Examiner Editorial: Boggling deficits and blue smoke 

One way to look at President Barack Obama’s proposed budget for 2011 is to focus on the fact that it includes the largest annual deficit — $1.6 trillion — since World War II.

It’s even more revealing to examine Obama’s spending plans for the next five years. There, we find a cumulative federal deficit of $5.08 trillion. White House spinmeisters will crow about Obama “cutting” the deficit in half — to $700 billion — by 2013.

But the reality is, as the Brookings Institution’s Isabel Sawhill told The Wall Street Journal, “these proposals will still leave us with unsustainable deficits as far as the eye can see. It is depressing to discover that we can no longer even aspire to balance the budget once the recession is over.”

As bad as the official numbers are, however, a closer examination of the data behind them makes it clear that future deficits are almost certain to be higher than even the Obama administration now projects. The reason is that Obama, like previous presidents of both parties, too often counts his federal revenue chickens before they hatch.

For example, buried deep in the footnotes of the official budget, is this concerning expected revenue from a cap-and-trade program:

“A comprehensive market-based climate-change policy will be deficit neutral because proceeds from emissions allowances will be used to compensate vulnerable families, communities, and businesses during the transition to a clean energy economy. Receipts will also be reserved for investments to reduce greenhouse gas emissions, including support of clean energy technologies, and in adapting to the impacts of climate change, both domestically and in developing countries.”

The administration doesn’t mention last year’s projection of $650 billion in cap-and-trade revenue. But clearly, the administration still has plans — aka “investments” — for huge spending increases based on expected cap-and-trade revenue that is not reflected in the official projections.

Similarly, Obama projects increasing revenue from oil and gas development in the outer continental shelf, but the reality is Kenneth Salazar, Obama’s Interior secretary, is throttling new continental shelf exploration at every opportunity. Most recently, he delayed for at least a year a decision on Virginia’s request for fast-track approval of exploration in the state’s portion of the continental shelf.

Federal revenue from area was $3.7 billion in 2009, and it will dip to an estimated $2.745 billion this year. Yet, Obama’s budget assumes continental shelf revenue will somehow more than triple, rising to $6.638 billion next year and thereafter to $9 billion in 2015.

If the energy portion of Obama’s budget includes these revenue fictions, can the rest of his spending blueprint be trusted?

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Staff Report

Staff Report

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A daily newspaper covering San Francisco, San Mateo County and serving Alameda, Marin and Santa Clara counties.
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