In his State of the Union Address, President Obama promised a freeze on discretionary spending and a return to fiscal discipline. Moreover, the Obama administration promised more than 20 billion dollars in cost savings in this year's budget by consolidating a few departments and cutting wasteful programs. Both of those sound like great ideas on paper. One would think that by freezing discretionary spending next year and cutting some wasteful programs, the government would be projected to spend less money.

The official budget projection has changed between 2009 and 2010...for the worse. Spending, which was projected to be $3,625 billion in 2011 will actually be $3,834 billion, an increase of more than 200 billion dollars or nearly 6%. The picture gets somewhat better in the later years. The new budget shows 2015 spending at 4,386 billion compared to 4,258 billion in the old budget, an increase of 128 billion. At first glance it doesn't seem like this is big difference, after all, what's a hundred billion when the budgets are in the trillions? It's when one adds up total sum of the deficits over the next decade that the numbers get scary.

Old estimate of 2010-2019 deficit: $6969 billion

New estimate of 2010-2019 deficit: $9085 billion

Yikes!

The new budget includes what Obama calls a "discretionary spending freeze", a drawdown of troops from Iraq, a new tax on bankers, a repeal of the Bush tax cuts on the rich, and an end to tax breaks for oil companies. However, Obama still manages to increase the national debt by nearly 75% in less than a decade. By 2020, interest on the national debt alone will total nearly a trillion dollars with most of that money going to foreign owners of US debt.

A 9 trillion dollar addition to the national debt is bad enough but there is also a serious question about the credibility of Obama's numbers. Obama uses fairly optimistic assumptions about economic growth. Obama's budget assumes that the economy will grow at a  compound annual rate of 2.5% a year for the next decade. To put this in prospective, the economy grew at a 2.3% rate between the January 2000 and June of 2008. This time period excludes the impact of this past recession but includes the entire housing boom. If we couldn't manage a 2.5% growth rate during a massive credit expansion and housing boom, how are we supposed to grow faster than that with consumers and business paying down debt?

Put another way, if we couldn't party like a rockstar last night, how are we supposed to party even harder today with a hangover and an empty liquor cabinent?

In effect, Obama's budget team is predicting a decade long winning streak in which economic growth exceeds historical norms for 10 years in a row without a slowdown. In short, Obama's budget is based on projections of GDP growth that are improbable if not impossible.

Why does this matter?

The reason you should care about Obama's fuzzy math is that a strong and growing economy can produce huge amounts of new tax revenue while taking millions off the unemployment rolls, providing a double boost to the government's finances. If one assumes a more realistic projection for GDP growth, tax revenue projections fall far short of Obama's projections and deficits explode.

The current budget isn't a bold step towards fiscal responsibility, it's a ten year plan for national insolvency. Republicans in Congress should filibuster this budget and demand that Obama begin to take the deficit seriously. Bush's failure to control spending in the 2000s does not give Obama free reign to borrow and spend America into bankruptcy. America does not have time for partisan bickering right now, the survival of the Republic is at stake.

Budget 2011-2020: http://www.whitehouse.gov/omb/budget/fy2011/assets/tables.pdf
GDP Data: http://www.bea.gov/national/index.htm#gdp