The impact of the admission of the $9 trillion deficit can be measured by the editorial page in the Washington Post. The lead editorial today urges Congress to scrap ObamaCare, in the face of what it calls a “bad-news budget.” Until Congress can control the deficits, WaPo’s editors explain, they should refrain from launching any new programs that will spend massive amounts of cash:
NO ONE LIKES to be the bearer of bad news — especially when it could threaten your multibillion-dollar health-care reform bill. And so the Obama administration did not exactly rush to publish yesterday’s required mid-session update to its federal budget estimates of last February. Still, once the numbers finally emerged in the dog days of August, they retained the power to stun: Instead of a cumulative $7.1 trillion deficit over the next decade, the White House now projects a $9 trillion deficit. These figures imply average annual budget deficits greater than 4 percent of gross domestic product through fiscal 2019, a rate of debt accumulation faster than projected GDP growth. This is not a sustainable fiscal path.
The extra $1.9 trillion in red ink mainly reflects the Office of Management and Budget’s adoption of more realistic — that is, more pessimistic — estimates of economic growth and unemployment. White House officials protest that their original, rosier numbers made sense at the time; actually, plenty of forecasters, including those at the nonpartisan Congressional Budget Office, made more accurate calls. This situation was foreseeable and should have been acknowledged earlier. …
The new deficit numbers make it even more urgent that any health-care reform not only be fully paid for and certifiably budget-neutral in the eyes of independent analysts such as the CBO but also promise meaningful reductions in the cost growth of health care. So far, none of the plans under discussion measure up. The time is fast approaching for the president and Congress to face that reality, too.
Oh, and that “I inherited this” argument? Over:
Still, the Bush administration’s irresponsibility notwithstanding, it is time to stop crying “we inherited it.” …
Meanwhile, [Orszag] said, it will continue pushing pay-as-you-go budget legislation. This is weak reassurance, since the administration’s version of pay-go exempts the extension of the 2001 and 2003 tax cuts, patches for the alternative minimum tax and physician payment reforms under Medicare — that is, most of the policies the administration complains about inheriting. The fact is that the administration supports the continuation of the prescription drug benefits — which Democrats also advocated — and continuation of the Bush tax cuts for 95 percent of taxpayers.
We used to wonder when Obama would fully own the economic crisis. That day has probably come with the fumble on the deficit. Until then, Obama could claim that he was offering clear-eyed reaction to a situation that existed prior to his assuming the Presidency. Now, it turns out that his OMB had it wrong all along, and his proposed solutions have been a bust.
Besides, the “inherited” meme is intellectually dishonest. The Bush tax cuts didn’t create the $1.65 trillion deficit. Under Republican-only governance, the deficit never got higher than $428 billion, even four years after the last of the tax cuts went into effect. Only after Democrats took over Congress — including then-Senator Barack Obama — did deficits start angling upwards sharply, thanks to increased domestic spending.
That argument will fade away now that the White House has finally admitted to the deficit explosion. The first victim will be, and should be, ObamaCare. The next victim should be, and probably will be, cap-and-trade, which had more opposition than ObamaCare in the Senate even before these numbers went public.