President Obama Drops The Ball On Deficit Reduction

President Obama's new budget involves nothing less than a thumb in the eye of anyone who hoped he would seriously address federal spending in his first term.

Buried in the President’s newly released budget is this rather grim statistic about the Federal Budget deficit:

WASHINGTON—The White House projected Monday that the federal deficit would spike to $1.65 trillion in the current fiscal year, the largest dollar amount ever, adding pressure on Democrats and Republicans to tackle growing levels of debt.

The projected deficit for 2011 is fueled in part by a tax-cut extension that President Barack Obama and Republican lawmakers brokered in December, two senior administration officials said. It would equal 10.9% of gross domestic product, the largest deficit as a share of the economy since World War II

Meanwhile, by at least one analysis, the National Debt is now equal to the size of the entire American economy:

Amid the other staggering numbers in the budget Mr. Obama sent to Congress on Monday, the debt stands out — both because Congress will need to vote to raise the debt limit later this year, and because the numbers are so large.

Mr. Obama’s budget said 2011 will see the biggest one-year jump in debt in history, or nearly $2 trillion in a single year. And the administration says it will reach $15.476 trillion by Sept. 30, the end of the fiscal year, to reach 102.6 percent of gross domestic product (GDP) — the first time since World War II that dubious figure has been reached.

In one often-cited study, two economists have argued that when gross debt passes 90 percent it hinders overall economic growth.

The president’s budget said debt as a percentage of GDP will top out at 106 percent in 2013, but only if the economy booms.

“I still don’t see a sense of urgency from the president about the massive federal debt,” said Sen. Lamar Alexander, Tennessee Republican. “His budget calls for too much government borrowing – even though the debt is already at a level that makes it harder to create private-sector jobs.”

This is, it would seem, the perfect opportunity for the President to address the problems associated with the Federal Government’s structural budget deficits, and the long term consequences of high levels of debt. Instead, he’s essentially punted the ball down the field. The meager budget cuts that he proposes touch only 35% of the Federal Budget to begin with, and, as Peter Suderman notes, they aren’t really budget cuts at all:

The president outlines a plan that would keep the yearly deficit above $1.6 trillion this year and around $1.1 trillion the year after. The 10-year plan is to shave off about $1.1 trillion from the next decade’s total expected deficit. But in the context of a $7 trillion-plus projected deficit, this is hardly a breakthrough, or a serious fix. Last December, the president’s own fiscal commission proposed about $4 trillion in cuts, including an overhaul of Social Security. The president’s budget, by contrast, barely touches our unsustainable entitlements—and certainly doesn’t offer anything in the way of major reform.

Ezra Klein notes that the President completely disregarded the recommendations of his own Deficit Commission:

What was notable about the Fiscal Commission’s final report was the way it opened up the playing field on the budget. It went after tax revenues, tax expenditures, the military, Social Security, Medicare, Medicaid, domestic spending, government reform and more. Most everyone disagreed with some of the specifics in the report, but plenty of folks on both sides of the aisle were happy to see so many cows demoted from sacred status.

(…)

The president’s 2012 budget dodges on almost all of that. Entitlements are left alone. So, broadly speaking, are tax deductions (though it’s worth noting that the Affordable Care Act took a big chunk out of the tax deduction for employer-provided health benefits). The military cuts are exactly what Secretary of Defense Robert Gates said they should be, and they’re really not cuts at all: Just slight reductions in the rate of spending growth. The big attack is on the 12 percent of the budget known as non-defense discretionary spending, which is what politicians in Washington always like to focus on, and what the commission’s report was trying to move the discussion past. It’s like the Fiscal Commission never happened.

Andrew Sullivan, meanwhile, characterizes the budget proposals as a big “Screw You” from Obama to the next generation of Americans:

This president is too weak, too cautious, too beholden to politics over policy to lead. In this budget, in his refusal to do anything concrete to tackle the looming entitlement debt, in his failure to address the generational injustice, in his blithe indifference to the increasing danger of default, he has betrayed those of us who took him to be a serious president prepared to put the good of the country before his short term political interests. Like his State of the Union, this budget is good short term politics but such a massive pile of fiscal bullshit it makes it perfectly clear that Obama is kicking this vital issue down the road.

