President Obama’s 2012 budget is out, and it’s pretty much what we expected: more SOTU-style talk with little movement towards the tough choices policymakers will need to make to get our budget back to sanity. Some scary facts from the budget (and remember, this is the Administration’s best case scenario, where everything goes as planned and all planned savings turn out to be real):
– At no point in the next 10 years, according to the President’s budget, will the federal government spend less than it receives in revenue. Debt held by the public (not including the money gov’t owes itself, like the Social Security trust fund) will increase to almost $19 trillion by 2021.
– Debt as a percentage of GDP will increase from 62.2 percent last year to 77 percent in 2021. It will decrease in only one year over the next 10. This comes despite the fact that the Administration anticipates federal revenues to more than double by 2021.
– Interest payments on the federal debt will increase by a shocking 352 percent over the same period, to just under $1 trillion per year. That means debt service payments will go from 9 percent of all federal receipts to 19 percent. Yikes.
– The budget deficit is anticipated to drop to 3.6 percent of GDP in 2014 and roughly hang there for the rest of the decade. The Administration’s benchmark assumes slightly higher budget deficits over the next 5 years than the Congressional Budget Office did last month in its budget outlook for the decade.
The fact is, though, that none of this is news. This is all broadly in line with the CBO’s estimates, which anticipates roughly the same progress of the deficit over the next 10 years (though the Administration’s baseline assumes slightly lower revenues).
That the Administration’s and CBO’s conclusions are so similar is exactly the problem. This budget was an opportunity for the President to take a stand on deficit reduction, to actually make the “tough choices” he talked about during his State of the Union address. Instead he chose to freeze discretionary spending, which has never been expected to be a driver of big deficits, for five years while ignoring the catastrophic trajectory of Medicare and Social Security spending.
Moreover, he completely passed the buck on tax reform, offering no new ideas except raising taxes on the wealthy in the form of reduced tax deductions to pay for continued AMT patches. Otherwise, the Administration offers only a hazy, unspecific promise for corporate tax reform down the line.
In essence, we should look at this budget as a more detailed continuation of the State of the Union speech: long on platitudes and solemn doomsaying about the mess we’re in, short on real solutions. Expect more analysis from Reason Foundation as we dig deeper into these fiscal follies over the coming weeks.