We’re just two days away from the release of the president’s budget. And here are two words you should be looking for (and dubious of) when it arrives Wednesday: primary balance.
At this point, it’s crystal clear that the president’s budget will never actually balance. The president’s top communications expert has already bluntly admitted it won’t. Despite an $845 billion budget deficit this year alone, it’s reported that the president’s budget would only reduce the deficit by about $600 billion over the next decade. With mounting debt continuing to hamper our economy, that clearly won’t cut it. We need a balanced budget.
To average folks, a balanced budget means Washington is spending only the amount that it takes in. Period. That’s the kind of budget that House Republicans passed last month and the kind of budget Americans expect when they hear the word balanced. The president, or course, has never had a balanced budget plan, which leaves him out of step with the American people.
Enter White House distortion.
White House officials have tried numerous ways to muddle the consequences of the president’s spending addiction. Most recently, they’ve concocted a novel term, calling his a “balanced approach” – referring to the ratio of spending cuts to new tax hikes. Of course, the president’s proposal is not “balanced” even under this invented definition. And, as we’ll see Wednesday, this “balanced approach” will leave America far, far from a balanced budget.
This is where “primary balance”– a term the White House will surely apply to its budget on Wednesday – comes in to play. “Primary balance” is defined as government revenues being equal to new spending, excluding interest payments and borrowing costs. Put simply, “primary balance” means the budget would balance if we could ignore interest. Except we can’t. American families sure can’t.
When Americans buy a home or new car, they can’t ignore the interest payments when balancing their family budget. A business cannot ignore borrowing costs and still say it’s balancing its books. Only in Washington would leaders attempt to arbitrarily disregard a significant – and very real – portion of our budget to claim fiscal responsibility.
So how big of a liability is the interest we owe on our debt? Big. And growing. If we assume the president’s budget reaches “primary balance” by fiscal year 2015, Washington would approximately:
- See average ANNUAL budget deficits of $550 billion;
- Run cumulative deficits of $5.5 trillion over the next decade;
- And in 2023 – given ten years to sort out our finances – still run an $800 billion deficit.
So remember on Wednesday, when White House officials are patting themselves on the back for reaching “primary balance,” their version of a balance means we’re still borrowing $800 billion from future generations. Quite an achievement. One average Americans surely won’t see as a reason to celebrate.