Congressional Budget Office takes issue with Obama budget

One of the great dangers of President Obama's proposed budget, which he defended again last night in his press conference, is the way it dramatically increases the annual deficits and national debt. In my post from last week, "The Budget that Will Change Your Life," one of the linked articles made the argument that the deficits, as dire as they were in the budget projections, would actually be much worse.

The Congressional Budget Office has since come out with its assessment of the budget, and their verdict is that the 10-year deficits will be 33% higher than the budget projects.

An editorial in Investor's Business Daily contains this critique:

This makes Obama's budget one of the worst accounting jobs ever put forward in modern times by a new administration.When the CBO reviewed George W. Bush's first budget, for example, the difference between what Bush said his budget would cost and what the CBO said it would cost was minimal. Ditto its review of Clinton's first budget.

Even Reagan's first budget, which was widely panned for allegedly employing rosy scenarios to cook the numbers, differed from the CBO by just 1.2% in projected revenues and 5% in spending over the first four years.

So why the huge gap between Obama and the CBO?

Obama's team employed one of the oldest budget tricks in the books - exaggerating economic growth - to hide the true cost of his tax and spending plans. Budget forecasts are hugely sensitive to predictions about GDP growth, inflation, unemployment and interest rates. Even slight differences can have a huge impact on projected outlays and revenues....

Shorn of these tricks, the CBO finds that what remains is a fiscal plan that will leave the country mired in gargantuan deficits and debt. (Full article...)

Some defensive investment strategies require you to pick up the phone. Congressional phone numbers available here.

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Austin Pryor is the founder and publisher of the Sound Mind Investing newsletter and website. Visit www.soundmindinvesting.com to learn more.