To all those under 30 who worked so hard to get this man elected, know this: he just screwed you over. He thinks you’re fools. Either the US will go into default because of Obama’s cowardice, or you will be paying far far more for far far less because this president has no courage when it counts. He let you down. On the critical issue of America’s fiscal crisis, he represents no hope and no change. Just the same old Washington politics he once promised to end.

It’s all really rather depressing. Realistically, the FY2012 budget is the last chance that either the President or Congress have to begin the process of reforming the government and reducing spending that the deficit for at least the next two years. By this time next year, we’ll be well into the beginning of Presidential and Congressional campaigning and neither side is going to be willing to use the budget process for anything other than political grandstanding. In 2013, we’ll either have a re-elected President Obama, likely-still-Republican House, and a closely divided (and thus ineffectual) Senate or we’ll have a new President who will need to build up political credibility before taking Medicare, Medicaid, Social Security, and the Defense budget head-on. In either case, it will be at least Fiscal 2014 before we would be able to put the beginnings of a sane budget together. By then, the National Debt is likely to have soared by several more trillion dollars.

There is still the possibility, of course, that the House GOP will come up with a budget that seriously addresses our problems and, at least in their reaction to the President’s budget, there’s some sense that they realize that:

Republicans in Congress are already criticizing President Barack Obama’s budget a few hours after its release, accusing the president of putting together a debt-fueling disaster, despite his call for hefty spending cuts.

House Majority Leader Eric Cantor (R-Va.), the second-ranking House Republican, said Obama “missed a unique opportunity to provide real leadership by offering a budget that fails to address the grave fiscal situation facing our country.”

“”We need a government that finally does what every other American has to do in their households and their businesses, and that’s to live within our means,” Cantor said in a statement. “Instead, President Obama’s budget doubles down on the bad habits of the past four years by calling for more taxes, spending and borrowing of money that we simply do not have.”

In his meeting with reporters Monday afternoon, Cantor said the difference between the president’s budget and what Republicans believe illustrates a “fundamental difference in the style of leadership.”

“As far as individual items, I think there’s probably some areas of agreement,” Cantor said, responding to a question about areas of agreement in the two parties’ plans. “But we cant keep taking the saivngs and going to spend it. The object here is to cut.”

House Budget Chairman Paul Ryan (R-Wisc.) said the budget stifles job growth, “leaving our children with a diminished future.”

“Failing to heed the warnings of economists and the demands of the American people, the President’s budget accelerates our country down the path to bankruptcy,” Ryan said in a statement. “Far from ‘living within its means,’ the President’s budget puts the government on track to nearly double in size since the day he took office – a direct result of his party’s reckless spending spree.”

Sen. Lamar Alexander (R-Tenn.), the third-ranking Senate Republican, echoed his colleagues in the House, saying he does not get a “sense of urgency from the president about the massive federal debt.”

“His budget calls for too much government borrowing – even though the debt is already at a level that makes it harder to create private-sector jobs,” Alexander said in a statement

There were similar dismissals from House Freshmen and from many of the potential 2012 GOP candidates. That’s rhetoric, though, and we have yet to see very much in the way of reality outside of Rand Paul’s $500 billion spending cut proposal, which hasn’t exactly gotten much in the way of endorsements from his fellow Senators, or from anyone in the Lower Chamber.

Back when the Simpson-Bowles plan was first submitted, I said this:

If we lived in a country with adult political parties, the release of the Commission’s report would serve as the beginning of a long overdue national conversation about how to get our fiscal house in order. Liberals would recognize that social spending would have to be cut, and conservatives would recognize that defense spending cuts and tax increases would have to be on the table. Instead, what we’re likely to see is more of the same political gamesmanship — liberals accusing the GOP of wanting to starve Grandma, conservatives accusing liberals of just wanting to raise taxes so they can spend more. And the debt will continue to rise.

