Does Obama's Budget Increase or Decrease the Deficit? Actually, Both

The CBO says that President Obama's budget will increase deficits by $3.5 trillion over the coming decade. The CBO also says that President Obama's budget will decrease deficits by $4.3 trillion over the coming decade. What is this, Schrödinger's budget?

Almost. Like many of the truths we cling to, the answer to whether the president's budget adds or subtracts from the deficit depends on your point of view. Take a look:

This chart compares the President's budget (dark blue) to the CBO's "baseline" (light blue) and an alternative fiscal scenario (dotted line). Compared to the CBO baseline, the president's budget appears mildly reckless. Compared to the alternative scenario, the president's budget appears mildly prudent. So what's the difference between the baseline and the alternative scenario? The baseline assumption is a fantasy. The alternative scenario is reality.

Under the CBO baseline assumption, all of the Bush tax cuts come off the books and the automatic spending cuts from the debt ceiling deal kick in during early 2013. The result is a budget that nearly moves into balance over the next ten years. This assumes that a do-nothing Congress will in fact do nothing.

But nobody expects or wants this to happen. Democrats want to keep most of the tax cuts, and Republicans want to keep all of them. And neither side wants their preferred parts of the budget -- Medicare and defense -- to get whittled down. There is a bipartisan consensus to do something. And that's exactly what the alternative scenario lays out. Under this assumption, Congress mitigates the fiscal pain. The tax hikes get put off and the spending cuts evaporate.

Obama's plan is less responsible than doing nothing and more responsible than a do-nothing Congress. If the president is trying to seem like the adult in the room, he's massively helped by the fact that he's surrounded by old men and women running a severe maturity deficit.