Budget Transparency To Come With Massive Political Price?

Budget Transparency To Come With Massive Political Price?


As was the case with many things the Bush administration touched, the federal budget was gamed in such a way to make the deficit problems look smaller than they actually were. But now Obama and his team are set to change that.

Only problem? The deficit is going to get a lot bigger.

How much?

Try $2.7 trillion.

From NY Times:

WASHINGTON — 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.

No doubt there will be an initial backlash, but I’m hoping that folks will appreciate the increased transparency and realize once and for all how devastating the deception out of the Bush administration really was.

Here’s more…

Mr. Obama’s banishment of the gimmicks, which have been widely criticized, is in keeping with his promise to run a more transparent government.

Fiscal sleight of hand has long been a staple of federal budgets, giving rise to phrases like “rosy scenario” and “magic asterisks.”

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.”

“The president prefers to tell the truth,” he said, “rather than make the numbers look better by pretending.”

I think we just saw Orszag call Bush a liar.

Well deserved. Especially since Obama has to dig us out of an additional $2.7 trillion hole that wasn’t accounted for.

  • shane

    I’m not particularly a fan of the new administration, but I really like the concept of open and transparent government…. and I don’t think that anyone paying attention will be too surprised that the deficit number was bigger than reported.

  • Snarkless J. Harden

    Obama should hire you Justin & I don’t say that facetiously — there is not a dog turd that could come out of the Obama Administration that you couldn’t spit shine into a pearl.

  • gerryf

    I recognize that you’re referring to anything Obama related, Jeff, but given this post is about being truthful about the budget, you seem to be advocating gimmicky accounting tricks to hide the real costs of running the government?

    I cannot count how many times I’ve had to correct people who have defended W’s and the GOP-led congress’s wasteful and outrageous government spending. Such defenders always say, well, a war is expensive? Katrina was expensive. Of course there were going to be deficits. People don’t realize the war and Katrina were off budget expenditures and the massive deficits run up by the Bush administration and the GOP were irresponsilbe examples of largess.

    The last Republican who even remotely believed in the idea of fiscal responsibility was Eisenhower

  • Trescml

    Whatever the government spends is what the government should say it spends. We have a budget deficit which at some point will need to be tackled and we have to be honest about what the numbers are.

  • http://www.donklephant.com Justin Gardner

    I always find it odd how the guy who accuses me spinning is trying to spin real numbers as fiction.

    gerryf, his name is Josh. I’ve met him in real life. A very nice guy. But on the internets…

    Agreed about Eisenhower. But let’s remember that Eisenhower warned about military spending getting too big and he spent massive amounts of money on infrastructure, essentially creating the interstate highway system we have today. Today I’d fear he’d be accused of being a bleeding heart spend thrift.

  • John Davis

    I just hope everyone has their bottles of Vaseline on standby!


  • http://dailykiss.blogtownhall.com/ Comrade Revere

    Open is better. However it is disingenuous to suggest gwb created this accounting system. He inherited it. I can’t believe the libs aren’t in love with him. What a spender, funny how they were always saying he was cutting everything.
    Back to the big O being transparant, how about that stimulus. How do you like the health care provisions? Vague enough for the right hack to set up a new program to manage our health.

  • Erik Sickinger


    Hasn’t that whole “healthcare scare” thing pretty much been smacked down at this point?

  • Joe

    @ComradeRevere from reading the Times article, it seems true that Bush inherited the games with the Alternative Minimum Tax: “Recent presidents and Congresses were complicit in the ploy involving the alternative minimum tax.” That accounts for the lion’s share of the additional deficit.

    But the fudging of Medicare and Military expenditures sound like they were specific ploys by the Bush administration. Those are pretty devious.

  • gerryf

    Comrade, inherited it form whom? What fantasy world do you live in? George W. from the very beginning took the Iraq war off the books and used supplemental, off budget spending to finance it. That worked so well conning his base that he decided to begin doing the same with other projects.

    Surely you are not saying that Clinton started the war in Iraq and ran it off the books and then gave it to George W?!?!

    Once again, I would like to point out that the only president to have a budget surplus in the last 30 years was a Democrat. Once again, I would like to point out that Republicans Presidents Reagan, Bush, and Bush 2 are responsible for more than 70 percent of the national debt SINCE THIS COUNTRY was founded.

    That is a jaw droppingly amazing pile of dung that “fiscal conservative” Republicans keep repeatedly sweeping under the rug. When are people who support them going to wake up and smell that stink oozing from under the carpet?

