Rush Limbaugh, James Pethokoukis, wrong on balanced budget
On Thursday, Rush Limbaugh cited a blog post by American Enterprise Institute scholar James Pethokoukis during his show. The post in question presents the notion of a balanced federal budget in 2015. Unfortunately, the post by Pethokoukis has three major flaws in it that makes its premise – a balanced budget in 2015 – extremely unlikely.
First, and most critically, Pethokoukis cites the firm Potomac Research for the following information:
… official forecasters will have to radically alter their projections this summer. The CBO forecast of $845 billion in red ink this year, 5.3% of GDP, is hopelessly outdated; the deficit will fall well below 5% of GDP, perhaps to about $700 billion. Then the improvement really takes hold – instead of the official forecast of a $616 billion deficit in fiscal 2014, we’d anticipate something like $500 billion, close to 3% of GDP. And in fiscal 2015, the deficit could drop below 2% of GDP, perhaps to $300 billion.
Call us crazy, but if the economy finally lifts off in 2014-2015, with GDP growth in the 4% neighborhood — with the sequester still in place – a surplus by fiscal 2015 is not totally out of the question.
Yet in following the link provided by Pethokoukis to Potomac Research’s website, there is no such analysis found. The language in Pethokoukis’ post is similar to what Potomac published in January, with different numbers, about the national debt and the economy.
Tea Party Patriots reached out to Pethokoukis by e-mail about the lack of citation, and he replied that “Potomac research is proprietary.” So no data or explanation of the analytical process is likely forthcoming.
Assuming the Potomac Research information is accurate, there is still a second problem – the analysis relies on an unrealistic budget projection to reach a balance. It uses numbers from the Congressional Budget Office’s (CBO) current law scenario, which assumes certain unrealistic things happen, such as tens of billions in cuts to Medicare providers. The more politically realistic scenario, known as “current policy,” is totally ignored by Potomac Research. This scenario assumes certain spending cuts and tax increases do not go into place, thus deficit reduction measures seen in the current law projection do not take place.
Asked about this in an e-mail, Pethokoukis responded that “current law assumes the sequester and Obamacare remain– seems reasonable.” Yet Obamacare is in both scenarios, so this point is merely a straw man argument. With regards to sequestration, whether or not it lasts into future budgets is a huge unknown in CBO’s projections, due to future Congresses not being bound by present Congresses, as CBO’s Director pointed out in 2011.
A third issue arose in examining the Potomac quote above – their assumption of economic growth. According to Pethokoukis in an e-mail, the 4% potential growth is real GDP, meaning it accounts for inflation and other factors. Yet this projection is given no analytical backing in the Pethokoukis post, and, based upon recent data, is well outside of what can reasonably be expected with America’s current debt levels. The kind of growth Potomac expects is more typically seen by nations with a far lower debt-to-GDP ratio than America currently holds.
In his closing, Pethokoukis finally says something Tea Party activists can agree on:
The real concern, of course, is that any momentum or interest in long-term entitlement reform might evaporate.
Indeed. But Pethokoukis is not helping the situation by placing unrealistic budget and economic growth scenarios in front of influential speakers like Rush Limbaugh. Instead, he is causing a great deal of harm to those who know fiscal discipline sooner rather than later is necessary to a better future for America.