At some point we’re going to be forced to deal with these problems, but it’s not going to happen until we start feeling the pain that we could ward off if we’d just grow up already

Today, rather than growing up, the White House proved that it would just rather pretend that the problem doesn’t really exist.

FILED UNDER: Barack Obama, Congress, Deficit and Debt, Politicians, Social Security, Taxes, US Politics
Doug Mataconis
About Doug Mataconis
Doug holds a B.A. in Political Science from Rutgers University and J.D. from George Mason University School of Law. He joined the staff of OTB in May 2010. Before joining OTB, he wrote at Below The BeltwayThe Liberty Papers, and United Liberty Follow Doug on Twitter | Facebook

Comments

  1. sam says:

    All cuts (piddling as they are) from both sides, and no tax increases from any quarter. Why pick on Obama?

  2. JD says:

    I remember when we used to lambaste Bush and his $200 billion dollar deficits. Those were the days…

  3. ponce says:

    I’m looking forward to the the budget the House Republicans produce.

    Millions of Tea Party members will see exactly how badly they’ve been used…

  4. Brummagem Joe says:

    As ever Doug you forget budgets have inputs and outputs. At the moment the inputs are at 60 year lows and the opportunity for serious cuts on the outputs side given the weakness of the economy next to nil. Ultimately the only way out of this impasse is an increase on the revenue side whatever yourself and other fantasists on the right believe. Some of this will come from growing the economy (which would be seriously impaired if people like you had their way) and some from some fairly modest tax increases. If we went back to the levels prevailng in the mid 90’s (not exactly a period of extreme economic hardship) the problem would be largely solved. I know you and a lot of other people on the far right have dreams of a return to 1928 but let me assure you it’s never going to happen and most of the people hoping for it would get the shock of their lives if it did.

  5. MichaelB says:

    If we went back to the spending level of the late 1990s, we’d be fine. In fact, if we went back to the spending in Clinton’s last budget proposal, the budget would be balanced.

    http://en.wikipedia.org/wiki/United_States_federal_budget#Total_outlays_in_recent_budget_submissions

    Sure looks to me like the real problem is spending running way ahead of growth + inflation.

  6. Dave Schuler says:

    At the moment the inputs are at 60 year lows

    Interesting. Do you have some sujpport for that? Seems to me that real federal revenues are higher now than they were back in the early 1990s.

    Unless you mean as a percentage of GDP. Why is revenues as a percentage of GDP the proper measure?

  7. Steve Verdon says:

    Joe,

    According to the CBO revenues are projected to decline from 2010 to 2011 by 0.1% points. That is revenue, as a percentage of GDP will decrease from 14.9% in 2010 to 14.8% in 2011. The deficit, but contrast will go from 8.9% of GDP in 2010 to 9.8% in 2011. So while you are technically true that revenue decline is a part of it, right now it looks more like it is the spending side that is resulting in the increased deficit. And that is just with current law. It looks like Obama’s new budget will have even greater increases in spending.

    Your supposed solution is to raise taxes at a time when the economy is, even by your own admission, is weak is…interesting, but I doubt one Obama will seriously consider as he already has issues with his various no tax increase pledge from the previous campaign. Raising taxes is rarely seen as a pro-growth move, especially if they are perceived as being permanent. Yes, yes I know about Romer & Romer’s work with regards to tax increases to reduce a deficit, however I’d bet that those tax increases are seen more as being temporary and they still have a contractionary effect, just a smaller one than tax increases for other reasons.

  8. wr says:

    Ah, the deficit commission. A group of multi-millionaires calling for shared sacrifice. The poor and middle class give up all the programs that exist to keep them out of povery. The rich give up having to pay taxes, and occasionally have to step over homeless people — or bodies — in the street.

