Federal law calls for the President to submit a new federal budget on the first Monday in February.  UnknownPresident Obama has missed this deadline for all but one year that he has been in office and the 2015 budget will be no exception.

Bloomberg reports the federal budget will be released in two phases this year. The first phase – a summary by department and agency with some spending detail – will be released March 4th.

As we await the White House budget for the fiscal year beginning October 1, 2014, it may be interesting to take a look back at what President Obama proposed in his 2014 budget.  OLC member, Alan Davis, has done that and here are his findings:

Analysis of President’s 2014 Budget

In 2012, the President came under a lot of criticism for not putting forward any meaningful proposals to address our nation’s deficits.  It appeared that he was just against what the Republicans proposed.  He remedied that complaint when he put forward his 2014 Budget Proposal which included a $1.4 trillion dollar reduction in the projected ten year deficit ($6.7 trillion deficit in 2013 vs. $5.3 trillion deficit in 2014).  Much of Washington praised the President for finally making the effort to reduce the deficit and the numbers in the budget went pretty much undiscussed.

However, as is the case with so much this Administration does and that comes out of Washington, the Administration’s plan hardly reflected reality.  The main areas of savings were:

  • Net Interest Outlays:  $810 billion
  • Individual Federal Income Tax Receipts:  $635 billion
  • Social Security & Retirement Receipts:  $388 billion
  • Medicaid:  $296 billion
  • Total Savings:  $2,129 billion
  • All Other Budget Items:  $715 billion increase in deficit

I found myself quickly questioning the decrease in Net Interest Outlays.  A decrease of that size would come from one of three things:

  • Substantial decrease in the national debt (Not the case)
  • Substantial change to the use of short term maturity debt (Uncertain)
  • Use of substantially lower interest rate assumption values (Yes)

The White House used low values for the budget assumptions in the 2013 Budget, but used substantially lower assumption values in the 2014 Budget.  The average of the values for the 91 Day Treasuries was 0.7% less and the average for the 10 Year Treasuries was 0.5% less than what was used in the 2013 Budget.  This is a dramatic change that has gone without any meaningful explanation and has gone unchallenged, even by Republicans.

However, it’s even worse.  The Committee for a Responsible Federal Budget (CRFB), a purportedly independent group, put out an analysis of the White House OMB’s Budget in April 2012.  It included a discussion of changes in the values of each of the economic assumptions EXCEPT the interest rate assumptions.  Was this because they didn’t want to question the changes in the interest rate assumptions and point out the games the President was playing?  I can’t imagine what other explanation there could be for this oversight on CRFB’s part.

The second savings in the President’s budget that makes little sense is the $296 billion in lower Medicaid Outlays, especially given the rapid rise in new Medicaid enrollees as a result of Medicaid expansion in the Affordable Care Act.

If you exclude savings from Net Interest Outlays and Medicaid Outlays, you’re left with a much lower decrease in the deficit ($308 billion instead of $1.414 billion).  What’s more, the $308 billion savings can be attributed to new revenue of over $1 trillion from increased taxes.  That’s not the picture the President or Democrats wanted to portray!

WH OMB Budget 2013 Table S-5 Proposed Budget By Category can be found here.

WH OMB Budget 2013 Table S-14 Economic Assumptions can be found here.

WH OMB Budget 2014 Table S-5 Proposed Budget by Category can be found here.

WH OMB Budget 2014 Table S-12 Economic Assumption can be found here.

Alan Davis has a MS in Accounting from University of Houston.  A former CPA, Mr. Davis has had a long career in healthcare finance.  He is a board member of the First Capital Tea Party.