2013 Budget - Washington is MIA

The WH OMB 2013 budget will have been out a full 3 weeks by tomorrow at noon.  Yet I’ve haven’t seen any comments on the two most important items in the budget.

30+ years in the healthcare finance field taught me that the most important part of any budget is the key assumptions.  Because of that, I go to the Key Economic Assumption schedule first (page 244 Table S-14), before even looking at the projections.  If the values for the the assumption are unreasonable, then the projections are meaningless.

This is the fourth budget I’ve looked at.  Each of them has appeared to use assumptions that are overly optimistic.  Recently I’ve concentrated on the assumption values for Inflation (CPI-U).  From the 2010 budget on, they have used understated values.  In fact, in each of the budgets, despite wide differences in the last year’s actual inflation, they’ve used values that average 2% and don’t exceed 2.1%.  But we haven’t seen inflation consistently low like that since the early 60’s.  and in recent years its been a struggle to keep inflation below 4%.

Why is this important?  Compounding and interest rates!  Low values compound slower over 10 years than higher values and low values allow for the use of artificially low interest rates.  The combination of the two result in a dramatic understatement of Outlays and Debt.

A second problem with the budget jumped out as I looked at the summary page.  Despite Democrats spending much of last year telling us that Social Security wasn’t in the budget, that it didn’t add to the deficit and that it was sound for decades, both Social Security Outlays and Social Security Payroll Taxes do appear in Table S-5 on page 210 of this year’s budget.  The ten year projections show Receipts falling $1,586 billion short of Outlays.  This is up from the $216 billion shortfall shown in the 2010 budget.  Despite that huge increase in the shortfall, no one in DC seems to care.

I actually wondered if anyone had noticed seither of these items o I drove from Ohio to DC.  I spent 1 1/2 days walking the halls of the House and Senate Office Buildings handing out material related to these items.  (You should have seen the face on the staff at Sen. Conrad’s office, Sen. Shumer’s and Sen. Reid’s offices!)  There were many who were surpirised with what I shared with them (both Republican and Democrats) and all promised to pass the material on to their budget “expert”.  But in the last two weeks have we heard anything from any of them about these items?

Democrats held a “Hands Off Social Security” rally 3/28/12 to tell Congress to leave Social Security alone.  Maybe I should go back to DC 3/28/12 to have a rally of my own exposing these items to the country?  Anyone interested in joining me there?  Unfortuantely no one in DC will care!