Today, President Obama released his budget for the 2014 fiscal year. Coming just a little over two months past the legal deadline for the budget, it’s as bad as anyone would expect:
President Obama plans Wednesday to unveil a $3.77 trillion spending plan that proposes modest new investments in infrastructure and education, major new taxes for the wealthy and significant reforms aimed at reducing the cost of Social Security and Medicare.
The President’s budget forecast looks pretty bad as well:
While the nonpartisan Congressional Budget Office forecasts $3.6 trillion in outlays in the fiscal year that begins in October, Obama calls for $170 billion more.
And while the CBO forecasts a deficit of $616 billion in 2014, Obama calls for a larger gap between spending and revenues of $744 billion, administration officials said, or 4.4 percent of the nation’s gross domestic product.
The budget gap would narrow over the coming decade, shrinking to 1.7 percent of GDP by 2023, when the national debt would also be shrinking as a measure of the overall economy.
A couple of things to note about the third paragraph above – the “budget gap” would shrink to 1.7% of GDP under the President’s proposal, yes…but if it’s anything like last year’s proposal, it assumes nearly impossible levels of economic growth, and double-counting on the spending “cut” side. Additionally, 1.7% of GDP is still huge deficit. Currently, America’s GDP is just shy of $16 trillion, which would be the equivalent of a nearly $300 billion deficit today – and the GDP in 2023 is certain to be much larger.
To be fair, if the economy picks up over the next decade, deficits of the size the President predicts could be sustainable. But that is unlikely to happen and, furthermore, the expected shrinking of the national debt as a measure of the economy is based upon the CBO’s baseline budget projections, which are far more optimistic than more politically realistic ones.
With regards to the $1.8 trillion in alleged deficit reduction the President is aiming for over the next decade, it turns out it is like last year’s proposal – even that low level of deficit reduction is misleading:
While Obama proposes $1.8 trillion in new savings and tax revenue over the next decade, much of the money would be dedicated to replacing the sequester, $1.2 trillion in automatic spending cuts that went into effect March 1.
In other words, the real deficit reduction is about $600 billion, almost all of that from taxes on the wealthy:
His $3.77 trillion proposal would reduce the deficit by $1.8 trillion by adding $580 billion in new taxes on the wealthy, according to senior administration officials.
The budget can be summarized thusly:
In other words, Obama wants Republicans to agree to tax hikes today for down-the-road cost savings in entitlement programs that are necessary whether we hike taxes or not. In exchange, he wants to increase spending in most or all other categories.
Historically, this approach has never worked, but don’t let the facts get in the way of a good spending binge.