Welcome back, budget sanity

WELCOME BACK, BUDGET SANITY…. President Obama has only been in office for a month, and I’m already tired of the phrase “change you can believe in.” When he does something great, his supporters use it (“That’s change we can believe in!”). When he does something misguided, his detractors use it (“Whatever this is, it’s not change we can believe in”). This has become rather tiresome.

That said, the whole point of “change you can believe in,” when it was used during the presidential campaign, was to highlight Obama’s commitment to changing the way the system works. Americans had been misled so often about so many aspects of government over the last eight years, Obama wanted to return some integrity and intellectual honesty to the political process. The cliche was practically intended to be literal — he would change the system, so that we could believe in it again.

And with that in mind, this is exactly the kind of change Obama promised to deliver.

For his first annual budget next week, President Obama has banned four accounting gimmicks that President George W. Bush used to make deficit projections look smaller. The price of more honest bookkeeping: A budget that is $2.7 trillion deeper in the red over the next decade than it would otherwise appear, according to administration officials.

The new accounting involves spending on the wars in Iraq and Afghanistan, Medicare reimbursements to physicians and the cost of disaster responses.

But the biggest adjustment will deal with revenues from the alternative minimum tax, a parallel tax system enacted in 1969 to prevent the wealthy from using tax shelters to avoid paying any income tax.

While budget sleight of hand and “magic asterisks” had become the norm, OMB Director Peter Orszag explained, “The president prefers to tell the truth, rather than make the numbers look better by pretending.”

It’s about damn time. The smoke-and-mirrors approach to which we’ve grown accustomed was ridiculous. It was a problem policymakers recognized, but didn’t want to talk about, and had no interest in fixing. It’s not only heartening to see Obama bring some sanity to the process, it will also have key practical consequences — honest budgets lead to better policy making.

Noam Scheiber added that it will be “kinda helpful to have a budget that actually means something when you’re debating public policy,” and added the political upside to using honest budget numbers for a change: “Why not make the long-term deficit look as large as possible at the beginning of your term? Not only can you fairly blame your predecessor at that point; the bigger the deficit looks, the easier it is to show progress, which Obama will need to do as he runs for re-election. To take one example, you can’t claim savings from drawing down in Iraq if you don’t put Iraq spending on the budget in the first place (which Bush mostly didn’t).”

I think that’s largely right, but the politics might be more complicated than that. By bringing some integrity to the budget, Obama will also show some steep deficits, which will likely cause a major-league trantrum on the Hill.

John Cole offers the administration some excellent advice:

The very first thing I would do if I were Peter Orszag and company, and this is one of the very few times I actually hope someone in government listens to me, is to go back and re-score the last decade or so of budgets using the new accounting system, so when they roll this out they can say “Here is what this year’s budget would have looked like under the old system. Here is what it looks like under the new system. Here are the past ten years worth of budgets under the old system. Here they are under the new system.” For political reasons, this simply has to be done.