    Just like the shared sacrifice of Bush’s wars…

  9. Brummagem Joe says:

    Steve Verdon says:
    Monday, February 14, 2011 at 17:58

    “Your supposed solution is to raise taxes at a time when the economy is, even by your own admission, is weak is…interesting”

    Er…no…don’t put words in my mouth…I think a tax increase at the moment would not be a good idea but when the economy has regained it’s footing it would. And in fact I’d say it was inevitable.

  10. Drew says:

    What Steve V said + the only thing surprising is that anyone is surprised.

  11. Brummagem Joe says:

    Dave Schuler says:
    Monday, February 14, 2011 at 17:46

    “Unless you mean as a percentage of GDP. Why is revenues as a percentage of GDP the proper measure?”

    I do. And why isn’t GDP a reasonable benchmark? It’s used for many other parts of public finance. In fact I seem to remember reading endless editorials in the WSJ journal when the deficit was gong through the roof insisting it was a small part of GDP. Effective tax rates also at very low levels in historic tierms.

  12. Steve Verdon says:

    Er…no…don’t put words in my mouth…I think a tax increase at the moment would not be a good idea but when the economy has regained it’s footing it would. And in fact I’d say it was inevitable.

    Isn’t that what many were saying back when Bush was president during a recession? Deficits now, reduce it later…of course that didn’t work so well. Rarely does. The once exception was Clinton who had a the benefit of a bubble economy. Is that the solution? Creating new economic bubbles hoping that somehow that will solve the problem?

    What I’m really getting at here is the reversal of positions as the party holding the White House switches.

    As for tax increases, frankly we need an entirely new tax regime. One that promotes savings and growth, one that is simpler and reduces the burden of simply doing one’s taxes. Of course, such a switch in tax regimes would be seen as a bad thing by many special interest groups. Not because it would be bad for the economy, but because it would be bad for them.

  13. Steve Verdon says:

    By the way Joe you lost your privilege not to have words put in your mouth when you made that crack about Doug wanting things to go back to 1928.

  14. Brummagem Joe says:

    “So while you are technically true that revenue decline is a part of it, right now it looks more like it is the spending side that is resulting in the increased deficit.”

    What you’re ignoring in all this Mr Verdon is we’re living beyond our means. Faced with that situation and without resort to banal analogies with domestic housekeeping, we can either reduce spending or increase revenue. At this precise moment neither is really a viable option because it will depress aggregate demand and then there’s the unavoidable fact that politicians are not going to make substantive cuts because when it gets down to it the public doesn’t want them. Thus revenue which by just about any measure you want make is at historic lows will have to rise. Republicans can deny this reality for a limited period of time but ultimately it’s going to have to be faced. Now I know there is a nihilist tendency that wants some gigantic crash so they have some excuse to remove the last vestiges of FDR and Johnson off the fact of the earth but the Republican party is going to blink long before we get there.

  15. Brummagem Joe says:

    Steve Verdon says:
    Monday, February 14, 2011 at 18:49

    “By the way Joe you lost your privilege not to have words put in your mouth”

    What a pity you can’t tell the difference between a broad philosophical observation about the programs of Libertarians and a bit of specific comment on policy making.

  16. Brummagem Joe says:

    “The once exception was Clinton who had a the benefit of a bubble economy. ”

    The 90’s were certainly not a bubble economy since it was one of the two greatest periods of productivity growth since the war. There may have a lot of misdirected investment in Pets.com but the 22 million jobs created were very real.

  17. john personna says:

    The Deficit Reduction Commission wimped out a little, but the nation as a whole wimped out a lot in response to their bad news.

    I can’t remember, did anyone here at OTB accept all of the commissions proposed cuts, and the necessary taxes?

    Anyway, given the political reality that the commission’s report sunk like a stone in the ocean, it is pretty crazy to personalize this as about Obama and what he should do … not just lacking political imperative, but actually facing a wall of opposition.

    America is not ready for cuts and/or tax cuts. That is the sad bottom line, at least as seen by this cynical moderate.

