Peter Orszag at The White House Blog:
Today, the President transmitted the FY 2011 Budget to the Congress. In about an hour, he will deliver remarks about the Budget, and after that I will be taking questions from the press with CEA Chair Romer. This post gives readers of OMBlog a brief overview of the document.
After a year in which we took immediate and unprecedented action to rescue the economy from the brink of a second Great Depression, the FY 2011 Budget takes steps to jumpstart job creation, strengthen the economic security of middle-class families, and make the tough choices to put our Nation back on the path to fiscal sustainability.
When the President took office, the economy was on the brink of a depression. The economic crisis required that we take immediate and extraordinary steps to prevent a complete economic collapse that would have caused millions more to lose their jobs. Not all of the efforts we undertook to avoid a deeper recession were popular. Nonetheless the President did what was right for our country’s future: signing into law the Recovery Act to jumpstart economic growth and taking steps to prevent the collapse of the financial system.
A year later, the economy is back from the brink – and is growing again. This “statistical recovery,” however, is cold comfort for the millions of Americans who have lost their job. The President has therefore called for a package to spur job creation now – including small business tax cuts and investments in clean energy and infrastructure.
To sustain job creation and economic growth into the years ahead and provide room for the private sector to expand, we are also making tough choices in the Budget: cutting what doesn’t work or isn’t necessary and investing in what will help to expand the economy and employment in the coming years.
Nicole Allen at The Atlantic:
Today President Obama revealed his 2011 budget, which would draw funds from big finance to inject them into small businesses. His bank tax would collect $90 billion over the course of the next ten years, while small businesses would receive tax credits for hiring new employees or giving raises. But you can find other winners and losers in the legislation. Here are four of each:
1) Lower-income families would benefit from stimulus tax breaks that would be extended for another year.
2) Elementary and secondary schools would receive an extra $3 billion, in line with the administration’s belief that education drives innovation and competition. College students would benefit from a $17 billion boost to the Pell grant program.
3) The government would funnel $6 billion of Bush-era tax breaks on oil, gas and coal companies to clean energy technologies. Money would also flow to civilian research and development and regional infrastructure projects, as well as to new TSA screening technologies.
4) A major chunk of discretionary spending, which excludes entitlements like Social Security and Medicare, will go to war spending, which will increase by $33 billion this year and $159 billion in 2011.
1) Wealthy families would up their contributions to federal coffers as the Bush tax cuts on households making over $250,000 expire, netting the government nearly $1 trillion in additional revenue.
2) Hedge-fund and private equity employees will supply $24 billion over 10 years by having their fees taxed as income rather than capital gains, and multinational corporations will pay higher taxes on overseas earnings.
3) Oil, gas, and coal companies would cough up $40 billion after the elimination of some Bush-era tax breaks.
4) Perhaps the biggest non-financial loser in the proposed budget is NASA. While the agency would see an extra $1 billion a year, several of its prize programs would be slashed, including a return to the moon by 2020. NASA supporters have bemoaned the cuts, worrying that this budget would undermine the country’s role in the future of human space flight.
Chris Good at The Atlantic:
President Obama’s budget proposal will dominate the news cycle today, but how important is the document, really?
It’s worth keeping in mind that the administration’s budget proposal is exactly that–a proposal, a suggestion of what the White House wants Congress to spend and what it wants Congress to spend on. The legislature controls the purse strings.
ABC’s Rick Klein sizes up budget day as “that annual Washington tradition of making far too much out of a proposed budget that needs to thrash its way through a Congress that has its own ideas.”
Just last week, Barack Obama declared that he needed to freeze spending to arrest the growth of gigantic federal deficits, which have exploded since Democrats took control of Congress, and announced a freeze on non-defense discretionary spending … sometime later. Today, after casting himself as a deficit hawk, Obama will roll out a budget with a $1.3 trillion deficit while admitting that this year’s gap will be $1,600,000,000,000
Nick Gillespie at Reason:
So how’s that “New Era of Fiscal Responsibility” working out? Sadly, in an incredibly predictable way.
