In looking at the President’s FY2011 budget, it bears pointing out that there are some pretty significant assumptions built in. Three notable ones:

  1. The Administration’s $1 trillion health care expansion will pass and save the government money in the long run. On page 11, the budget states “Undertaking health insurance reform at this moment is an important step toward putting the country on a more solid foundation for economic growth.”
  2. Cap-and-trade will pass without affecting the government’s bottom line at all. Footnotes on pages 148 and 171 state “A comprehensive market-based climate change policy will be deficit neutral because proceeds from emissions allowances will be used to compensate vulnerable families, communities, and businesses during the transition to a clean energy economy. Receipts will also be reserved for investments to reduce greenhouse gas emissions, including support of clean energy technologies, and in adapting to the impacts of climate change, both domestically and in developing countries.”
  3. The economy will recover – and grow significantly. On page 17, the budget states “The budget assumes that the economy will grow by an annual rate of 3.0 percent in 2010, and accelerate to approximately 4.25 percent annually over 2011 to 2013.”

Let’s ignore those reports that health care reform, as it stands in Congress, will be far more expensive than projected.

Let’s ignore all those reports on cap-and-trade that warn about the jobs that will be lost and the capital that will be wasted.

And let’s ignore the fact that unprecedented deficits threaten to overtake the nation’s GDP by 2019 – which will lead to a weakening of the dollar and skyrocketing inflation (which, um, means that growth might not be as robust as the government hopes.)

These are pretty big assumptions… and ones that come with significant financial implications. As the old saying goes, people who assume make an ___ out of you and me.