Thursday, March 26, 2009

With a budget proposal, Obama's governing philosophy comes fully into view

"Though all of this is readily seen in the budget's revenue and spending figures, the Obama administration nonetheless tried to couch it in the soothing language of fiscal conservatism. In his speech before Congress, the president said his team had found '$2 trillion in savings' over ten years with their sharp, budget-cutting pencils. But, even before the budget's official release just two days later, it was clear that this claim was a mirage. The 'savings' stemmed mainly from the assumption that, in a status quo scenario, war-fighting costs in Iraq would remain at essentially 'surge' levels in perpetuity, which no one has ever thought would be the case. That false assumption alone added $1.4 trillion to the 'baseline' against which the Obama team measured itself.

"But it didn't matter anyway. This budgetary sleight of hand couldn't disguise what even the mainstream press recognized: The Obama budget, if adopted, would run up the nation's debt at an unprecedented pace -- some $7 trillion between 2009 and 2019. No matter what baseline it's measured against, that's a lot of borrowing. At the end of 2008, before the full force of the financial crisis had hit government tax collections, the entire debt, accumulated over more than two centuries, stood at only $5.8 trillion. In 2007, at the end of the government expansion that marked much of the Bush era, the federal budget deficit fell to a comparatively insignificant $161 billion, or just 1.2 percent of GDP. By contrast, the lowest annual budget deficit in the Obama plan would be $533 billion in 2013, or 3 percent of GDP.

"This massive run-up of debt cannot be explained away with a continuing weak economy. In the run-up to the passage of the so-called stimulus bill, the president spoke incessantly of the financial crisis and the likely economic troubles that lie ahead. We won't dig ourselves out of the problem easily or quickly, he warned. But the budget he submitted to Congress now predicts otherwise. Robust economic growth is expected to resume in 2010 for good. Indeed, in 2012, the administration projects real GDP will increase an astonishing 4.6 percent, three years into a recovery.

"If anemic growth isn't to blame for the Obama deficits, what is? It's simple: spending. For all the talk of combing through the budget for savings, President Obama is planning an unprecedented expansion of government, with just about every agency and program in line for a major bump-up in funding. In 2008, total federal spending was $3 trillion. In 2013, after the financial crisis is expected to have subsided and economic growth to be in full swing, the president's budget, including his health-care plan, forecasts spending of about $4 trillion -- a $1 trillion, or 33 percent, increase in the size of government in just five years.

"And the spending is pretty much for anything and everything. Child-nutrition programs, Pell Grants (an 80 percent increase by 2014), national-service scholarships, state welfare grants, job training, disease prevention, research, agency overhead, and on and on. The State Department (and related international funding) would nearly double in size in five years; the Education Department would grow by more than 60 percent. Overall, annual appropriations spending would increase by $780 billion over the coming decade. "