  18. john personna says:

    Shorter: voters are still in the market for fairy dust.

  19. Tsar Nicholas says:

    Well, if you’re actually surprised by Obama’s desired plan to spend and tax and punt the massive deficit ball downstream:

    (a) you’re too naive for words, (b) you’re too numbingly stupid for words, (c) you’re too wealthy (presumably by inheritance) really to care about such maudlin items as the country’s fiscal health, (d) some combination of two or more of the above, or (e) all the above.

  20. Nightrider says:

    One big problem is that Medicare must be drastically slashed, but neither party will move on it because they can’t “afford” to lose the senior vote. They perhaps could afford it if so much of the country is hopelessly and reflexively locked up in their partisan associations and biases. Just take that Kos guy and that Red State guy who goes on TV as examples. They are both 35-45 or so, right. Nothing in politics should matter more to anyone who cares what this country will still be like in 40 years than cutting Medicare. The country should be investing its limited resources, and putting livers in people who have 4 months to live regardless is not an investment. But would Red State guy suddenly back Obama if Obama got seriously behind this? Would Kos back Eric Cantor? No. Instead we get Sarah Palin deriding death panels.

    The Palm Beach butterfly ballot could go down as the pivotal tragic moment in American history. Cutting taxes on the lecherous baby boomers in the final and most lucrative earning years of their lives was an awful policy. A trillion dollar waste of money on the needless Iraq debacle the cherry on top, I guess. But maybe we could still avert it if we man up and tell the boomers, sorry, but you already spent your “entitlements”

  21. michael reynolds says:

    Tsar:

    And your plan?

    How about the GOP’s plan?

    Anyone?

  22. An Interested Party says:

    “There is still the possibility, of course, that the House GOP will come up with a budget that seriously addresses our problems…”

    Oh look, Doug made a funny…

    I can’t wait to see the reaction to the budget put together by the House GOP…but hey, who knows, maybe the budget can actually be balanced by gutting the Department of Education, cutting off all foreign aid (well, except to Israel, of course) and getting rid of all that magical waste, fraud, and abuse…

  23. michael reynolds says:

    Once tax increases were taken off the table and the deficit commission was dismissed out of hand, it was clear we were not yet serious about this.

    But let’s stop pretending this is a partisan thing. Obama was gutless. The GOP has been lying since Reagan’s first term. And the American people are children.

  24. Pete says:

    Michael Reynolds for President!!!!!!!

  25. michael reynolds says:

    Pete:

    Yeah! My slogan will be, “You People Are A Buncha Goddamned Children!” I think I can get the “The Rent Is Too Damn High” guy to be my Veep.

  26. Have A Nice G.A. says:

    Harry in 2012? whats his plan?

  27. Have A Nice G.A. says:

    “You People Are A Buncha Goddamned Children!” I like the slogan, kinda what I have thinking for last twenty five years….let me hear the platform.

  28. anjin-san says:

    > How about the GOP’s plan?

    Tax cuts for billionaires. Corporate welfare. Nothing new under the sun…

  29. c.red says:

    Every move the president has made on the budget has been blocked by the opposition (and I’m not limiting that to Republicans) and now when he’s basically saying we can’t address the problem at this time that same opposition grumbles that he’s not serious about the budget?

    Please!

    His proposal was to spend enough stimulus money to get real growth. His proposal was to actually let the tax cuts expire (as planned by the Republicans when they put them on the national tab you all are complaining about) AFTER the recession was over at least on the people who are making enough money to be able to afford it.* His proposal has been to eliminate various corporate loopholes, subsidies, and tax dodges and get our actual corporate tax rate within spitting distance of the rest of the industrialized world.

    He is the first person to take the steps towards actually reigning in medical entitlements, but was blocked from actually achieving anything substantial because of some crap about it would give the government an unfair advantage over the private insurance companies and curtail some of the ludicrous profits of the drug companies … and it is his fault entitlements are getting out of control? And even the small steps he managed to take are under threat of repeal by disinformation.