During another brief, teleprompter-aided statement this morning, Obama lectured: “‘Changing spending as usual depends on changing politics as usual.”
Dean Baker at The American Prospect:
The headline of a WSJ article on the deficit told readers that: “deficit to hit all-time high.” This is not true in any meaningful way. Measured in nominal dollars, the $1.6 trillion deficit is an all-time high, but measured as a share of GDP (the only meaningful measure) the deficit is about 11 percent of GDP. This leaves it much smaller than the deficits run during World War II which exceeded 20 percent of GDP. (Marketplace radio made the same error on Monday morning.)
The article reports that after falling as the economy recovers, the deficit is projected to rise again due to baby boomers collecting Social Security and Medicare. Actually, the main reason for the projected increase in the deficit at the end of the decade is rising health care costs which will get passed on in higher costs for Medicare, Medicaid and other government programs. If the United States health care system were as efficient as those in other countries, the U.S. would be expecting huge budget surpluses in future decades.
Derek Thompson at The Atlantic:
I’m with Dean. It’s not that years of trillion-dollar deficits aren’t worrisome (they are) or that our long-term debt isn’t a crisis (it really, really is). But it doesn’t make any sense to divorce the deficit figure from history. In 1943, when the deficit accounted for a modern record of 28 percent of GDP, our GDP was smaller than $200 billion. Today it’s around $14 trillion. It’s silly to compare the GDP numbers nominally, so why compare the deficit figures without context?
That said, it’s impossible to avoid the conclusion that we face a long-term debt crisis. That bit is not only widely reported, it’s also exactly right. After we climb down from the trillion-dollar-debt range in the next five years, we have about a five-to-ten year window of smaller deficits before the baby boomer generation begins to retire, pays fewer taxes and collects a lot more government benefits from Social Security and Medicare. That’s exactly why any serious deficit commission cannot leave revenues and entitlements off the table. Debt reform is revenue and entitlement reform, ipso facto.
Conn Carroll at Townhall:
At the very least, the budget document President Obama is submitting today exposes his spending “freeze” promise for the fraud that it is. As outlined last week, the administration would halt spending increases for only a $447 billion sliver of our total budget, with a total of $15 billion to be saved. That is less than half a percent off of last year’s spending. Worse, this isn’t even an across-the-board spending freeze; it is an aggregate one. So “spending cuts” in parts of the budget are immediately channeled to others. For example, even though the federal government does not need any money for the Census next year, President Obama counts the $5 billion spent this year as a “spending cut” that can be immediately spent on other government programs, such as a 16% increase in Department of Education funding, a 6.8% increase in Department of Energy funding, and increases for ineffective Health and Human Services programs like Head Start and sex education.
Given the best case scenario, the most the White House hopes to save from this supposed spending “freeze” is $15 billion. And that is easily dwarfed by just the $100 billion President Obama wants for his Economic Stimulus II plan. Then there are… the tax hikes, including higher taxes on families earning more than $250,000 and a brand new tax on financial institutions to pay for the failed automobile union bailout.
And what is the end result of all of President Obama’s new taxes and spending? A record national debt. According to the White House Office of Management and Budget, the United States will post a $1.556 trillion deficit in fiscal 2010, which the Obama administration claims will be reduced to $1.267 trillion in fiscal 2011, thanks to their budget. Given this administration’s budget forecasting record, however, expect that final deficit number to go up. The Obama administration now forecasts $5.08 trillion in debt over the next five years; that is 35% more debt than they forecast just 12 months ago.
A common sense budget would move our country in a much different direction. For starters, the remaining TARP and stimulus funds should both be rescinded. Next, instead of the President’s fungible “aggregate” spending freeze, tough hard spending caps should be enacted. Finally, Congress should disclose the massive unfunded obligations of Social Security, Medicare and Medicaid; put those programs on long-term budgets; and enact the necessary entitlement and programmatic reforms that can keep government within those limits.