Jan 26, 2011
President Obama wasn’t all that specific about the deficit in his State of the Union speech, and neither was Rep. Paul Ryan. The commentators are bemoaning that this morning, but if you want details, you only had to wait 12 hours. The Congressional Budget Office put out its new budget estimates this morning and, as usual, it’s grim. The International Monetary Fund, in another report, also chimed in on the fiscal problems of the United States.
So, in some ways, it’s a typical day on the deficit beat: lots of specifics about the problem, and a lot less commitment to specific solutions. And that’s what has to change.
CBO Says We’re Still Headed Into the Ditch on the Deficit and Debt
The deficit is projected to reach $1.5 trillion in 2011 and will total $7 trillion over the next decade if current law holds, and $12 trillion in the far more likely alternative scenario, according to the CBO’s latest budget outlook. The alternative scenario is what happens if we do things like extend the Bush tax cuts yet again, or refuse to cut Medicare payments to doctors and hospitals, as planned.
This scenario is also really the more likely one, and that’s why it’s the one to focus on. As CBO director Douglas Elmendorf said in his blog:
“To prevent debt from becoming unsupportable, the Congress will have to substantially restrain the growth of spending, raise revenues significantly above their historical share of GDP, or pursue some combination of those two approaches. The longer the necessary adjustments are delayed, the greater will be the negative consequences of the mounting debt, the more uncertain individuals and businesses will be about future government policies, and the more drastic the ultimate policy changes will need to be.”
The IMF Sends a Warning
The International Monetary Fund released its World Economic Outlook yesterday, which has warnings for lots of countries, including the United States:
“The absence of a credible, medium-term fiscal strategy would eventually drive up U.S. interest rates, which could prove disruptive for global financial markets and for the world economy. It is thus even more critical that policies be put in place to bring debt down over the medium term. Such measures could include entitlement reforms, caps on discretionary spending, reforms of the tax system to boost fiscal revenue, and the establishment or strengthening of fiscal institutions.”
Generally Speaking: The State of the Union
President Obama proposed a two-year extension to the government’s discretionary spending, which he said would save $400 billion over a decade, according to The New York Times.
“But Mr. Obama, in his State of the Union address Tuesday night, declined to suggest additional ways to rein in the unsustainable growth of Medicare and Medicaid or to resolve the long-term financial problems facing Social Security. He is waiting for the new political dynamic of divided government to sort itself out before inviting Republicans to plunge into the risky business of addressing costly entitlement programs.
The Associated Press produced a useful “fact check” on the speech, What I Heard and What I Didn’t:
“On a purely rhetorical level, President Obama gave a terrific State of the Union address last night. He delivered the usual laundry list of promises but packaged them in a strong framework of optimism and American exceptionalism, two themes that are proven political winners. But we are policy wonks here at the Tax Policy Center, and from a wonk point of view, the speech was disappointing.”
Ross Doughat at The New York Times says both the president’s speech and the Republican response showed The Politics of Evasion::
“It’s clear that both parties have decided that a period of divided government twelve months before a presidential election is the wrong time to make big moves on entitlements and the deficit. Better to wait, jockey for position, and hope that the correlation of forces after 2012 will be more favorable to their preferred solutions.”
Ezra Klein at the Washington Post says we’ll have to wait for the actual budget request next month to see specifics, but the folks at the WP should get some credit for this “tag cloud” version of the speech, showing the most-used words:
Click here to see a larger copy of this image.
For another take on the State of the Union, have a look at the live Twitter chat @FiscalFuture held with a group of college students at Emporia State University in Kansas, joined by other interested Americans (you can check out that chat here http://wthashtag.com/Fiscalfuture and feel free to join in with your own post-speech reflections).
If you want to quiz the president yourself on specifics, the White House urged citizens to send in their questions; some are being answered by Press Secretary Robert Gibbs and others will get a response from President Obama himself on YouTube tomorrow.
Finally, for those who can supply their own answers, The Washington Post held a cartoon caption contest (click here to check out the winning entry).
Chart of the Day
This CBO chart shows what happens to the national debt under the “baseline” scenario, which assumes current laws stay in place, and with “continuation of certain policies,” which is both more realistic and much worse for the budget:
Click here to see a larger copy of this image.
Join the discussion! Your voice is important. You can comment here at OurFiscalFuture.org, on Facebook, and on Twitter. And to learn more about the numbers that set the stage for some of our choices, check out our slideshow, iPhone and Android apps, and Our Fiscal Future’s Visual Budget Tool.
Fiscal Future Daily is produced by Public Agenda for Choosing Our Fiscal Future, in partnership with the National Academy of Public Administration and with support by the John D. and Catherine T. MacArthur Foundation. The editor in chief is Scott Bittle, with contributors Francie Grace, David White, Jen Vento, Hart Hooton and Tom Watson.