Thursday, April 7, 2011

EFN EXCLUSIVE! Alan Davis of Stop The Madness blog-2012 Budget Debate

It’s sad to see the budget debate go on as it has, not because the debate is bad, but because it should have been over some time ago. The real debate is over whom the American Public should trust. That was easily addressed shortly after the White House OMB released the 2012 budget. There were three keys:

- Social Security

- Budget Assumptions

- Budget Performance

If the media had properly addressed those three items the debate would have been over a long time ago.

Social Security: The beginning of the year the Progressives put together an aggressive campaign to “Save Social Security”. The first I knew about it was Feb. 20th when I watched Sen. Durbin on Meet the Press claim that Social Security wasn’t part of the budget, didn’t add a penny to the deficit and was sound for decades. I’ve seen others repeat it. Sen. Reid and others held a Save Social Security rally on Monday, March 28th.

I had already downloaded the Summary tables from the WH OMB website so I knew it wasn’t true. You can find Social Security in the WH OMB budget on page 176 Table S-4 and they project it will add $1 trillion to the deficit over the next 10 years.

Budget Assumptions: Any budget’s projections are dependent on the assumptions they are based on. That’s why I used to get my Board’s approval of assumptions the month before I presented the overall budget for approval. That’s why I go to the assumptions first, before looking at the projections. They appear on page 202 Table S-13. This year I immediately saw a problem. I saw the WH OMB using some pretty amazing assumptions for inflation (Consumer Price Index, percent change, year to year). They projected a drop in inflation this year (from 1.6% to 1.3%) despite showing us in a recovery? They showed an average inflation of 2.0% and a maximum inflation of 2.1% for the next 10 years. Those numbers can’t be supported by historical trending which shows inflation typically falling into a range of 3.5% to 4.0%. And we should exceed all their projections THIS YEAR!

Why would they understate inflation? Compounding and interest rates! Lower inflation rates compound to much lower inflation factors for the last five years of the budget understating the size of deficits. And lower inflation rate assumptions means lower interest rate assumptions can be used. A 1% understatement of interest rates means a $200 billion understatement of Net Interest Expense projection for a single year with average debt of $20 trillion. The budget projections include several years with higher debt than that.

Budget Performance: Having studied the history of the US Budget (surpluses and deficits) by party in control of Congress, I know that the last budget passed by Democrats to finish with a surplus was the 1969 budget. They are 0 for 29 since then. And their voting record on things like Balanced Budget Amendments, etc. is dismal.

So we’re left with a case of Democrats:

- Lying (about Social Security impact on the budget)

- Playing games (with the assumptions to make the budget look better)

- Voting against fiscal discipline

That’s how easy it is to prove to the American People that Democrats can’t be trusted on the budget. Why the media hasn’t already pointed this out is beyond me. But now maybe they will!

Alan R. Davis
Private Citizen
Stop The Madness

"The battle, sir, is not to the strong alone; it is to the vigilant, the active, the brave."

Patrick Henry

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