Over the last few years, both parties have worked together to reduce the deficit by more than $2.5 trillion – mostly through spending cuts, but also by raising tax rates on the wealthiest 1 percent of Americans. As a result, we are more than halfway towards the goal of $4 trillion in deficit reduction that economists say we need to stabilize our finances.
President Barack Obama
The State of the Union Address
February 12, 2013
Many years ago, a seasoned Capitol Hill professional cautioned me about giving any questionable number to a politician. Many have fly-trap minds, and once you put something in, you never can get it out. Any nuanced but only partially understood fact, like a discount-store blowtorch, could be misused with considerable ill effect at some later moment.
This bit of wisdom comes quickly to mind when one hears the current buzz about a mere $1.5 trillion of deficit reduction over ten years ending our budget woes. Some reach that number by the roughest of arithmetic; others use more sophisticated analysis, and even provide important and subtle caveats. But the number, even though it has some limited use, already has left the corral of qualification and analysis far behind.
The simple way to reach that number is the way the President did. Three years ago, Erskine Bowles and Alan Simpson characterized our fiscal plight with a calculation that $4 trillion of deficit reduction would “stabilize the debt.” As the President noted in his remarks, some have estimated subsequent budget action to have achieved $2.5 trillion of that. $4 trillion minus $2.5 trillion equals $1.5 trillion, under either OMB (Office of Management and Budget) or CBO (Congressional Budget Office) scoring.
That little inside-Washington joke is not really a joke, however. Bowles and Simpson’s $4 trillion was derivative of many complex and controversial assumptions, and was calculated at a particular time. Let’s review the numerical spreadsheet, and its even-more-subtle and important conceptual underpinnings.
