Feb 15, 2011
Nobody’s really happy about President Obama’s budget request, but as several commentators point out, it was probably designed to be that way.
But one major goal was to put the ball in Congress’ court, and start the long, potentially ugly process of negotiation that’s going to be necessary to get to solutions.
If you care about the national debt specifically, however, there’s at least one (projected) surprise.
Will this Budget Control the Debt?
The Center for Budget and Policy Priorities says the critics don’t give the budget enough credit on one score: if the projections hold, it would stabilize the national debt at about 75 to 80 percent of the gross domestic product, at least until 2021. After that, it’s a different story:
“The President’s budget, however, does not go nearly far enough to keep the debt stabilized in later decades, which the Administration acknowledges. The President and Congress will need to take much bigger steps — on both spending and taxes — to meet those challenges. The budget signals the Administration’s interest in bipartisan discussions on these issues, explicitly calling, for example, for bipartisan talks on Social Security and laying out the Administration’s principles for such negotiations..”
Controlling the debt at a certain proportion of the overall economy has been recommended by a number of budget experts, including the Committee on the Fiscal Future. If things stay on their current track, the debt could be as big as our entire economy in about 10 years. (The Committee for a Responsible Federal budget has a useful chart here). The Fiscal Future committee report recommended a lower target, however, 60 percent of GDP,, and also suggested making this an official government budget target.
The Financial Times columnist Clive Crook says that’s not good enough, and recommends that the federal budget have a “stress test” to determine if its assets can cover its liabilities, the same way banks do:
“Let’s be optimistic and suppose that the deficit projections do hold, and that a debt ratio of 80% can be comfortably supported at full employment. What happens when we enter the next recession with debt at that level? Assume another really serious downturn, and another 30-odd percentage points of debt. Worried yet? That’s why the problem won’t wait another ten years, and why sort-of-stabilising at 80% won’t do.”
More React to Obama’s Fiscal 2012 Proposal
Ezra Klein points out that while the budget doesn’t offer a Social Security solution, it does call for a bipartisan attempt to find one.
Over at The Atlantic, Derek Thompson has his answer to How to Think About the 2012 Budget – - it is, he says, a spork:
“This is a cut-and-invest budget. But the same way a spork makes a incomplete fork and an ineffectual spoon, this compromise budget provides for both incomplete investment and ineffectual deficit reduction…
“The administration tried to cut smart, invest strategically, and make a “down payment” on deficit reduction all at once. But it’s hard to meaningfully be both an investment budget and a deficit reduction budget all at once in one year. So the outcry is predictable. Republicans said they didn’t cut enough. Democrats said they cut too much. Deficit hawks said they didn’t deal with the main drivers of debt. They’re all right, maybe. The White House tried to half-please everybody and mostly pleased nobody. This budget isn’t dumb. It’s just everything lite..”
His colleague, Megan McArdle, says “I don’t need to tell you what I think of the budget: it’s disastrous:”
“I was a laconic hawk when the deficits shot up in 2008, 2009, 2010. A few years of deficits in an unprecedented crisis weren’t going to kill us; we had time to get them under control. But I’m starting to think that it’s time to panic.”
The Republicans, not surprisingly, are unimpressed, and House Budget Committee chairman Paul Ryan calls the president’s budget plan a “failure of leadership.” Ryan, who got a chance to question White House Budget Director Jack Lew at a hearing on Capitol Hill today, also suggested that the Obama team’s assessments of economic growth are very optimistic. Click here for video of Lew’s testimony.
Charts of the Day
Our hats are off to the journalistic creatives who produced some terrific graphics on the budget proposal, just hours after it landed on Capitol Hill.
At the New York Times, be sure to check out this interactive: How $3.7 Trillion is Spent. The Washington Post, meanwhile, serves up the budget proposal department by department, while the Wall Street Journal focuses on the horizon, with two great charts in its “Deficit Would Stay High For Years To Come.” All well worth a look.
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.