]y the middle of this decade our annual spending will match our annual revenues. We will not be adding more to the national debt. So, to use a — sort of an analogy that families are familiar with, we’re not going to be running up the credit card any more.

That’s not close to being true, even assuming that the president’s budget is enacted exactly as proposed and all economic assumptions turn out to be accurate. The budget summary (table S-1, page 171) that the White House had released the previous day clearly projects annual deficits declining to a low of $607 billion in 2015, and then rising and remaining above that level for the remainder of the decade.

Obama attempted to clarify when challenged by a reporter who asked, "How can you say that we’re living within our means?" The president indicated that he meant to say the deficit would be eliminated — except for interest payments on the national debt.

Obama, Feb. 15: [L]et me be clear on what I’m saying, because I’m not suggesting that we don’t have to do more. We still have all this accumulated debt. … And there is a lot of interest on that debt. So, in the same way that if you’ve got a credit card and you’ve got a big balance, you may not be adding to principal — you’ve still got all that interest that you’ve got to pay.

Yes, indeed. That interest amounted to $196 billion last year, and the president’s budget projects that it will increase every year as the debt piles up and interest rates rise with the economic recovery. In 2015, the interest payments are projected to reach $494 billion, and by 2017 they will reach $627 billion. At that point, under the White House projections, the entire deficit will be accounted for by interest payments alone. But the deficits are projected to continue, piling on more debt and causing even higher interest payments in later years. (See table S-4, page 176.)

‘Discretionary’ Use of Budget Numbers, Part 1

In his press conference, Obama also said the "discretionary budget" makes up "about 12 percent of our budget." That’s not true.

Discretionary spending is the amount subject to annual spending bills passed by Congress — excluding mandatory spending, such as Medicare and Medicaid. It totals more than $1.3 trillion, or 36 percent of the president’s proposed $3.7 trillion budget for fiscal year 2012. 

Obama, Feb. 15: So what we’ve done is we’ve taken a scalpel to the discretionary budget rather than a machete. Now, I said in the State of the Union and I’ll repeat, that side of the ledger only accounts for about 12 percent of our budget. So we’ve got a whole bunch of other stuff that we’re going to have to do, including dealing with entitlements.

Obama meant "non-security discretionary" spending, according to Office of Management and Budget spokeswoman Meg Reilly. She cited table S-4 in the proposed budget, which indeed shows "non-security discretionary outlays" at $456 billion or a little more than 12 percent of the president’s proposed budget. But "non-security discretionary" spending is not a standard method used by nonpartisan budget analysts and, regardless, that’s not what the president said at his press conference or in his State of the Union address. In his annual address to Congress in January, Obama referred to "annual domestic spending."

Obama, Jan. 25: Now, most of the cuts and savings I’ve proposed only address annual domestic spending, which represents a little more than 12 percent of our budget.

Discretionary spending on domestic programs is not "a little more than 12 percent"; it’s nearly 15 percent.

Discretionary domestic programs — as defined by the nonpartisan Congressional Budget Office — "include all federal programs controlled through appropriations except those in defense and international affairs." By that standard measure, the president’s 2012 proposed budget (table 8.7) contains $546 billion, or 14.7 percent, for domestic discretionary spending. Total proposed discretionary spending is about $1.34 trillion, including about $730 billion for defense, $546 billion for domestic and $64 billion for international affairs.

The administration’s use of "non-security discretionary" spending is problematic because, as the Congressional Research Service pointed out in a 2010 report, it isn’t easy to determine how much federal agencies spend on security and non-security programs, making comparisons with past administrations difficult. The CRS report says "no standard method of dividing security spending from non-security spending has been universally accepted."

Congressional Research Service, Sept. 10, 2010: The G.W. Bush and Obama Administrations each created their own division of security and nonsecurity spending. Dividing spending into security and non-security components, however, presents many conceptual and practical difficulties. Some federal activities, such as Coast Guard patrols, advance non-security and security interests. Furthermore, federal programs tasked with non-security aims in normal times may respond to specific homeland security challenges.

The OMB says "security" spending includes not only the Department of Defense, but also certain spending by the Departments of Veterans Affairs, Energy, Homeland Security and State, including international food aid. Excluding such spending from "non-security discretionary" spending makes it appear that the president and Congress have less control over spending. Incidentally, we took aim at President Bush for using this same deceptive gimmick in 2004.

‘Discretionary’ Use of Budget Numbers, Part 2

Rep. Paul Ryan, the Wisconsin Republican who chairs the House Budget Committee, also had some trouble with discretionary spending figures, repeating false information from a partisan study that inflates how much discretionary spending has increased under Obama.

