How to play "spin the budget".

• Author: Weidenbaum, Murray
• Position: United States federal budget - National Affairs

THE RAPID GROWTH of government spending and of deficit financing being experienced in the U.S. underscores the importance of analyzing carefully the huge array of numbers contained in budgetary documents. In turn, that onslaught of statistical information reinforces the need to recognize the many budgetary games that are played regularly with the data.

To start off on a positive note, the situation has improved since the time when policymakers could choose among three competing concepts of the budget. Back then, they could select at different points in time the budget concept that generated the best statistical support for the policy positions they were advocating. That scenario prevailed in the Lyndon B. Johnson Administration. In retrospect, that time was a high point (or, rather, low point) in budgetary manipulation. Of course, no president since, Democrat or Republican, has been entirely blameless in this regard. That point can be inferred quickly by examining the following examples of budget games:

Change the way the overall Federal budget is measured, especially what categories of spending are included and excluded. In an article published during LBJ's term in office, I described a new presidential budget with the title, "Federal Spending--Up, Down, or Sideways?" At the time, three different measures of the Federal budget were in use: the traditional or administrative budget, which ignored trust funds such as Social Security; consolidated cash budget, which incorporated all of the trust funds; and the NIA budget, which put the budget on an economic basis by using the relevant components of the national income and gross domestic product (NIA or GDP) accounts.

Depending on which of the three budget concepts government officials employed, they could, with technical accuracy, state that Federal expenditures for the year ahead were rising, declining, or stable. That choice no longer is available since the "unified budget" has been adopted. It uses a variation of the consolidated-cash approach, with important, but relatively minor, omissions (such as some of the bailout programs).

Play games (literally!) with the allocation of government spending to specific fiscal years. A very different budget game now is being played: taking advantage of the fact that the calculation of the Federal surplus--or, rather, deficit--for the forthcoming budget year draws on an estimate of future spending (that is, expenditures). However, Congress does not act on expenditures. It acts on appropriations, defined as the legal authorizations for Federal agencies to spend money.

The game consists of overestimating expenditures in the current year and underestimating them in the year ahead. However, the attention of policymakers and those who report on the new annual Federal budget is on the year ahead, which is the budget year. Nobody pays much attention to the current year.

Thus, the Office of Management and Budget (OMB) can show that the deficit is coming down, based on the false, understated forecast of next year's expenditures. Of course, when the current year is over, it will mm out that the government did not spend money as last as it said it would. That pushes up the spending estimate for the next year. By then, though, that next year is the new current year and, once again, attention has shifted to the new budget year, and the game can start anew.

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