Budget Tricks

The Perspective:

Congressional Democrats reacted to the shocking scope of President Obama’s plan to spend $3.6 trillion next year in his budget (and a stunning $42.2 trillion over ten years) the way Washington insiders usually do — they turned to tricks and gimmicks. They “trimmed” his budget and got it down to $3.0 trillion for next year and about $15 trillion over five years without actually cutting any spending. Strip off the gimmicks, however, and the Congressional budgets still look almost exactly like the president’s budget.

Here are the top 5 tricks they used to do it:

5. Hiding Years 6 Through 10

President Obama criticized Bush for not following the practice of the Clinton years of doing 10-year budgeting, opting instead for shorter 5-year budgets. The White House made the case that showing longer-term obligations was important given the enormity of the country’s fiscal challenges. Congressional Democrats, however, decided that the quickest and easiest way to conceal a huge portion of the Obama budget from the public was to simply shorten it to 5 years, hiding some of the biggest big ticket items in the secret second 5 years.

4. A Hidden Wall Street Bailout

President Obama included $250 billion in additional Wall Street bailouts in his budget (a bit of a budget trick in itself — since it assumes that $750 billion in assets would be purchased that could later be sold for $500 billion). Both the House and Senate budget resolutions failed to show any funding for the almost certain new rounds of Wall Street bailouts, despite the fact that Treasury Secretary Geithner has already announced an expanded plan, and the Washington-Wall Street bailout machine shows no signs of slowing down. Future bailouts could cost hundreds of billions or trillions of dollars, making a budget that fails to include them an extreme low-ball.

3. Hidden Tax Hikes

The Senate and House both pretend that the Making Work Pay tax credit — Obama’s big campaign promise, originally a $500 per worker credit that’s since been trimmed to $400 — will expire after 2010 (House) or 2012 (Senate). Obama would pay for those so-called tax cuts (more than 42 percent, according to the White House which would take the form of checks to non-income tax payers) through revenues from his cap-and-trade energy tax.

Cap-and-trade is included in the Congressional budgets but there is no word about how high the tax hike would be. In fact, the Congressional budgets claim, unbelievably, that this tax would be “revenue-neutral.” Congress also pretends that the Alternative Minimum Tax will be allowed to slam the middle class, providing only for a 1-year fix, despite the White House insistence that there be a permanent reform. Even the 1-year cost, though, is hidden from the deficit total through a reserve fund.

2. Secret Reserve Funds

Speaking of reserve funds, lots of them are being used to hide a wide variety of tax hikes and policy changes that would substantially change the overall budget numbers — making them look like the original Obama budget — it they were properly accounted for. The House has 17 reserve funds and the Senate 15, most of which claim to be deficit-neutral without any explanation of how substantial tax cuts and spending increases could be done in a deficit-neutral fashion without big tax hikes. One reserve fund that does have an associated funding level is the Medicare reserve fund that would increase mandatory spending $285 billion over 10 years-on top of the reported total numbers for spending and deficits. These reserve funds serve no purpose other than to avoid accountability and transparency, and make the budget look a lot smaller than it really is.

1. Using the Reconciliation Trick for Health Care

This is by far the worst and most dangerous trick in the budget. The cap-and-trade energy tax could potentially be forced through Congress in budget reconciliation, a trick to avoid proper debate and the normal 60 vote requirement for important legislation. Fortunately, last week Sen. Mike Johanns of Nebraska introduced a budget amendment to prohibit the use of reconciliation for cap-and-trade, and it passed on a solid 67-31 vote. Every Republican supported the amendment, as did 26 Democrats. Unfortunately, Democrats are still poised to pull the same reconciliation trick for their plan to nationalize and ration health care.

While the Senate passed a budget resolution without reconciliation language, the House budget specifically includes a section authorizing the use of reconciliation for a national health care plan. This is despite the fact that reconciliation only matters in the Senate, where it can short-circuit debate and pass legislation with only 50 votes instead of the regular sixty. This sets up a conference committee where Senate reconciliation instructions can be inserted and railroaded through, despite the fact that the Senate already rejected this approach.

The country deserves an honest, public discussion of where we’re going on issues like health care, energy, taxes, and spending. Unfortunately we have a Congress whose budget is a big bag of tricks and gimmicks to hide its true cost and to slip major policy changes in through the back door.