NYT: Obama Budget Lessens Focus on Deficit
Washington Post: Obama’s Budget Seeks to Tame Debt
On Monday, the President unveils his budget for fiscal year 2013 (it starts Oct 1 this year and ends Sept 30 next year) and my two morning papers—print editions–had dueling headlines (yep, some of us fogies still like the old “broadsheets”). So, which is it?
Actually, the articles make similar points–typically, the peeps in the bylines don’t write the headlines, so this kind of thing occasionally happens. This budget looks much like the one the White House recommended to the supercommittee a few months ago. It’s got some salutary stimulus up front—much of what was in the American Jobs Act with some of the ideas from the State of the Union mixed in, like $2.2 billion for manufacturing R&D.
And, as far as I can tell, it’s got all the deficit reduction—$3 to $4 trillion, depending on whether you give them credit for war savings–that was in their Fall budget.* Though it was underappreciated at the time, that budget achieved a sustainable debt to GDP ratio within the next decade—i.e., it cut enough spending and raised enough revenue to reverse the upward trajectory of this important benchmark (see Kogan video on these points).
Other parts of note in the new budget:
–Look for wringing of hands and rending of garments over the increase in the current year’s budget deficit, up $200 billion from CBOs projection according to the WaPo. I say: stand down, wringers and renders! We’re still miles from full employment, there are 5.5 million long-term unemployed, and millions more underemployed. The question in the short term is not “how much does your budget reduce the deficit?” It’s “is your budget deficit temporarily large enough to offset the improving but not-yet-over demand contraction?
–The President offers cuts in Medicaid and Medicare, going out of some D’s comfort zones, for sure, but blunting the criticism that he won’t put entitlement cuts on the table. In the September budget, these cuts amounted to over $300 billion over ten years. Personally, I don’t see how you cut Mcaid without hurting beneficiaries and/or shifting costs to strapped states; the Mcare cuts can be structured to protect beneficiaries—e.g., using the program’s bargaining clout to get better deals on prescription drugs.
–There’s “more than $1.5 trillion in new taxes on corporations, hedge-fund managers and the wealthy, in part through the expiration of the George W. Bush-era tax cuts on annual incomes of more than $250,000” (WaPo).
But perhaps the most important thing about the budget release, as stressed in both documents, is that it’s highly unlikely to go anywhere. It’s more of a show of contrasts between the visions of the two sides right now—the YOYOs on the right (you’re-on-your-own) and the WITTs on the left (we’re-in-this-together).
The former, under Rep Paul Ryan, will soon announce their own budget, replete with much deeper spending cuts and no new revenues. In fact, cuts to programs for the poor will pay for the tax cuts for the wealthy. The WITTs take the more balanced approach described above, with attention to the fact that this economy is not yet achieved escape velocity from the residue of the great recession and needs another jolt from the fiscal booster rockets.
I’ll have more to say on Monday and I’ll link to CBPPs analysis—we take a deep dive into the weeds for y’all. For now, the punchline is this: these budgets can easily be dismissed as dry documents with too many numbers and decade-long projections, soon to be re-scored and revised. They will be pronounced DOA by rivals, scoffed at by many (CRFB “Not enough deficit cutting!!”), and ignored by most. But I’d encourage folks to pay attention the broad outlines and to appreciate how the budget and its surrounding debate underscore the quite starkly different visions described above. They matter…a lot.
*Earlier budgets plugged in billions for the Mideast wars that everyone agrees will now not be spent—that’s a good thing. But some argue that since those plug ins won’t now be used, they’re not real savings—they’re $ we would have spent but now we won’t. CBO, the official scorekeeper, counts them as real savings, and I’d say it’s legit, as long as you frame it as I did above. BTW, both sides have claimed these savings and both have accused the other side of gimmickry. Welcome to my world…