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i) The first obvious problem comes when you say that Obama set out $83 billion of deficit reduction for 2012 in his March Budget. Actually, he didn’t. The Congressional Budget Office figures that you refer to compare his budgetary plans to their own March 2011 baseline — and they discover that the deficit would have been $83 billion *higher* under Obama’s plans in 2012; $209 billion *higher* in 2013; and so on. We admit that this isn’t too clear from the CBO’s document, but they did include this line at the bottom, which we suspect you missed:
ii) In fact, Obama’s March Budget is irrelevant to the argument. The figures produced by the CBO yesterday, which again you refer to, reveal the effect on deficit reduction of yesterday’s Budget Control Act compared to the CBO’s March baseline
figures (adjusted for 2011 appropriations, available here). Obama’s planned deficit reduction
doesn’t come into it. And so, to see how much the US deficit will fall next year, we ought to see how much it falls between 2011 and 2012 in the CBO’s March baseline figures — and then add on
the effects of yesterday’s measures. Even if we discount the $1.2 trillion of consolidation that the joint select committee is yet to decide upon, then total deficit reduction in 2012 will be: $318
billion (the amount set out in the CBO’s March baselines) plus $5 billion (to account for 2011 appropriations) plus $21 billion (the extra deficit reduction announced yesterday). This comes to a
total of $344 billion of deficit reduction in 2012, some 2.2 per cent of GDP — much more than the 0.7 per cent that you claim.
iii) As an addendum to ii), we should say that it would be misleading to compare just yesterday’s extra US deficit reduction measures to George Osborne’s total deficit reduction package — after all, there was already significant deficit reduction encoded into the CBO’s March baseline. A proper comparison would compare the total deficit figures for the US with their counterparts in the UK.
iv) Now that we have worked out the deficit figures for the US after yesterday’s measures, as per point ii), we can more easily compare them to the UK’s. To do this, rather than using the cumulative “total discretionary consolidation” figures as you do, why not just use the figures for the UK’s actual deficit — i.e. public sector net borrowing? We have done this, and followed all of the steps above, to produce the pair of graphs below. What they show is that — as we found with Obama’s budget — the new US deficit reduction programme is certainly faster than Osborne’s, and it goes as deep over the course of this this Parliament:
And, remember, this is without including any of the $1.2 trillion extra deficit reduction that Congress has yet to find.
Apologies if any of the above isn’t clear: writing about public finance spreadsheets is a unforgiving task. And we are, of course, happy to discuss this via email, share our working, etc. Indeed, we may have made mistakes ourselves — so feel free to point them out, if so. We’d certainly like to hear your response, in any case.
Best wishes,
Peter and Jonathan
Because you read about barack obama
Also by Jonathan Jones
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