February 14, 2011 / 8:19 PM / 7 years ago

Facts and fiction gloss up U.S. presidents' budgets

WASHINGTON, Feb 14 (Reuters) - Every U.S. president does it -- plays with the numbers in their annual budgets to make them add up to meet policy goals and to put a nicer gloss on a bad situation.

In the case of the 2012 budget blueprint, President Barack Obama submitted to Congress on Monday, he plans to reduce a budget deficit that is projected to account for 11 percent of the entire U.S. economy this year to just 3 percent in 2015.

Meeting that goal "would be a significant achievement," said David Kendall, an analyst with Third Way, a centrist think tank.

Much of the deficit reduction is done through economic assumptions that are brighter than private forecasts, analysts said.

"The (economic) growth forecast is clearly rosy here," said Alan Viard, an analyst with the conservative American Enterprise Institute. Tiny differences in economic growth forecasts can result in big savings in long-term deficit projections.

The administration's budget shows inflation staying roughly at a modest 2 percent annual rate over the next decade. Few economists believe that will be the case, said Steve Bell, senior director of economics at Bipartisan Policy Center.

The inflation projections allow the administration to assume lower costs for servicing the nation's debt as well lower payments for government retirement and health programs that are adjusted annually for inflation.

"The budget pretty much guarantees trillion-dollar deficits for the next 10 years, it doesn't show it though," said Bell, a former Republican aide for the Senate Budget Committee. "It assumes the budget will be enacted entirely and inflation will be lower and (economic) growth higher than almost anybody in the (financial) market."

But Viard said Obama's plan at least tries to be more honest than budgets offered by previous administrations, which ignored big ticket items that everyone knew Congress would enact. Examples are higher payments for doctors treating Medicare patients and fixing the Alternative Minimum Tax to keep middle class taxpayers immune from the tax meant for millionaires.


"On the whole this budget is pretty honestly presented," said Viard.

White House budget forecasts are often optimistic on growth although this one is unusual because its estimate for fiscal 2011 is actually lower than the private sector, at 2.7 percent versus 3.1 percent from the Blue Chip survey of forecasters.

However, it then gets more upbeat, with 3.6 percent penciled in for 2012, with growth then staying well above 4 percent in 2013 and 2014. Blue Chip's view has growth peaking at 3.3 percent in 2012, slowing to 2.8 percent by 2014.

Obama proposes paying for an increase in Medicare doctors' pay through other cost saving adjustments in the program. They also propose paying for a fix to keep millions of middle class taxpayers from paying the AMT, a tax that originally was meant for only the wealthiest Americans.

But those fixes are only covered for a couple of years and some of the proposals to pay for them have already been rejected by Congress.

Republican critics said Obama's plan would do little to reduce eye-popping budget deficits.

"Riddled with budget gimmicks, this proposal's deficit reduction doesn't even pass the laugh test," said Senator Orrin Hatch, the top Republican on the Senate Finance Committee.

Reporting by Donna Smith; Editing by Sandra Maler

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