    From what I have seen so far his budget is at least some attempt at reducing the budget while still maintaining some sort of investment for the future and not suddenly throwing tens of thousands out of work… while wearing a straight jacket of our current “woe is me” hissy fit over taxes. This administration is far more fiscally minded than any that we have had in my lifetime, by far better than the last one that did EVERYTHING with special appropriations, so we wouldn’t even know how much was being spent.

    (* I actually disagree on this proposal, as I’ve said several times before, I think all of the tax cuts should have been let expire. Cuts would still be needed, but they would be manageable and we would have some cushion to phase them in.)

  30. RW Rogers says:

    Once tax increases were taken off the table and the deficit commission was dismissed out of hand, it was clear we were not yet serious about this.

    Bingo!

    Judging by the responses we’ve seen from partisans of both parties to even half-hearted efforts, we will not get serious about it until after it is too late. As you have children, you have more to worry about than me. I think the government will be around as long as I will be.

  31. john personna says:

    I think those “conservatives” up-thread who say “you can’t raise taxes in a recession” are smart enough that they must be dishonest.

    You can certainly pass a 10-year schedule of tax adjustments, with increments over time.

    In fact, that’s what you need to bend the debt curve as it stretches into the future.

  32. Brummagem Joe says:

    john personna says:
    Monday, February 14, 2011 at 19:33
    “Shorter: voters are still in the market for fairy dust.”

    The problem is it’s not fairy dust when you have a situation where 80% of retirees rely on SS at least 50% of their income and it’s 100% for about half of retirees. And of course Medicare is essential as you age. This is not fairy dust, it’s a matter of life and death and every one is connect to people who use these programs. Or I saw a story a couple of days ago where over 50% of births in SC are paid for by Medicaid. At the end of the day these programs are basically necessary and enormously popular which is why no politicians are EVER going to seriously mess with them. You can make an argument for some modest adjustments, raising retirement to 67, raising FICA caps etc but at bottom they are sacrosanct so it would a lot more productive if Republicans fessed up and started to work with the Democrats to get costs out of for example the provision of medical care because they are as hell never going to remove access to it through Medicare and the like. The tax expiration debate demonstrated Republicans don’t give a toss about the deficit so all rhetoric is completely hollow.

  33. reid says:

    jp: That “you can’t raise taxes in a recession” is really just “you can’t raise taxes… ever.” I can’t see Republicans going along with a tax increase under any conditions, and it’s a toxic idea with the public because of rightwing propagandizing and greed. Sad.

  34. Steve Verdon says:

    Joe,

    You put words in Doug’s mouth and then you complain about the same thing, which isn’t quite right since you didn’t say anything about when your tax increase was to tax place. So it is arguable that I was “putting words in your mouth”.

    What you’re ignoring in all this Mr Verdon is we’re living beyond our means.

    I’m pointing out that your narrative doesn’t fit the facts. I was making no statement on whether we are living beyond our means or not.

    Thus revenue which by just about any measure you want make is at historic lows will have to rise.

    The public has been pretty adamant about not wanting to pay more in taxes as well. At least not by enough to deal with all of our fiscal imbalances.

    Now I know there is a nihilist tendency that wants some gigantic crash so they have some excuse to remove the last vestiges of FDR and Johnson off the fact of the earth but the Republican party is going to blink long before we get there.

    We are in this mess now because of Johnson and FDR.

    The 90′s were certainly not a bubble economy since it was one of the two greatest periods of productivity growth since the war. There may have a lot of misdirected investment in Pets.com but the 22 million jobs created were very real.

    Right, there was no tech bubble. Any other history you care to re-write while you are at it Joe?

  35. john personna says:

    But Joe, we can’t means-test them either, can we? We can’t make sure that those benefits got to the folks you describe, specifically.

  36. john personna says:

    (The “fairy dust” message for voters is that they can ALL have benefits.)