Government Programs Don’t Always Increase the Deficit

The federal budget deficit, it seems, is back on the White House’s agenda. David Brooks, in his column today, asserted in passing that once (if?) health care reform passes, President Obama will “pick some fights with his own party over spending.” At Politico, meanwhile, Mike Allen and Jim VandeHei have a full article on the new budget-hawkery that opens by reporting that the 2010 State of the Union address will feature a focus on the deficit.

The Politico piece follows that lede with a lot of skepticism about whether Obama and Congress will actually deliver. Given the history of politicians’ promises on this front, skepticism is warranted. This graf, though, is a bit odd:

For starters, the White House has not dropped plans for an aggressive global warming bill early next year that will be loaded with new spending on green technology and jobs – that would be paid for with tax increases. Democratic lobbyist Steve Elmendorf says the White House focus on deficit reduction could easily kill the cap-and-trade effort. “I think this means cap-and-trade has to go to the backburner,” he said.

It’s not entirely clear here whether the argument is that cap-and-trade and deficit reduction are at odds, or simply that the political leadership couldn’t focus on two major tasks at once. But as the story notes, the global warming measures working their way through Congress are “paid for with tax increases”—and thus, wouldn’t necessarily increase the deficit. In fact, the Congressional Budget Office evaluated the cap-and-trade bill approved by the House over the summer and found that it would actually trim the deficit by about $24 billion. (It’s not clear that deficit reduction is always the highest policy goal in any case, but that’s a debate for another day.)

Cap-and-trade wouldn’t automatically help reduce the deficit, of course. As CBO Director Doug Elmendorf noted in October, “the economic impact” of greenhouse gas measures—which includes, but is not limited to, the deficit—“would depend importantly on the design of the policy.” But it wouldn’t automatically increase it, either.

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Greg Marx is an associate editor at CJR. Follow him on Twitter @gregamarx.