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

Posted By Kathryn Nix On February 8, 2011 @ 2:00 pm In Economics | Comments Disabled

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 [1], 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 [2] 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 [3].

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 [4].

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.


Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2011/02/08/preview-of-presidents-budget-leaves-a-lot-to-be-desired/

URLs in this post:

[1] A recent New York Times article by Jacob Lew: http://www.nytimes.com/2011/02/06/opinion/06lew.html?_r=2

[2] Republican Study Committee’s (RSC) proposal: http://www.foundry.org/2011/01/20/what-do-you-call-2-5-trillion-in-spending-cuts-a-good-start

[3] it won’t be enough: http://www.heritage.org/budgetchartbook/spending-cuts

[4] neither insufficient tax revenue nor excess defense spending is responsible for growing future deficits: http://www.heritage.org/Research/Reports/2010/06/Federal-Spending-by-the-Numbers-2010

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