  • Nikolai

    Comrade Revere:

    You said Inre to gw; ” I can’t believe the libs aren’t in love with him.” And ” What a spender, funny how they were always saying he was cutting everything”

    gw mostly spent on things that were DESTRUCTIVE, like 2 WARS. He was a destroyer, not a builder. That type of spending is abhorrent to libs. The few good things he did spend on were for AIDS and Malaria, but that was in AFRICA, not the U.S. Big help, dubya.

    As far as healthcare; what is your solution? Leave things the way they are? Maybe you’re young and don’t need any medical, dental or mental healthcare right now, but once you are a little older…

    And, if you have kids, SOME healthcare will ALWAYS be needed, included the children’s births. If you are wealthy, sure, healthcare is not a problem for you, but hear this; my family consists of my wife, my 16 year old son and myself, and our medications cost
    about $2000.00 per month. With my insurance (I’m now on COBRA since I was laid-off in Oct ’08) I pay $1260.00 for the COBRA coverage and about $250.00 for our deductables and approx $60-$80.00 per months on doctors office visits, so I’m really not getting much of a break. I used to spend about $600.00 a month total on healthcare costs when I was employed and my employer picked up the rest. Now I’m unemployed and even tho I can’t really afford it, I’m paying more than double. How is this a good thing? Shouldn’t a nations health come FIRST and NOT LAST? And the cost of phamacuticals?! Good lord!!! But then again, maybe you are a pharmacutical company rep, and LOVE high med prices.

    I’ll leave you with one last thought; In Denmark citizens pay about 50% of their wages in tax, but their healthcare is excellent, their country’s economy is healthy, everyone goes to college, and they are (literally) the worlds happiest people. By contrast, in the U.S. we end up paying about 38-40% of our wages in taxes anyway when you add it all up including federal, state, local, property, sales tax, etc, which DOESN’T include ANY healthcare, so a mere visit to the ER or OR, or ANY serious or semi-serious injury or illness can BREAK YOU. Is that a good system? I think Denmark is a paradigm that the U.S. ought to (hell, MUST) look into.

  • wj

    It would be really useful for general understanding (not to mention politically useful) if the budget would include historical numbers for comparison. That is, hisotrical numbers generated using the honest accounting system that is being used for this budget. At least then we could sensibly evaluate the virtues and follies of the new budget.

  • Bruce

    The truth really worked well for Gorbachev, let’s see how it works for Obama. Most people don’t really care or understand and prefer simplistic slogans, that’s the way it has been since the dawn of civilization and I don’t think there’s much hope of that changing. On the other hand people have really short memories, so it another generation when they’re picking through dirt and trash for food they will have forgotten it was ever any different.

  • mike mcEachran

    now we just have to wait for michelle malkin to accuse of Obama of being responsible for this deficit increase- as I guess J. Harden is implying… god justin, it is shameful how you have spun this to make obama look like a responsible steward meanwhile he is presiding over one of the biggest increases in the deficit in our nation’s history. headsmacking unbelievable!

  • http://marketrant.blogspot.com GT

    Unless and until the US government (and governments everywhere) move to a GAAP-style accounting system, the accounts produced are not worth spit.

    Every year the US government accrues hundreds of billions of dollars of unfunded future liabilities, in much the same way as GM and co accrue huge liabilities in their pension plans (and for other things like employee leave entitlements).

    The difference is that GM and co are required to account for the accruals.

    If governments – and here I include ALL western governments – were listed companies, every single one of them would be in Ch11 and their management would be in jail.

    It’s not this or that president, or this or that Congressional majority… it is the fact that politicians are parasites who are never satisfied with the blood they extract… they need to borrow more blood.

    To the poster who cited the tax take – add in the imputed future tax obligations to fund unfunded liabilities and concurrent public sector deficits, and you’re at 50% immediately: a deficit is a future increase in tax liability.

    Trying to ‘revive’ an economy by stealing money from future taxpayers instead of current ones, is like trying to build a cathedral out of marbles… time consuming, and not obviously a sensible thing to do.


    GT’s Market Rant.

  • http://DragonFlames.com Dragon

    Devil’s Advocate Time: And how do we know that this isn’t simply some Obama administration spin to make Bush look bad/worse/guilty?

    Obama may be a good guy, but he’s still a politician.

    Which of you out there has a Ph.D. in economics *and* access to all the requisite data to prove it either way?

  • Chris

    Josh –

    “It is better to keep your mouth closed and let people think you are a fool than to open it and remove all doubt.”

  • J. Stenworth

    This is just a start. The Federal government doesn’t follow the same “Generally Accepted Accounting Principles” (GAAP) that corporations are required to use.

    Using GAAP, the US government’s deficit in 2008 was $5.1 trillion. See http://www.shadowstats.com/article/401 for details. (This isn’t my website, but it appears to provide a professional accounting. It includes much more than the deficit — honest figures for US GDP, inflation, unemployment, etc.)

