Deficits

Budget Proposal

Posted on Wednesday, February 16, 2011

Budget Reax

Lori Montgomery summarizes: "President Obama submitted a budget blueprint for fiscal 2012 on Monday full of surgical cuts and cautious trade-offs to lawmakers clamoring for bold action to reduce government spending and control a budget deficit expected to rise to a record $1.6 trillion this year. The $3.7 trillion plan proposes to trim or terminate more than 200 federal programs, striking areas long favored by Democrats to make room for increases aimed at boosting the economy. The new priorities include spending on education, energy and medical research, and a push to bring high-speed Internet to virtually every American...His budget calls for $1.6 trillion in fresh revenue over the next decade, primarily through higher levies on businesses and the wealthy."

Annie Lowrey explains what the budget would look like if the US made as much as a typical household: "The Obama budget throws around some very big numbers, a dizzying array of billions and trillions, and they are difficult to parse and compare. So let's cut them down to a useful, human, household size. Next year, the government plans to take in $2.63 trillion—and to spend $3.73 trillion. For our purposes, let's use $60,000 as the government's income and $85,000 as its expenses. Where does all of that spending go?"

The business community is skeptical, report Jia Lynn Yang and Michael Fletcher: The fiscal 2012 budget outlines more than $200 billion in higher taxes for oil and gas companies, banks and multinational firms - ideas that have been offered in the past and vehemently opposed by industry. It does not detail a core part of Obama's effort to win the trust of big business: an overhaul of the corporate tax code that would lower the overall rate that firms pay. 'I'm just extremely disappointed,' said Caroline Harris, chief tax counsel for the U.S. Chamber of Commerce. 'I certainly did not expect to see a full plan. But I did think some good-faith effort would have gone a long way with the business community.'"

The budget strikes a good balance, writes Robert Greenstein of the Center for Budget and Policy Priorities: "Given current fiscal and political circumstances, the budget strikes a tough but generally sound overall balance among the need for fiscal restraint, the need to avoid large immediate cuts while the economy is still weak, the need to protect effective high-priority programs (especially those that represent effective long-term investments), and the need to avoid inflicting serious harm on the poorest and most vulnerable members of our society...The Administration was on sound footing in not offering, in the budget, various controversial proposals for long-term deficit reduction that policymakers could consider more constructively as part of future deficit-reduction negotiations."

The budget does not go nearly far enough, writes Maya MacGuineas of the Committee for a Responsible Federal Budget: "It is encouraging that the Administration identifies some areas for real savings. However, the total level of savings is far short of what is needed and too many heroic assumptions are used to achieve them. This budget fails to meet the Administration's own fiscal target, it fails to tackle the largest problems areas of the budget, and it fails to bring the debt down to an acceptable level. While we can certainly appreciate the difficult political environment in which the budget is introduced, the glaring omission of any significant entitlement reforms and the excessive use of 'fill-in-the-blank' budgeting does not help to advance the conversation."

Good start, but more needed, says Senate Budget Committee Chairman Kent Conrad: "The President’s budget gets it about right in the first year. Even as it moves to cut spending, it continues investments in the critical areas of education, energy, and infrastructure. These investments will help strengthen the economic recovery, create jobs, and build the foundation for long-term economic growth. But we need a much more robust package of deficit and debt reduction over the medium- and long-term. It is not enough to focus primarily on cutting the non-security discretionary part of the budget, which accounts for just 12 percent of spending this year. Instead, we need a comprehensive long-term debt reduction plan, in the size and scope of what was proposed by the President’s Fiscal Commission. It must include spending cuts, entitlement changes, and tax reform that simplifies the tax code, lowers rates, and raises more revenue."

Obama's budget represents a failure of leadership, writes House budget chair Paul Ryan: "Failing to heed the warnings of economists and the demands of the American people, the President’s budget accelerates our country down the path to bankruptcy. Far from ‘living within its means,’ the President’s budget puts the government on track to nearly double in size since the day he took office - a direct result of his party’s reckless spending spree. His budget destroys jobs by imposing a $1.6 trillion tax hike, adding $13 trillion to the national debt and fueling uncertainty in the private sector. We cannot tax, spend and borrow our way to prosperity. Where the President has fallen short, Republicans will work to chart a new course - advancing a path to prosperity by cutting spending, keeping taxes low, reforming government, and rising to meet the challenges of our time.”

The budget is a window into what the federal government really does these days, and what it really does these days is insure people, writes Ezra Klein: "Two of every five dollars goes to Social Security, Medicare or Medicaid, all of which provide some form of insurance. A bit more than a buck goes to the military. Then there’s a $1.50 or so for assorted other programs -- education, infrastructure, environmental protection, farm subsidies, etc. Some of that, like unemployment checks and food stamps, is also best understood insurance spending. And then there’s another 40 cents of debt repayment. Calvin Coolidge once said that the business of America is business. Well, the business of the American government is insurance. Literally. If you look at how the federal government spends our money, it’s an insurance conglomerate protected by a large, standing army." The changes from last year's budget are cosmetic, writes Douglas Holtz-Eakin of the American Action Forum: http://bit.ly/fVvshM

The Obama administration is finished with stimulus, writes Paul Krugman: "The important thing, I think, is that he has effectively given up on the idea that the government can do anything to create jobs in a depressed economy. In effect, although without saying so explicitly, the Obama administration has accepted the Republican claim that stimulus failed, and should never be tried again."

The budget doesn't do nearly enough on long-term deficits, writes Howard Gleckman: "Mostly due to one-off responses to the Great Recession, such as TARP and the stimulus, all spending as a share of Gross Domestic Product ballooned in 2009-10. While spending will slowly fall over the next couple of years--thanks to an improving economy, the merciful end to various government bailouts, and President Obama’s proposed spending freeze for some domestic programs, overall outlays would settle in at about 23 percent of GDP through the end of the decade according to Obama’s fiscal plan. That’s too high, especially since most costs of the aging Baby Boomers won’t have kicked in yet."

The budget is passive aggressive -- but in a good way, writes Jonathan Chait: "People support most actual programs, but they think foreign aid constitutes a huge part of the budget and you can generate mass savings by eliminating waste and bureaucracy. They've believed those things for a long time. What's more, I actually see the administration's budget gambit as a subtle attempt to change peoples' minds. The administration is loudly publicizing the fact that it's cutting programs it thinks are necessary. The message, sometimes made explicit, is that the budget actually does not contain a lot of waste. It's filled with programs that have survived many previous rounds of belt-tightening for a reason. If you want to cut the budget, you have to cut useful and necessary things. I don't think this will have a big effect. But I do think Obama is trying, in a passive-aggressive way, to do what liberals have demanded. He's explaining to the public that the free-ride view of budget cutting -- we can cut our way out of the deficit by eliminating waste and spending that only benefits foreigners -- is wrong."
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