U.S. Federal Budget - Part IV, Obama Budget FY2012

The CR has been passed with some pitiful reductions, about 1% of the budget and some reduced version of the FY2011 budget is in the process of being agreed to and passed, whether we like it or not with its $3.83 Trillion in federal spending and its Trillion deficit.  So now its time to move on to the FY2012 Budget and see if the President, the rest of the politicians and a large segment of our population get the fact that we are going broke.  

President Obama, by law, is suppose to release his budget no later then the first Monday of February (you knew that if you read my March 16th Blog – “U.S. Federal Budget – An Introduction”) and he was close, he only missed it by a week – Monday, February 14 – not bad.  The new budget for FY2012 produces some $3.73 Trillion in spending with $1.6 Trillion in deficits this year alone with $7.2 Trillion in deficits accumulating over 10 years resulting in a mere $1.1 Trillion in defict reduction over that same time period.  Great job Mr. President.

Mr. Obama will shun the recommendations of his own bipartisan budget commission which just a few months ago said we needed more than $4 Trillion in cuts to our projected deficits over the next decade.  He will not propose any changes in the biggest domestic spending programs - Social Security, Medicare and Medicaid nor any of the entitlements - which his commission said must be changed if the debt is ever to be tamed.  Now that would be some "change" we all could believe in.

Republicans obviously blasted the budget saying it fails to live up to recent assertions by Obama's budget director Jacob Lew that Obama would reduce deficits primarily by cutting spending.  "If we're going to get this debt down to a level that's sustainable, then we've got to do substantially more than $1 Trillion worth of deficit reduction in the next decade. We just do," said Senate Budget Chairman Kent Conrad (N.D.).

What we need is a broader debate on how to tackle the biggest drivers of future deficits: like our mandatory spending for entitlements like Social Security and health care for the elderly, as well as a tax code that offers more in breaks and deductions than it collects in revenue.  The mandatory spending on entitlements is growing and growing and is killing the country.  Politicians and the people must do something about it.  But the President hasn’t done his usual side step and shuffle and won't step up and do the hard work.  In a Washington Post article they say it clearly, “Obama's budget makes clear that he will not take the lead in that debate: It contains no specific recommendations for tax or entitlement reform.”

"What we have here is a total abdication of leadership and talking points based on gimmicks and cooking the books," House Budget Committee Chairman Paul Ryan (R-Wis.) said in an interview. "To me, it's more than disappointing. I expected more taxes, but I also expected some serious spending controls or reforms, and we're getting none of it."

On March 18, the Congressional Budget Office (CBO) released its preliminary analysis of President Obama’s FY2012 budget request. In conjunction with the CBO’s release, they published a paper that looks at the President’s budget in the context of CBO’s most recent analysis where they “explore the differences between CBO and OMB estimates, the factors contributing to these differences, and what all of this means for our fiscal outlook.”

The CBO estimates that “the President’s budget will fail to reach the Administration’s fiscal goals: balancing the primary budget by 2015 and stabilizing the debt-to-GDP ratio. In fact, whereas OMB assumes the debt would stabilize around 77 percent of GDP through the decade, CBO finds that it would rise above 87 percent by 2021. We voiced concerns about this earlier this year in our own analysis of the President’s budget.”

Their analysis finds “a $2.3 Trillion difference between CBO and OMB's estimates of the President's budget, stemming primarily from different economic assumptions and whether or not to count unspecified savings.”   And their paper concludes:

“CBO's estimate of the President's budget shows that we are on a dangerous fiscal path, even if we enact the deficit-reducing policies proposed in the President's budget. This demonstrates, quite clearly, that the debt cannot be stabilized by simply freezing non-security discretionary spending and identifying a few opportunities to raise revenue and reduce spending in a relatively painless way.”

Based on historical trends federal revenues (Red) have been pretty consistent at about $2 Trillion – but the past decade we have been spending (Blue) in excess of that and since 2008 we have been in excess of $3 Trillion - so do we have a revenue problem or a spending problem?  I think it is self evident but in case you can’t see it - ABC News’s gave their description of the Obama budget on the day it was unveiled and in that report they said this:  “At no point in the president’s 10-year projection would the U.S. government spend less than it’s taking in.”  I think they think spending is a problem too.

From the Heritage Foundation in March of this year they tell us that before the recession, “Washington spent $25,000 per household annually. President Obama has already pushed spending above $30,000 per household, and is on its way past $35,000 within the next decade.  The President’s budget fails to meet his own pledge to cut the deficit in half during his first term. After an election in which voters expressed disgust with business-as-usual spending and deficits, President Obama has proposed more of—almost exactly—the same.”

President Obama regularly disowns his own budget deficits, claiming they were inherited from his predecessor. However, President George W. Bush’s deficits averaged $415 Billion over eight years in office, while President Obama proposes deficits averaging $952 Billion over eight years.

Furthermore, when President Obama took office in January 2009, the “Congressional Budget Office (CBO) forecast a baseline budget deficit of $2.9 Trillion between 2010 and 2018. President Obama has now proposed running $8.0 Trillion in deficits over that period.”

In the fall of 2006 the President, then freshman Senator Obama, was swept into office with other Democrats and they took control of both the House and the Senate thus controlling the budget process for fiscal years 2008 and beyond.  Note in the above chart the big jump in the 2008 federal deficit spending after three successive years of declining and then the big jumps in 2009 and continued elevated high deficits in 2010, 2011 and this current proposal in 2012, all in excess of $1 Trillion.  Senator Obama and then President Obama with his Democratically controlled Congress has had his hand in all the Government budgets for the past five years so to say he inherited anything is not the truth – he voted yes on each and every budget that came before him as well as TARP, Omnibus, Obamacare and Financial Reform – all costing the U.S. Taxpayer Trillions of Dollars.

Do you really think he has OUR best interest or the COUNTRY’s best interest at heart?  Do you really think that spending a Trillion Dollars more then we have is somehow going to help our deficit problem or our economy, ever?  Let’s see what the Republicans come up with in their offer of a Federal Budget in my next blog – does anyone get it?