    BTW, the $5.1 trillion deficit amount is from 2008, so it does not include the so-called stimulus package that just became law.

  • Don Rosenfeld

    We, the people, seem to believe any sound byte spoken with authority by the media and the politicians, so long as we do not hate them (with or without good reason). So when a blogger, media person or politician(speaking with weight and gravitas) says “If [He, She, They, It] does [an Action, non-Action], [He, She, They, It] will pay a heavy political price.”, why is it we all take these sound bytes so seriously given that the level of discourse has fallen to the level of Pre-School Playground Squabbling? Obama seems to understand this.

  • Richard

    OMG you people are naive. Did it occur to you that Obama WANTS the deficit to look larger so he can make his case to raise taxes on the “wealthy” (anyone that still has a job).

  • jmulligan

    mike mcEachran: Obama is presiding over the biggest rise in the deficit yes, however it is an inherited situation and thus cannot be laid at his feet as mismanagement… yet…

  • Palinst

    When a country’s entire financial system is based on monopoly money (legal tender), is it even possible to have a “deficit” using the traditional meaning of the word? If I loan a person 2.1 trillion nothings, does that person really owe me anything other than nothing in return?

  • Palinst

    Nikolai, so what you’re saying is if the people of Denmark turned over 100% of their labor to government and were still happy, we should model our system after their’s? This reminds of the old adage that the best slaves are those that believe they’re free.

    Our “system” is modeled after the principle of individual liberty, and what you propose is incompatible with that principle.

    What do health care and college have to do with individual liberty? You see, in America all the people have the freedom to pursue happiness. It’s up to the individual. When government makes one group of people responsible for the happiness of another group through the use of force, that’s bondage.

    The people of Denmark may be bliss and blinded by ignorance and are not truly happy. There is a difference.

    I’m all right with a voluntary socialistic system in America. If a person wants to turn over all the fruits of their labor to the government to be redistributed “fairly”, I think a person has the freedom to do that. I’m opposed to a mandatory one, and so are our founding principles and our Constitutions that are based on those principles.

    Besides, as God tells us through the Bible, we are to put our faith in Jesus Christ, not other men grouped together in this thing we call government. Only there will a person find truth and happiness.

  • http://www.warning1938alert.ytmnd.com Jimmy the Dhimmi

    From the AP:

    The bottom line, said an administration official Saturday, is to halve the federal deficit to $533 billion by the time his first term ends in 2013. He inherited a deficit of about $1.3 trillion from former President George W. Bush.

    Apparently, Obama will continue to refer to the budget defecit in a similar fashion to the Bush administration. He may include Iraq war appropriations in the accounting, but not the extra 3 trillion in spending from the massive Stimulus packgage, TARP, the mortgage bailout, the auto industry bailout, or TARP II which will come out soon.

  • mike mcEachran

    @jmulligan – you missed the sarcasm.

  • kranky kritter

    The most important point here is wj’s. One issue that changing the accounting methods raises is the issue of how it makes comparisions difficult. Who is going to “translate” the old budgets into the new accounting so that we can compare budgetary performance on something resembling an apples to apples basis?

    I’ll be happy if it turns out that Obama both appreciates and acts upon our obvious need to bring spending in line with revenue collected. But what we have here is, let’ s face it, no moe than a nod of the head to an abstract principle. That’s admirable as far as it goes, bit it’s also easy, costs nothing, and does not by itself reequire making hard decisions about what we the people can and cannot afford in the way of gov’t services.

    We’ll have no idea whether there is any substance behind this head nod until we see how big the next budget is, and whether congress and Obama seek to understake a 2010 stimlus package when the economy is still struggling a year a from now.

    On that count, one thing to notice is that if the gov’t reports a bigger annual deficit, then a stimulus package doesn’t appear to be adding as much to the deficit. Under the reporting we have seen, the 800 billion stimulus package added about 60% to the existing 1.3 trillion deficit, IIRC, and I may not. But if you report the deficit at 5 trillion, then an 800 billion stimulus is “only” a 16% increase in the annual deficit.

  • John Milligan

    We do need to get the unitary budget accounting reality embedded standardized now or never. The era of book-cooking has to be over. Obama has said No Mas!!! We need that base target to work from if we are EVER to get a handle on a bipartisan syching up the vast legacy (and current) budgetary disconnects and get this thing reigned in. So Im all for a common language (and cross-walks to past gimmicks are all good and fine if it makes people more comfy). But lets set the target (finally) and then aim! We need the HARDS TRUTHS and pull teh Wizards Curtain if we are EVER to go forth responsibly! Kudos to Obama.