The Real Deficit

Ever wonder why no one made a big stink on the television invention about the vast amounts of money being used for Iraq and Afghanistan but wasn't included in the budget? George W. Bush would call it "emergency funding" or a "war supplemental" bill. They'd allocate billions and billions of dollars to the war on terror but not really show it on their balance sheets. They essentially had two sets of books. Well not anymore.

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.

...Mr. Obama’s banishment of the gimmicks, which have been widely criticized, is in keeping with his promise to run a more transparent government.

Fiscal sleight of hand has long been a staple of federal budgets, giving rise to phrases like “rosy scenario” and “magic asterisks.”

The $2.7 trillion in additional deficit spending, Mr. Orszag said, is “a huge amount of money that would just be kind of a magic asterisk in previous budgets.”

“The president prefers to tell the truth,” he said, “rather than make the numbers look better by pretending.”