WASHINGTON wonks are focused today on the release of the Obama administration's budget proposals for the 2013 fiscal year. We will have in depth coverage following the White House budget briefing. For now, a few things stand out. First, the president's proposals generate a federal deficit of $900 billion in fiscal 2013. If it is verified, that would be America's first deficit of less than $1 trillion since the 2008 fiscal year. It would also represent a reduction in the deficit, as a share of GDP, from 8.5% to 5.5%. Overall, the budget calls for a reduction in the deficit to 2.8% of GDP by 2019, where it is projected to remain through the end of the ten-year budget window. That's close to primary balance—the government's books would nearly balance net of interest costs. The 2013 budget's proposals result in less deficit reduction than the plan produced (but not agreed upon) by last fall's bipartisan budget "Supercommittee".
In the short term, much of the president's deficit reduction can be attributed to economic improvement. The budget envisions a recovery that accelerates, in real terms, through 2015, after which growth settles down to 2.5%. That's certainly an optimistic forecast, though it's not entirely unreasonable. Given the scope for catch-up growth back to potential, we would expect, in the presence of appropriate macro policy and absent severe shocks, for growth to be above trend for a few years. Of course, both policy and unexpected headwinds have constrained recovery since 2009.
Toward the end of the ten-year period, the biggest deficit cuts come from reductions in overseas military spending and from higher taxes on top earners, including the expiration of the Bush tax cuts for those earning more than $250,000 a year. Savings that aren't directed toward deficit reduction are focused, in the short term, on stimulative measures like an extension of a payroll-tax cut through 2013 and, in the long term, on infrastructure priorities, like a long-overdue reauthorisation of the nation's surface transportation laws and new spending on immediate transport needs. The budget for those items runs to nearly $170 billion over the ten-year window. That sounds like a lot, but the CBO has suggested that the economy could use that much spending every two years. The president is likely to make much of proposals to support manufacturing and "insourcing", but among his initiatives on this score, most of the budget room is allotted to an extension of the R&D tax credit, which is virtually guaranteed to take place anyway.
In the best of times, the budget document is best understood as a political document, used to frame administration priorities in a way that might possibly inform actual legislation, if the president is lucky and controls Congress. Amid a divided Congress and ahead of a presidential election, the budget is both an opening bid and a campaign tool. The White House cannot expect to get much of what it wants, but it can hope to show voters the difference between Mr Obama's goals and those of his Congressional antagonists.
At the end of the day, however, serious fiscal questions loom. The long-run debt picture is disconcerting, but more worrisome, perhaps, is the fiscal hit the economy will take if the parties are unable to agree on extensions of at least some of the many tax cuts scheduled to expire at year's end. Mr Obama hopes this budget will help get him re-elected, but if it makes actual budget deals more difficult to achieve, he could be in for a tough start to a second term.
(Photo credit: AFP)
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An irrelevant budget. First if the community organizer turned president could not pass a budget when his democrat party controlled everything unopposed for two years, he will hardly pass one in a congress leaning republican.
Next, the clown of a president is making a budget spanning a decade or more of time? The guy will be lucky to make it past the end of 2012 and even if that miracle happens to the prophet obama, he can only be there 4 more years. 10 year projections are pretty much pointless.
What do we say to our grandchildren when they ask us, "why are you spending all our money?"
If the answer is, "they don't ask because they don't understand government finances", then we are the worst the kind of thieves, robbing from the vulnerable and uninformed to maintain our exorbitant lifestyle at their expense.
Maybe if the debate was framed on a personal level, (i.e. that first world elders through government profligacy have already spent their kids' money and now they're onto their grandchildren), shame and guilt could bring the world back from the brink of bankruptcy.
He is wasting the country away with his wild spending. With any luck, we will send this man packing and he wont need to do another budget.
''Fiscal hit'' = if spending not increased and taxes not reduced below the levels in current law, as recent CBO Budget and Economic Outlook indicates. http://cbo.gov/doc.cfm?index=12699
Bush tax cuts expire at the end of December, while the ''sequester'' cuts mandated in law at the end of the near disastrous debt ceiling debacle in 2011 begin to take hold in 2013.
These, combined with reductions to Medicare payments in current law, reduce spending and raise revenue so quickly that the deficit drops sharply, eliminating the silly rhetoric about American being unable to pay its debts. It would, however, slow an already feeble recovery.
Obama has a strong hand this time, as any changes to law require his signature or could bring a veto. He knows better what to expect from the opposition and that if nothing is done, the deficit drops quickly in 2013.
His current term of office ends with this year. He may get another four years, he may not. I expect nothing but political posturing from both parties for the next nine months. Not much will get to his desk for his veto one way or the other. As for next year, it is completely dependent on the state of the economy. One blog cites an interesting set of forecasts made by Ray C. Fair at Yale. Bottom line, is "It's the economy stupid." Yes this is a conservative blog, but read about the prediction method and result. That is apolitical. http://www.americanthinker.com/2012/02/will_we_have_a_fair_election_in_2... If the economy improves, he is back. If not, he is not.
My estimates show that the preparation of this useless document created five jobs for lumberjacks and two jobs for garbagemen.
That's a good start. But if we regulate the disposal of useless documents, my calculations show we can create three more jobs from oversight and enforcement. We can pay for them by taxing the disposal of useless documents.
I doubt the webmaster actually checks comments but if for some reason he does, the "Tax and build" link on the left side of the front page doesn't link to this article as of this moment.
Perhaps we should but in a set aside to build that link, eh? Think of the jobs saved or generated or masticated or manipulated or something.