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  • Preview of President's Budget Leaves a Lot to Be Desired

    Next week, President Obama will release his budget proposal for fiscal year 2012. Though the President’s budget carries no real legislative weight, it will showcase his financial priorities and the seriousness of his rhetorical commitment to rein in federal spending.

    A recent New York Times article by Jacob Lew, the Director of the Office of Management and Budget, provides a snapshot of what Americans can expect from the President’s proposal. He describes the coming budget as “a comprehensive and responsible plan that will put us on a path toward financial sustainability in the next few years.” However, the glimpse he provides suggests that the President’s budget will not go far enough toward achieving needed reductions in runaway spending.

    Lawmakers on both sides of the aisle have voiced the need to reduce the federal deficit, focusing largely on non-defense discretionary spending. According to Lew, the President’s budget would put a five-year freeze on this type of spending, resulting in $400 billion in savings over a decade.

    This level of savings won’t go nearly far enough, especially when contrasted with the Republican Study Committee’s (RSC) proposal to achieve cuts in discretionary spending that would save $2.5 trillion over the next decade. Though the details behind the RSC’s proposal need to be hammered out, this is the magnitude of savings that the President and Congress should be looking at as a first step to necessary reductions, especially since closing the budget gap will be impossible if lawmakers focus on discretionary spending alone. Moreover, mandatory spending—which largely consists of funding for Medicare, Medicaid, and Social Security—must be structurally reformed.

    Indeed, any serious discussion of fiscal restraint and budget control must include spending reductions within these programs, but unfortunately, it looks like the President will once again take a pass. Lew writes that the President would “reform and simplify our tax code” and “strengthen and protect Social Security” to address long-term budget shortfalls. It’s no secret that the United States seriously needs a tax code overhaul, but it should be within the context of maintaining revenue and promoting economic growth—not increasing revenue to reduce the deficit. And though Social Security is a great place to start in on entitlement reform, without the inclusion Medicare and Medicaid, it won’t be enough.

    Finally, Lew writes that the President’s budget will include $78 billion in cuts to defense spending over the next five years. The Department of Defense should identify areas of inefficiency and make cuts where waste exists, but any savings should be reinvested in national security. Like with tax reform, Congress should evaluate defense spending—the primary obligation of government—independent of the deficit conversation and based upon what is required to protect the nation, since neither insufficient tax revenue nor excess defense spending is responsible for growing future deficits.

    It’s a positive sign that the White House is discussing deficit reduction through cuts in excessive federal spending. Whether these discussions will lead to meaningful action has yet to be determined.

    Posted in Economics [slideshow_deploy]

    9 Responses to Preview of President's Budget Leaves a Lot to Be Desired

    1. DanJ DTW says:

      Since when is "not spending more" the definition of the word "savings".

    2. George Colgrove, VA says:

      It really does not matter what cuts we make: $125 billion each year the most optimistic desires of the GOP or the $40 billion from the White House. Either side is not serious in making cuts.

      We need to cut $1.5 trillion each year to stop going into debt. This leaves a remaining $2.3 trillion for federal spending. We need to cut more to start paying off the debt. Defense is $0.95 trillion. This leaves $1.35 trillion for entitlements and federal operations. Federal operations with GOP cuts are $0.32 trillion, leaving $1.03 trillion for entitlements. Interest on the debt is $0.43 trillion, but if we pay the amounts we have been, which is $0.23 trillion, that leaves $0.800 trillion for entitlements. Entitlements are currently $2.2 trillion. We are not paying off the deficit nor are we paying the full interest, meaning after all that cutting – and not touching defense we will still go into debt.

      Go tell the folks on the entitlements that they will have their benefits cut by 64%. But by god let’s not cut defense – never!

    3. Bobbie says:

      Mr. President, you do nothing of significance and everything needs further investigation because you are deceptively set traps.

      Because you failed to have necessary requirements regarding the position of presidency to this country, I don't look at you as the president of this country and not only you should be impeached but all appointed by you, including Joe Biden.

      We're done following unaccountable, selfish, unreasonable, anti American's we're forced to follow. And I do not blame myself for the actions of others.

    4. George Colgrove, VA says:

      Frequently when it comes to defense spending we are reminded about how much we spent on defense several decades ago. I have studied the years since Ford was president and found that defense spending has historically been about $460 billion in today’s dollars. I extended this study back between the years of 1911 to 1950 durring the big wars. Here is what I discovered:

      1. Prior to FDR defense spending in non-war times ranged from 34% to 50% of the federal budget – depending on the war effort at the time. After the add-on’s of entitlements by FDR, base line defense spending settled at the current 25%, though at times the percentage did get down to 19% to 20% of the federal budget. War time efforts in WWI topped out at 60% and in WWII it topped out at 88% of the federal budget.

