Obama’s Budget Deficit Smoke and Mirrors

I interest of giving full credit, I heard this 1st on Hannity, and took the figures in this entry from Dick Morris’ website at www.dickmorris.com

Harry Houdini, David Copperfield, and now Barack Obama

President Barack Obama has joined the club of elite magicians this past week, with the unveiling of one of history’s most spectacular optical illusions. Somehow, he told the American Public that when he took office, the budget deficit was already 1.3 trillion under George W. Bush. My initial reaction was that of hearing some guy claim that he had dated Heidi Klum. It got my attention, but after dismissively laughing it off, I pondered what kind of drug they must be smoking, and didn’t even bother to try to figure out what the hell they were talking about.

Well tonight I heard how this illusion was pulled off. The sad thing is that most of the general public probably took it hook, line, and sinker. Here is the lowdown.

The nuts and bolts of Obama’s magic trick

Here are the facts:

In 2008, Bush ran a deficit of $485 billion. By the time the fiscal year started on October 1, 2008, it had gone up by another $100 billion due to increased recession-related spending and depressed revenues. So it was $600 billion. That was the real Bush deficit.

But when the fiscal crisis hit, Bush had to pass TARP in the final months of his presidency which cost $700 billion. Under the federal budget rules, a loan and a grant are treated the same. So the $700 billion pushed the deficit — officially — up to $1.3 trillion. But not really. The $700 billion was a short term loan. $500 billion of it has already been repaid.

So what was the real deficit Obama inherited? The $600 billion deficit Bush was running plus the $200 billion of TARP money that probably won’t be repaid (mainly AIG and Fannie Mae and Freddie Mac). That totals $800 billion. That was the real deficit Obama inherited.

Then…he added $300 billion in his stimulus package, bringing the deficit to $1.1 trillion. And falling revenues and other increased welfare spending pushed it up to $1.4 trillion.

So, effectively, Obama came close to doubling the deficit.

His program of fiscal austerity in this new budget is a joke. If he wanted to lower the deficit, here’s what he could do:

1. Cancel the remaining $500 billion of stimulus spending and

2. Cancel the $300 billion of spending in stimulus II.

Presto! The deficit is cut in half.

Those are the real numbers.

This entry was posted on Tuesday, February 2nd, 2010 at 3:16 am and is filed under Obama Administration. You can follow any responses to this entry through the RSS 2.0 feed.