Out of Control Policy Blog

Obama's Proposed Budget and the Fantasy of Fiscal Responsibility

Calling it "one of the greatest spend-while-you-can documents in American history," this Wall Street Journal editorial today nails the bottom line on President Obama's proposed FY2011 budget:

We now know why the White House leaked word of a three-year spending freeze on a few domestic accounts before this extravaganza was released. No one would have noticed such a slushy promise amid this glacier of spending. The budget reveals that overall federal outlays will reach $3.72 trillion in fiscal 2010, and keep rising to $3.834 trillion in 2011. [...]

If this budget is Mr. Obama's first clear demonstration of his long-term governing priorities, then it's hard not conclude that this spending boom is deliberate. It is an effort to put in place programs and spending commitments that will require vast new tax increases and give the political class a claim on far more private American wealth.

Despite talk of "tough choices" in yesterday's document, the Administration wants $25 billion in new spending for states for Medicaid, $100 billion for yet another jobs "stimulus," big boosts in spending for low-income family programs, for health research, heating assistance and education. If Mr. Obama's priorities become law, federal outlays will have grown an astonishing 29% since 2008.

Over at The New York Times, David Sanger adds:

By President Obama's own optimistic projections, American deficits will not return to what are widely considered sustainable levels over the next 10 years. In fact, in 2019 and 2020 — years after Mr. Obama has left the political scene, even if he serves two terms — they start rising again sharply, to more than 5 percent of gross domestic product. His budget draws a picture of a nation that like many American homeowners simply cannot get above water.

For Mr. Obama and his successors, the effect of those projections is clear: Unless miraculous growth, or miraculous political compromises, creates some unforeseen change over the next decade, there is virtually no room for new domestic initiatives for Mr. Obama or his successors. Beyond that lies the possibility that the United States could begin to suffer the same disease that has afflicted Japan over the past decade. As debt grew more rapidly than income, that country’s influence around the world eroded.

Hopefully Americans see past smoke and mirrors like the proposed discretionary domestic spending freeze—which would have no real impact since it covers a sliver of a subslice of the budget and will be matched with new spending goodies—and the proposed cuts to 120 programs, which at a weak $20 billion in savings might just as well be a rounding error, even if they somehow manage to get through Congress.

Some pundits across the political spectrum are giving the administration a little pat on the back for these steps as moves in the right direction with small impact but symbolic value. My reaction to those proposals is admittedly less nuanced: "is that all you've got?" The proposed cuts and ironically named "freeze" are dwarfed by the magnitude of overall spending, new spending, entitlement spending, etc. we're facing. Call me crazy, but I'm having trouble getting too excited about baby steps taken by an adult government facing major, grown-up fiscal problems.

I'd like to see a budget that actually starts the process of ramping spending down the next several years to generate those long-forgotten things called surpluses, but that's clearly a fantasy in DC today where the push is to ramp up federal hiring. Setting the bar much lower, I'd love to see a budget that sends a symbolic message by actually budgeting for anticipated revenues, even with the rosy, unrealistic estimates used by the administration. That won't happen either.

Instead, as David Rogers at Politico.com wrote yesterday, the administration has presented a budget that adds $5.08 trillion in deficits over the next five years. Given its history, Congress may drive that even higher. If there's even a bar anymore, it's so low that policymakers can just step over it at will.

So in the end, the administration essentially wants to bring a small band-aid to a major trauma. Color me underwhelmed. In a conversation yesterday, an associate made an astute and spot-on assessment of Obama's FY2011 budget in a great one-liner: "by 2014 we intend to slow the pace of digging our fiscal grave in half!" Exactly.

Perhaps the change we were supposed to believe in was that the current administration would actually be less fiscally responsible than the last, not more so.

Leonard Gilroy is Director of Government Reform


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