AP Fact Check Calls Obama Budget Phantom Savings

Copies of President Barack Obama's fiscal 2013 federal budget arrive at the House Budget Committee on Capitol Hill in Washington, Monday, Feb. 13, 2012. (AP Photo/J. Scott Applewhite)

Editor’s note: the following is a fact check done by the Associated Press.

WASHINGTON (AP) — When a president introduces a budget, there are always phantoms flitting around the room. President Barack Obama’s spending plan sets loose a number of them.

It counts on phantom savings from the wars in Iraq and Afghanistan. It’s underpinned by tax increases Republicans won’t let happen and program cuts fellow Democrats in Congress are all but certain to block.

And it assumes rates of growth that the economy will have to become strikingly undead to achieve.

A look at three budget ghosts, sometimes known as gimmicks:

BUDGET: Claims about $850 billion in savings from ending the wars and steers some $230 billion of that to highways.

REALITY: There is no direct peace dividend from ending the wars because the government borrowed to pay for them. The government would have to keep borrowing that amount of money to have it to spend on something else.

Counting the end of wars as a dividend is like a student coming out of college loaded with debt and aching to buy things, says Maya MacGuineas, president of the Committee for a Responsible Federal Budget. “When you finish college, you don’t suddenly have thousands of dollars a year to spend elsewhere – in fact, you have to find a way to pay back your loans.”

MacGuineas says, “Drawing down spending on wars that were already set to wind down and that were deficit-financed in the first place should not be considered savings.”

President George W. Bush kept the cost of the wars out of his budgets, a contentious accounting maneuver that may have papered over the impact on spending projections but deepened the national debt as surely as if the price tag had been shown transparently. Taken together, the Bush and Obama budget tricks seem to suggest war costs nothing but ending it frees a ton of money.

AP Fact Check Calls Obama Budget Phantom Savings

BUDGET: Forecasts healthy growth in years ahead, with GDP growth predicted to reach 4 percent in 2014 and 4.2 percent in 2015.

REALITY: It’s obviously too soon to know, but reputable private forecasts are not nearly as rosy as the administration’s assumptions, and their track record tends to be better. They are generally forecasting a percentage point lower or close to that, a huge difference, and don’t see reaching 4 percent growth in the foreseeable future.

Last year, the administration built its proposed budget on a projection of 2.7 percent growth in 2011; it turned out to be 1.7. The forecast for 2012 was 3.6 percent, which the White House lowered in the new budget to 3 percent. IHS Global Insight, a leading forecaster in Lexington, Mass., projects 2.1 percent.

Such projections are key because the government’s spending and debt plans rest on how much revenue can be expected to come in.

BUDGET: Assumes taxes will go up on the rich, tax breaks will end for the oil and gas industry, and spending will be cut for programs the president is willing to sacrifice.

REALITY: Tax increases are a non-starter before the election, with Republicans standing in the way, so sweeping parts of Obama’s budget plan are little more than a campaign platform laying out what he would try to get done if re-elected.

Some of his proposals are not so tied to the election. They have little or no chance of passing Congress regardless of what happens in November.

For example, he proposes using money from a Justice Department fund for crime victims for other purposes. But Democratic Sen. Patrick Leahy of Vermont, chairman of the Judiciary Committee, quickly signaled he would work to protect the fund, just as he has successfully done in the past.

Obama is the latest in a line of presidents to zero out – provide no money for – programs in order to show budget savings even while knowing Congress will restore the money. Amtrak and the post office are among institutions that have seen such phantoms before.

Associated Press writers Martin Crutsinger and Pete Yost contributed to this report.