      2. In today’s dollars, defense spending prior to WWI was under $10 billion. Between the start of WWI (1914) to the time we entered the war (1917/18) defense spending went up to $11 billion (2011 dollars). In 1918 and 1919 defense spending soared to $224 billion and $273 billion respectively – in today's dollars. The war was concluded. Defense spending in 1920 was reduced 68% to $86 billion, then in two years the defense budget was further reduced to a minimum of $15 billion (2011 dollars). This showed restraint.

      3. For nearly a decade and a half, the federal government was perfectly fine enjoying peace. This would be the last decade the US has not faught a war. defense spending stayed around $15 billion to $30 billion (2011 dollars). Even as WWII was ramping up (1939 – 1940), the US showed restraint and kept defense spending under $40 billion (2011 dollars).

      4. The US entered WWII in 1941. Defense spending shot up to $112 billion, then up close to the current base line spending of $401 billion.

      5. The US decided to go hog wild and ramped up spending to an all time high of $940 billion in 1943; $1.1 trillion in 1944; and $1.2 trillion in 1945 (2011 dollars).

      6. At the conclusion of the war, defense spending was again drastically cut by 44% to $645 billion (2011 dollars) in 1946. From 1947 to 1951 defense spending was brought down to $193 billion to $264.

      7. We could not leave the world alone however, by 1950 we were heading to Korea to justify high levels of defense spending. From 1950 to today, the DoD has been very effective in finding conflicts to get into. (Korea, Vietnam, Cambodia, the Middle East, etc.) It is common knowledge that the United States is by in large the biggest killing machine on the planet. We have killed more people than any other country in the world. Fitting since we are in a near constant state of war with someone over the last half of the decade. Since 1950's to pre-9/11, defense budgets have ranged from $430 to $550 billion annually.

      8. The national debt grew 6 times in today’s dollars in WWI (from $65 billion to $395 billion.) However in every year during the decade after the war we decreased the deficit by half – to $206 billion. This was restraint by both the defense department and the US government.

      9. The national debt grew also 6 times in today’s dollars in WWII (from $562 billion to $3.3 trillion.) However in nearly every year during the 6 years after the war we decreased the deficit by a third – to $2.2 trillion. This also showed restraint by both the defense department and the US government. Ever wonder why we have such high regards to this generation.

      10. Did the DoD waste a lot of money during these two conflicts? Probably – most likely due to the speed of the ramp up. However, they knew enough to cut it off and had the decency to stop it. Since the “greatest generation”, we have gone to having a spend thrift defense department.

      11. In 2011 dollars, the DoD increased spending by $240 billion over two years for WWI, then stopped the spigot. The DoD increased spending by $4.1 trillion in 6 years for WWII, then significantly slowed down the spigot. The US was fighting two global wars.

      12. For the current conflict with the Middle East, we have increased spending by $2.6 trillion over the baseline defense budget of $4.6 trillion over 10 years fighting rag-tag terrorist groups spending no more than $100 million! And we have no stop in sight! Over the next five years we are being told we need to spend an additional $2.3 trillion over the base line defense spending!

      All I have to say is that current government spending is nothing like the spending that went on with the ”greatest generation”. In WWI and WWII we did what we had to and pulled back. The DoD had restraint and the federal government had restraint – even in the entitlement spending areas. Today we have a federal government and DoD who are showing no restraint. Spending is at an all time high. Federal Budgets topped out at$ 273 billion during WWI and $1.3 trillion during WWII in 2011 dollars. After WWII, federal spending hovered around $350 to $600 billion (anywhere between two thirds to three quarters was due to defense spending). The two major jumps in the national debt was due to the DoD and the war effort – debts that we are still covering on the books ($189 billion for WWI – after paying back $206 billion and $1.5 trillion for WWII – after paying back $1.1 trillion.) If we want to be like those folks, we would be seriously cutting back now. We need restraint. Yes, there is still work to do for the current war effort – however we arew out of money! At this point we need to begin prioritizing what our defense dollars are going to.

    5. Pingback: » Financial News Update – 02/08/2011 NoisyRoom.net: The Progressive Hunter

    6. Gabriel says:

      "We’re done following unaccountable, selfish, unreasonable, anti American’s we’re forced to follow. And I do not blame myself for the actions of others"

      Bobbie, would you say the same for Bush, Cheney, republicans and conservatives in the House and Senate? would you say the same for them or did this just all the sudden start when President Obama took office? dying to hear your answer!!!!

      let me guess, personal attacks? deflection? no specific answers?

      lets wait and see what your response will be….. :)

    7. Bobbie says:

      When it fits and I see it, I do.

    8. Bobbie says:

      You discriminate, I do not!

    9. Pingback: House and Senate Cloakroom Report: February 14th-18th, 2011 | The Conservative Papers

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