In an interview on ABC’s "Good Morning America," Ryan said domestic discretionary spending has gone up 84 percent in Obama’s first two years.

Ryan, Feb. 15: We don’t want to accept the fact that the president increased domestic spending by 84 percent over the last two years when you count the stimulus, 24 percent in the base budget. That’s too much.

As we’ve explained before — most recently when we fact checked Ryan’s official party response to the president’s State of the Union address — the 84 percent is wrong. It comes from a partisan report issued by the Republican staff of the House Budget Committee. A CBO report from January shows (see table E-7) that domestic discretionary spending rose from $485.1 billion in 2008 to $614.2 billion in 2010, an increase of $129.1 billion or 27 percent. The CBO’s discretionary spending figures include stimulus funding. (For an explanation of how the GOP staff came up with their inflated figure, see our Sunday Replay article of Nov. 8.)

‘New’ Taxes?

Ryan’s House Budget Committee also claimed on its website that the president’s spending plan includes "$1.6 trillion in new taxes on families, small businesses, and job creators." But that’s a 10-year estimate, and a big chunk of the GOP’s total is due to the expiration of the Bush tax cuts on upper-income earners. Republicans say allowing the expiration of the cuts for upper-income folks, as scheduled under current law, would bring in $709 billion over 10 years. That’s 44 percent of the $1.6 trillion figure that Ryan and the GOP call "new taxes."

It was Republicans who initially passed the Bush tax cuts with an expiration date, and Republicans and President Obama worked out a deal in December to extend the cuts for two years. We’ll leave it to readers to judge whether those can properly be called "new" taxes, or just old taxes returning on schedule. The committee released a document that explains several of its statements about the budget. It says that the "key tax provisions" include "Expiration of 2001/2003 Tax Rates Provisions for Higher Incomes" and that the president’s "proposal would increase the top two income tax brackets from 33 percent to 36 percent, and from 35 percent to 39.6 percent, starting in 2013." But that’s in current law — not something new in Obama’s budget.

Other items in the Republican calculation: $98 billion over 10 years for reinstating the estate tax at 2009 levels (there was no estate tax in 2010), and $321 billion over 10 years to pay for fixing the Alternative Minimum Tax for three years (preventing a big tax increase for moderate-income families). So, the administration is actually proposing to lower taxes for some Americans by sparing them of the Alternative Minimum Tax and paying for that by "an across-the-board 30 percent reduction in itemized deductions for high-income taxpayers," according to the president’s budget. The AMT was originally designed to affect few high-income taxpayers, but because it was never indexed for inflation, it has had the potential to hit more and more middle-class or upper-middle-class earners, with nearly 31 million taxpayers in 2011 potentially subject to it, according to the Tax Policy Center. But Congress has repeatedly enacted a patch to spare those taxpayers. Obama’s budget proposes a three-year fix to the AMT problem.

Palin’s Mis-Tweet

Former Alaska Gov. Sarah Palin joined the budget-bashing, using the social networking site Twitter to spread a falsehood about Obama’s budget cuts on the day that the president presented his budget.

Sarah Palin, Feb. 14: Here’s how minuscule the White House’s $775 million a year cuts are: less than 1/10 of 1% of this year’s budget deficit http://j.mp/fsjlop

But the White House isn’t planning to cut $775 million next budget year. The president’s budget proposed cuts totaling $33 billion in 2012 discretionary spending (see pages 3 to 5 for a tabulated account of the cuts).

Palin’s mis-tweet, which has since been re-tweeted by more than 100 users, links to Glenn Beck’s conservative website The Blaze. A blog item on the conservative website mischaracterized a recent op-ed by White House Budget Director Jacob Lew. Palin sent the tweet following the president’s budget announcement, but The Blaze post was written five days before by Mike Opelka. The Blaze mocked the $775 million as the total amount of proposed cuts, but they were merely examples offered by Lew:

Opelka, Feb. 9: White House Budget Director Jack Lew penned a piece for the New York Times that let us all know the President made some “tough choices” when cutting an estimated $775 million from the 3.8 TRILLION dollar budget.

In his article, Lew gave three examples of cuts that totaled $775 million, and said they were "only a small fraction" of the total cuts:

Lew, Feb. 5: These three examples alone, of course, represent only a small fraction of the scores of cuts the president had to choose, but they reflect the tough calls he had to make.

Using the right numbers, Obama’s proposed 2012 discretionary cuts represent 2 percent of the $1.645 trillion projected deficit. Still a small amount, but it’s 20 times larger than what Palin claimed.

Boehner’s Blunder on Federal Jobs

House Speaker John Boehner, in discussing the president’s budget at a Feb. 15 press conference, falsely claimed that the president has added 200,000 federal jobs.

