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Jewish World Review Feb 15, 2012/ 22 Shevat, 5772 Obama budget vs. Simpson-Bowles By Robert Robb
http://www.JewishWorldReview.com |
Let's assume that President Obama's budget was enacted in its entirety, down to the very last detail. What would be the federal government's financial condition at the end of its 10-year horizon?
It would stink. Really, really bad.
Federal debt is currently $16 trillion. Under Obama's budget, it would increase to $26 trillion over 10 years.
The annual cost of servicing the national debt is currently $225 billion. Under Obama's budget, it would rise to $850 billion by 2022. Debt service would increase from its present 6 percent of federal outlays to nearly 15 percent.
The federal debt currently exceeds 100 percent of annual Gross Domestic Product. Economic historians believe that is the point at which sovereign debt begins to burden the performance of the private economy and raise questions about the government's ability to pay it back. Under Obama's budget, federal debt remains above that red line for the entire decade.
The reason federal debt continues to accumulate at such alarming levels is that Obama doesn't propose to do anything meaningful to get federal spending under control. Remember, these debt numbers are what Obama's own budgeteers project even after every tax increase he proposes for the rich is enacted, down to the very last detail, and they raise exactly what he says they will raise.
From 2007 to 2009, federal spending increased 29 percent, supposedly to deal with the turbulence in financial markets and the subsequent recession.
What Obama has done is to treat this explosion in what was supposed to be temporary spending as a new base, and continue to increase spending from the swollen base.
Forget the claims about spending and debt reduction. This is the bottom line: Obama proposes that federal spending increase from $3.8 trillion today to $5.8 trillion in 2022 — an annual rate of growth of 4.4 percent. In real, per-capita terms, the increase is 17 percent.
Basically, Obama is proposing that the country not even try to turn the corner on debt for the next decade.
An instructive comparison is the recommendations of the Simpson-Bowles debt commission. It, after all, was appointed by the president to make recommendations on reducing the national debt.
The debt commission proposed roughly the same amount of increased annual revenue as Obama's budget contains, but from broadening bases and lowering rates, not sharply increasing marginal tax rates. As Indiana Gov. Mitch Daniels has said, there are smart ways and dumb ways to get more money from the rich. The debt commission recommended the smart way.
The real difference, however, is in spending. From 2007 to 2009, federal spending leapt from 20 percent of GDP to 25 percent, again supposedly as a temporary countercyclical measure.
The debt commission proposed to get spending back down to 21.6 percent of GDP by 2015. Under Obama's budget, it remains at 22.8 percent through 2022.
The difference is enormous. From 2013 through 2020, the debt commission's recommendations would result in $2 trillion less in annual deficits than Obama proposes. For 2020, the debt commission's recommended deficit is less than half that recommended by Obama.
The debt commission offered a blueprint for turning the corner on the federal debt, breaking its peak and having it constitute a declining share of GDP over time.
Why Obama would appoint the debt commission and then largely ignore its recommendations is a political mystery and one of history's great missed opportunities.
But he did, and he has not offered an alternative approach to turning the corner on the national debt. Instead, he proposes that the country remain mired in it and threatened by it.
This Obama cannot blame on Republicans. This isn't what he is left with after recalcitrant Republicans refuse to pass his initiatives. This is actually what he proposes for the country.
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JWR contributor Robert Robb is a columnist for The Arizona Republic. Comment by clicking here.
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