The President's Budget: No Fiscal Restraint in Sight

On Monday, February 01, 2010 President Barack Obama unveiled his budget for Fiscal Year 2011. Despite ongoing verbal nods to the need for fiscal restraint, this budget however delivers little of that. The budget, rather than freezing spending – let alone cutting it – continues down the path of fiscal recklessness and continues to increase total government spending.

Quick Facts:

• Overall 2011 Spending: $3.834 trillion – a 5.7 percent increase over the current budget
• 2011 Discretionary Spending: $1.415 trillion
• 2011 Public Debt: $10.498 trillion, soaring to $18.573 trillion in 2020 – expressed as a percentage of GDP this means an increase from 53% in 2009 to 77.2% in 2020, the highest since 1950. Note that even after the Senate just passed a $1.9 trillion increase in the Federal debt ceiling, this will warrant another increase in 2011.

The Discretionary “Spending Freeze:”

The President’s discretionary spending “freeze” proves to be little more than a sleight of hand. A more accurate portrayal than “discretionary spending freeze” was given by Republican staff on the Committee on the Budget, who referred to the “freeze” as a “freeze in non-defense, non-homeland, non-Veterans, non-international affairs, non-Pell Grant, non-emergency discretionary spending.” Indeed, the three-year freeze only applies to 13% of the budget and does not go into effect until 2011.

What is needed is an across-the-board roll back of Federal spending to pre-binge levels, not locking in increased levels. And there is no reason such a spending cut could not occur immediately rather than in 2011. Leaving “stimulus” and TARP aside, the FY2010 appropriations bills signed by President Obama have increased non-defense, discretionary spending by 12% over last year.

“Terminations, Reductions, and Savings:”

The budget touts a list of 126 “terminations, reductions, and savings” in areas and programs that range lower on the President’s priority list. The budget document claims that these would amount to more than $23 billion in 2011. 78 discretionary terminations and reductions are said to save $10 billion in 2011, while 33 mandatory terminations and reductions would save $240 billion over ten years.

However, even at first glimpse, this list fails to impress when the $23 billion in “savings” for 2011 is compared to the sheer size of the overall budget - $3.834 trillion.

The picture gets worse when reviewing the list of individual proposals for program termination or reduction. The list is disingenuous, as it mixes tax increases in with spending cuts. For example, under “mandatory terminations,” the list boasts $36.5 billion in energy tax increases, disguised as ending “oil and gas company tax preferences.”

Experience shows that most of the spending reductions put forth by Presidential budgets fail to make it through Congress, further evidenced by the fact that some of this year’s proposals were already part of last year’s budget. Consequently, when political realities are factored in and tax increases are taken out of the equation, the actual savings are a drop in the bucket when compared to the overall Federal spending spree.

More Gimmickry

To create the illusion of fiscal responsibility, the budget touts some other gimmicks which will do little to rein in Federal spending but will likely lead us down the path of higher taxes. Among them are:

The enforcement of pay-as-you-go, which is nothing more than a fig leaf to provide political cover for tax-and-spend policies, and would in fact set the stage for higher taxes being touted as the only way to avoid across-the-board cuts in entitlement spending.

 A Presidential bipartisan tax and spending “reform” commission, modeled after the Conrad/Gregg bipartisan commission proposal which would have guaranteed a tax increase. While not binding, the Presidential commission will most certainly put “everything on the table,” and seek to build momentum to increase taxes. In doing so, any such commission looking at both tax increases and spending reductions is placing a misguided emphasis on the “deficit” when the real problem of our fiscal woes is total government spending.

A prudent way to address the issue would be to set up a commission modeled after the successful Base Realignment and Closure commission (BRAC), which would subject all Federal agencies and programs – across the board – to a BRAC-style review process.
 

Permalink | Email | Print | Tags: TAXES, CONGRESS, SPENDING, OBAMA, BUDGET, CFA

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