Boehner, Feb. 15: Over the last two years since President Obama has taken office, the federal government has added 200,000 new federal jobs. And if some of those jobs are lost in this, so be it. We’re broke. It’s time for us to get serious about how we’re spending the nation’s money.

But the actual number of federal jobs that have been created from January 2009 to January 2011 is nowhere near 200,000. According to seasonally adjusted data from the Bureau of Labor Statistics, the overall rise in federal employees during that time period is 58,000. During that same time, the increase in federal employees without counting U.S. Postal Service workers is 140,800 — because there has been a restructuring of the postal service and a steep decline in postal jobs.

Either way, both numbers are much lower than the figure cited by Boehner.

No Republican ‘Red Ink’?

In an interview with Politico, Republican Sen. Roy Blunt of Missouri said that the federal government was “spending … so much of a bigger percentage of the economy than it’s ever spent before going back all the way to World War II.” To be clear, Blunt is saying the government’s spending is more than it has been since World War II, not more than “it’s ever spent,” period.

His claim is true of the fiscal year 2011 budget, but it’s not true of President Obama’s proposed 2012 budget – the topic of the interview. Federal spending is projected to be 25.3 percent of gross domestic product for the 2011 budget, according to historical tables from the Office of Management and Budget. That’s the highest since 1943-1945, when spending was more than 40 percent of GDP for all three years. But Obama’s proposed 2012 budget is projected to be 23.6 percent of GDP, which is lower than the fiscal year 2009 budget, President George W. Bush’s last budget, which reached 25 percent of GDP.

Blunt also deflected any blame when Politico’s Mike Allen asked whether he was “partly responsible” for increasing spending when he was a GOP leader in the House. (Blunt was Republican whip from 2003 to 2009, and the Republicans were in control for four of those years, from 2003 to 2007.) Allen asked: “Do you have some red ink on your hands?” Blunt replied that that would only be true if one included the bailout, passed in the fall of 2008.

Blunt: That only counts if you add the Troubled Asset Relief Program to the spending in 2008, and almost all of that money is being paid back and will be paid back with interest. So, it’s a not a long-term deficit. It’s not long-term debt if the money is immediately paid back.

Blunt ignores the fact that Republicans backed other measures that greatly contributed to deficit spending. The GOP-controlled Congress passed the Medicare prescription drug program – Part D – in 2003; the chief actuary of the Centers for Medicare & Medicaid Services put the 10-year cost of the program at more than $500 billion, though the Bush administration did not release CMS’ estimates before the legislation was passed. Another obvious source of Republican-backed spending: the wars in Afghanistan and Iraq. While Blunt was Republican whip, federal spending as a percentage of GDP went from 19.7 percent to 25 percent. Both Republicans and Democrats have had roles in increasing government spending during that time.

It is true, we’ll note, that the TARP funds are being repaid. The most recent report from the Congressional Budget Office said that the cost to taxpayers would be $25 billion, not the $700 billion that was originally authorized.

Promise Kept or Broken?

Obama claimed that his budget proposal fulfills his campaign promise "to cut the deficit in half by the end of my first term." The House Budget Committee countered that "instead of fulfilling his campaign promise … the president’s budget doubles the debt over that same period of time." Obama’s claim is closer to reality than the Budget Committee’s.

First, the president and the Budget Committee are talking about two different things. The deficit is the difference between the revenues (receipts) that the government collects and what it spends (outlays) in a given year. The debt is the accumulation of many deficits minus any surpluses. So, even if the debt increases, that doesn’t automatically mean that the president would be breaking his campaign promise to cut the deficit. But let’s look at the numbers anyway.

According to the budget proposal, the deficit at the end of Obama’s first term in fiscal year 2013 would be $768 billion. That’s about a 46 percent decrease from the actual $1.4 trillion deficit at the end of fiscal year 2009. That’s very close to what the president claimed.

As for the debt held by the public, the president’s budget projects that it will reach $12.8 trillion in FY 2013. That’s a nearly 71 percent increase from the $7.5 trillion public debt for fiscal year 2009. That’s a significant increase, but it’s not "double," as the Budget Committee claimed. That would require a 100 percent increase. If you look at the total federal debt, which includes money the government owes itself, it still doesn’t amount to a doubling over the same time period ($11.9 trillion in FY 2009 and $17.8 trillion in FY 2013).

It remains to be seen what the deficit and publicly held debt will total in 2013. But based on current projections, the president is on track to keep his promise.

— by Eugene Kiely, Lori Robertson, D’Angelo Gore, Brooks Jackson, Michael Morse and Lara Seligman

Sources

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