A Reader's Guide to OMB Red Ink

Fri, 2010-07-23 10:49 | Economy | Douglas Holtz-Eakin
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Friday – late Friday, probably during a “coincidental” international Internet outage – the Obama Administration will simultaneously release and try to bury its Mid-Session Review of the Budget. The Mid-Session is required by law and provides a mid-year update to the budget outlook. The update is intended to show how the projection in the President’s February budget has been affected by, among other things, Congressional actions on:

  • Passing a Congressional budget resolution,
  • Enacting appropriations bills for the next fiscal year, and
  • Undertaking necessary changes to tax and mandatory spending legislation.

Oooooops! Congress has done none of its jobs. Indeed, for the first time ever, the House did not even pass a budget resolution. As a result, the Mid-Session should be scrutinized to glean new information regarding the Administration’s thinking.

Here’s what to look for:

What will not be interesting in the Mid-Session:

  • Any new policies. New policy proposals are restricted to the February Budget.
  • Any real surprise on the deficit. The budget world has long since been numbed to the sea of Obama red ink. Expect more of the same.
  • The Administration’s efforts to spin a “surprise” reduction in the deficit. In a charade as old as the budget process itself, the Administration will trumpet the good news that the FY 2010 deficit is smaller than expected – but only because they changed their assumptions.

What will be interesting in the Mid-Session:

  • Will the Administration alter its economic forecast? The economy is expanding, but at a very slow and grinding pace. For how long will the Administration acknowledge that unemployment will continue to remain elevated?
  • How will the Administration alter its projections of health spending programs? Will the Administration show deficit reduction from plugging in the CBO’s gimmick-ridden estimates of the new programs, Medicare cuts, and Medicaid expansions? Or, will it heed its own CMS Actuary Richard Foster and recognize that the Medicare cuts can’t happen and the pace of health care spending has gone up and not down?
  • How much leg will the Administration show on the cost of taking over Fannie Mae and Freddie Mac? The GSE zombies have an unlimited line of credit at the U.S. Treasury and the various Administration housing programs have had essentially no beneficial impact on the housing market. What will it all cost?

The bottom line: Congressional Democrats should be taken to task for failing to pass a budget or spending bills. The Administration should be taken to task for the decade of deficits the U.S. faces because of its profligacy, and for their repeated attempts to hide the facts and duck responsibility.