On Oct. 11, George W. Bush went before the television cameras to proudly announce that the budget deficit for fiscal year 2006, which ended on Sept. 30, was only $248 billion. This was a great success, he said, because in February the Office of Management and Budget had estimated that the deficit would be $423 billion.
If this is the standard for success, one wonders why we didn't do even better. All Bush had to do was order OMB to make an even bigger mistake than it did in estimating what the deficit would be. If it had wrongly projected the deficit to be $500 billion or $600 billion in 2006, then Bush could have announced an even bigger improvement. Maybe next year he should tell OMB to project a deficit of $1 trillion. Then even if the budget deficit rises, Bush can congratulate himself once again for beating expectations.
In the real world, of course, people measure their progress not against some incorrect forecast, but against actual results. By this standard, the numbers don't look as good. Bush inherited a budget surplus of $128 billion in fiscal year 2001, which the government was already in the midst of when he took office. By the following year, FY 2002, the surplus was gone and the government had a deficit of $158 billion, which rose to $378 billion in 2003 and $413 billion in 2004, before falling to $318 billion in 2005 and $248 billion last year.
But these figures greatly understate the budgetary turnaround. In January 2001, the Congressional Budget Office estimated budget surpluses as far as the eye could see. It projected an aggregate surplus of more than $2 trillion between 2002 and 2006. Instead, we had an aggregate deficit of $1.5 trillion -- a deterioration of $3.5 trillion.
Yet these figures still understate the budgetary damage caused by the Bush administration because it leaves out changes in the budgetary status of entitlement programs such as Social Security and Medicare. The federal budget only measures their current cash receipts and outlays. Because these are permanent programs not subject to annual appropriations, however, it is necessary to look at their budgets in what accountants call accrual terms -- taking into account future commitments already made.
Incidentally, the difference between cash accounting and accrual accounting is the subject of two new reports. The first is from the Congressional Budget Office (www.cbo.gov) and is titled, "Comparing Budget and Accounting Measures of the Federal Government's Fiscal Condition." The second is from the Government Accountability Office (www.gao.gov) and is titled, "Understanding Similarities and Differences Between Accrual and Cash Deficits."
Bruce Bartlett is a former senior fellow with the National Center for Policy Analysis of Dallas, Texas. Bartlett is a prolific author, having published over 900 articles in national publications, and prominent magazines and published four books, including Reaganomics: Supply-Side Economics in Action.
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