WASHINGTON (MNI) – The following is a statement by Office of
Management and Budget Director Jack Lew in response to the preliminary
analysis of the President’s FY’12 Budget by the Congressional Budget
Office (On MNI Main Wire At 13:49 EDT) released Friday:

Today, the Congressional Budget Office (CBO) released its
preliminary analysis of the President’s FY 2012 budget.

Their analysis leads them to a different projection of the deficit
picture, and it’s worth understanding our analytical differences.

There are two main reasons why our projections differ. First, is
that the CBO re-estimate does not reflect two important budget policies.
In the budget, the President laid out a plan to make a historic
investment in our transportation infrastructure in order that our
country can keep pace with our competitors in the global economy. We
were crystal clear that this spending had to be paid for with a
bipartisan funding source and that if one was not identified, that the
Administration would not support making these investments. This way
there would be no risk that this spending would add to the deficit. CBO
chose to treat this spending as a free-standing initiative, not in
tandem with our commitment to pay for it which is not the policy we
proposed.

Similarly, the budget proposes that we fully pay for the cost of
fixing the Medicare physician payment formula so that reimbursement
rates are not cut dramatically which could lead to doctors refusing to
treat Medicare beneficiaries. In past years, this fix was not paid for,
but last year, the President signed into law a fully paid for fix for
one year, and our budget identified tens of billions of dollars in
specific health care savings that will pay for another two years. With
three years of the fix paid for, we believe that this establishes a
pattern of practice critically important in scoring policies — that
strengthens our commitment to work with Congress on a permanent
solution. Again, CBO chooses not to make this assumption.

The second main difference between our and CBO’s analysis is that
our economic assumptions differ. The economic forecast in our 2012
Budget, which was prepared in November 2010, is actually more cautious
than the consensus forecast for 2011, and is well within the range of
the Federal Reserve’s assumptions in all years. Beyond the short-term,
we believe that the economy will fully recover after this recession as
it has after previous ones. It is our view that the economy will return
to full strength, and that is a view shared by the Federal Reserve as
well.

There is large uncertainty in economic projections and differences
of opinion when it comes to assessing individual policies. But
regardless of our differences, CBO confirms what we already know:
current deficits are unacceptably high, and if we stay on our current
course and do nothing, the fiscal situation will hurt our recovery and
hamstring future growth. That is why the President’s 2012 Budget puts
forward more than $1 trillion of deficit reduction including a five-year
freeze in annual domestic spending that will save more than $400 billion
over the next decade, and puts the nation on a sustainable fiscal
course. And that is why we are committed to making real progress on our
fiscal situation this year and not put off action any longer. As this
debate continues, we look forward to working with people from across the
spectrum to rein in our deficits, grow our economy, and win the future.

** Market News International Washington Bureau: 202-371-2121 **

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