Coloring President Barack Obama’s budget proposal for fiscal year (FY) 2012 are the undeniable shades of masked fiscal disaster and a want of long-term solutions.
According to analysis (pdf) by the Congressional Budget Office (CBO), the President’s budget would result in $1.43 trillion and $1.16 trillion deficits for FYs 2011 and 2012, respectively, adding two more years of annual deficits in excess of $1 trillion. Total spending would increase by 57 percent over the next decade, from $3.7 trillion this year to $5.8 trillion in 2021. Net interest alone mushrooms from $214 billion to $931 billion, a 335 percent increase.
The President’s budget, CBO reports, would have deficits that average $947 billion over the next 10 years. Rather than driving deficits down, the President’s budget would increase them 23 percent over the course of the decade. While Obama’s budget people claim (pdf) that the 10-year deficit would total $7.2 trillion, under CBO’s more realistic (though still flawed) assumptions, annual deficits would total $9.5 trillion. The President’s budget says that debt held by the public will reach nearly $19 trillion by 2021, yet CBO reports that it will double to nearly $21 trillion in 2021. According to CBO, debt as a share of the economy will increase from 69 percent of GDP to 87 percent. Such a path is clearly unsustainable and demonstrates the need for deep reductions in federal spending if debt is to be brought under control.
The CBO’s analysis highlights the minimalist policy proposals that the President offered in his budget (pdf) to reduce the deficit and contain federal spending. For example, his policies of first pushing spending up dramatically and now a freeze on the domestic, non-security discretionary part of the budget still leaves spending out of control. Other proposals, such as simply reclassifying transportation spending as mandatory spending, amount to just another round of budgetary musical chairs.
The most egregious part of the Obama budget is not what is included but what is missing: concrete policy proposals to reform Social Security, Medicare, and Medicaid. These mandatory programs are the main drivers of federal spending and the budget deficit; the CBO analysis finds that by 2021 entitlement spending will account for 60 percent of total spending. Failure to implement entitlement reform compromises the economic future of the country and would leave an unacceptable tax burden that families and businesses must bear.
The CBO report shows the expected damage that the President’s budget would cause to the nation’s fiscal house. Running contrary to the President’s vision for “Winning the Future” through tax-borrow-and-spend policies is the certainty that greater government spending will lead to ever-higher taxes, massive deficits, and a lower standard of living for future generations of Americans.
Again, it is made plain that the President chooses to ignore the recommendations (pdf) of his own bipartisan fiscal commission, which called for prompt and serious reform of entitlement programs. Curtailing domestic discretionary spending back to pre-recession levels is only part of the equation to put the nation on sound financial footing. The nation is looking to the President for leadership—not only on real spending cuts but on the hard work of entitlement reform.