Kent Conrad’s Budget

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The contrast between the volume of huffing and puffing Kent Conrad did when presented with the CBO analysis of Barack Obama’s budget and the changes he actually made when writing his proposal is a pretty telling Washington story. It’s not that Conrad didn’t change anything substantive (he did) or that he’s crazy to worry about long-term deficits (he’s not) or that there’s anything uniquely villainous about Conrad’s affection for the occasional budget gimmick (happens all the time), but someone who was genuinely alarmed by the fact that the CBO scored Obama’s plans as leading to large deficits in the final years of his ten year budget would not have “solved” this problem by abandoning Obama’s ten-year budget window switching to a five-year window. Similarly, re-inserting the “let’s pretend will use the AMT to raise taxes on the upper-middle class and then not actually do that” approach to budgeting, though now a time-honored trick of the Bush years, is not an actual deficit reduction measure.

Long story short, Senator Conrad cares about the deficit and is taking some action to make it smaller. But he also cares a great deal about being seen as a deficit hawk, the kind of guy who’s not afraid to take an axe to the president’s proposals. And in this instance the administration rather smartly eschewed a lot of this kind of pain free “virtual” deficit reduction, thus making it possible for interested Senators to deploy favored accounting patches on their own initiative and take credit for more reduction than they actually produced.

Meanwhile, a smart observer observed to me earlier that we’re at risk of missing the forest for the trees in terms of the growth projection. CBO has these big deficits because they’re foreseeing relatively slow economic growth. But that relatively slow growth is bad for many reasons that have nothing to do with the deficit. That slow growth may come about or it may not. But either way, it would make more sense for congress to think about avoiding the slow-growth scenario and not just about mitigating the budgetary consequences of slow growth.