It is often said that if a proposal draws ire from both sides of the political aisle, it must be good. By that metric, Obama’s 2011 budget proposal is a winner.
The White House proposal comes a few days after House Republicans proposed a $100 billion reduction, not from 2010 levels, but from proposed 2011 levels. Why does this matter? Because the 2011 proposal calls for a total increase of $90 billion over 2010. So the GOP proposal calls for merely $10 billion in less spending, compared to 2010. There’s a lot to look over in their proposal. Read it and comment here on what you see.
But let’s look at the GOP Pledge from last fall, which is the basis for the $100 billion number. The text said: “Cut government spending to pre-stimulus, pre-bailout levels saving at least $100 billion in the first year alone.” Pre-stimulus, pre-bailout is the 2008 budget, which was $2.9 trillion. That’s $790 billion less than the Obama budget proposal. This sleight of hand is important.
It’s been said before, but it bears repeating: most of the federal government’s annual expenditures consist of “mandatory spending,” things like Social Security, Medicare, basic emergency safety net programs (e.g., unemployment insurance, food stamps), and interest on the debt.
Social Security is logistically an easy program to fix, but politically extremely difficult. Combinations of means testing, increasing the minimum age for drawing benefits, and raising the caps on contributions would easily make the program fully solvent for all time. But it requires a change in the social contract that underpins the program, and many of those elements of the contract were put in place as a means of compromise to get the program passed in the first place. This is not an easy task, but one I support, even though it would almost certainly mean I would pay more into the program and get less out of it.
There are big cuts in small programs, such as disadvantaged school programs, low-income heating bill assistance, and disaster relief. And there are small growths in big programs, such as operation and maintenance of the national defense. By and large, the growth in discretionary spending comes from defense and health care.
So there’s stuff to hate in both Obama’s proposal and the Republicans’ counterproposal. As a Keynesian, I think it’s too early for cuts of this magnitude anyway. Fixing Social Security would be beneficial to both the budget and the economy. Wearing my economist’s hat, that is the low-hanging fruit. It would take some serious political will to accomplish, unfortunately.
How do you feel about the proposals? What would you do differently if you didn’t have to deal with politics? What would you do differently if you did have to deal with politics?
- Opinion: Obama “Punter-in-Chief” For Pushing Budget Woes Off (patspapers.com)
- Federal budget: Why is Obama playing the Republicans’ game? Discretionary spending cuts are kid stuff. (slate.com)
- Obama’s budget shies away from tough choices (sfgate.com)
- Comparing Obama’s plan with his commission’s (msnbc.msn.com)
- New plan, same dire battlefield (seattletimes.nwsource.com)
- Budget chiefs: Not happy with Obama plan (money.cnn.com)
- Obama Can’t Balance Budget With Social Spending Cuts (alternet.org)
- Left not too happy about the budget, either (hotair.com)