Double Down on Spending

After 3 years of prodigious deficits, gratuitous spending and a midterm election shellacking, the American people expected a semblance of fiscal discipline.  President Obama, with his new found political capital, was boldly going to drop his iron hand and finally “go line by line” through the federal budget to cut spending. 

Instead, Nancy Pelosi’s routinely quoted “are you serious?” seems a more apt summation of this budget proposal.

Perplexingly, the White House’s budget proposal not only does not tackle our looming fiscal catastrophe within the first two years, it actually increases the baseline of spending over 2011 and 2012.  In 2011, spending as a percentage of GDP will rise to 25.3 percent, an enormous percentage (relative to historical average) and the highest since 1945.  By 2020, gross public debt would reach $26 trillion and 100 percent of GDP.  Overall, the proposed budget would accumulate nearly $13 trillion over the next decade.

The White House should be commended for at least attempting some cuts to the federal budget.  Still, the administration claims $1.1 trillion in new cuts, but the deficit alone for fiscal year 2011 is pegged at $1.65 trillion.  Is Bernie Madoff handling our accounting?

Even these supposed cuts are largely budgetary gimmicks, since the bulk of the cuts pertain to years outside of President Obama’s current term of office and even 2016.   As the Wall Street Journal shows:

    “How unserious is this budget? Although the White House trumpets $2.18 trillion in deficit reduction over the next decade, those savings are so far off in the magical “out years” that you can barely see them from here. More than 95% of the savings would happen after Mr. Obama’s first term in the White House is over, and almost two-thirds of the promised deficit reduction would arrive after 2016. Pretending to cut deficits by pushing all real cuts into the future is Budget Flimflam 101.”

Also, the administration proposes $1.6 trillion new tax increases.  These tax hikes range from an increase in capital gains rates from 15 to 20 percent and the highest income tax rate would rise from 35 percent to 39.6 percent.  What happened to not wanting to “refight old battles”?

Overall, this budget continues the egregious tax-spend-borrow mentality that has been pervasive throughout the first 2 years of the Obama administration and the decade as a whole.  Our current fiscal crisis demands a strong leadership, not a double down on reckless spending.