Obama's 2010 budget: deficit soars amid job spending
http://www.reuters.com/article/idUSTRE60U00220100201?type=politicsNewsWASHINGTON (Reuters) - President Barack Obama pledged on Monday to halve a record 2010 budget deficit by the end of his first term in office, but made tackling double-digit unemployment his immediate priority with a spending plan that risked public ire and a rough battle in Congress.
Criticized by Republicans for raising taxes on wealthy Americans, Obama is under pressure to convince investors and vital creditors like China that he has a credible plan to control the U.S. deficit and debt over time.
"We won't be able to bring down this deficit overnight, given that the recovery is still taking hold," Obama said after laying out $3.8 trillion in spending plans for the fiscal year to September 30, 2011.
"We will continue, for example, to do what it takes to create jobs. That is reflected in my budget. It is essential," he said in a televised statement from the White House.
Obama's blueprint now goes to a Congress deeply split on how to handle the twin woes of a massive deficit and high unemployment amid a still fragile emergence from recession.
Lawmakers girding for the annual budget battle will be in no mood to anger voters ahead of congressional elections in November, and could reshape it extensively during negotiations that may stretch into the year.
The budget forecast a $1.56 trillion deficit in 2010, or 10.6 percent of gross domestic product (GDP), up from a 9.9 percent share of GDP in 2009.
But the shortfall was forecast to shrink to 8.3 percent of GDP in 2011. By the time his term ends in January 2013, it would have halved from the level Obama inherited on taking office last year, keeping a key pledge. That supposes Obama gets Congress to agree to spending cuts and that the economy rebounds strongly enough to sharply lift tax revenues.
Even if all goes to plan, the budget still forecasts U.S. public debt rising above 71 percent of GDP by 2013, up from 53 percent in 2009, and almost 80 percent by 2020 -- levels that could spook investors.
Financial markets largely ignored the budget numbers, which had been extensively previewed, but analysts were not assured.
"We're playing with fire. Foreign countries are noticing our governance failures," said Bill Galston, a senior fellow at the Brookings Institution, a Washington think-tank.
"The dollar's standing as the world's reserve currency and our economy's standing as the world's leader are both in jeopardy," he said.
The deficit's rise in 2010 was partly due to the $787 billion stimulus package Obama pushed through Congress early last year to fight the recession.
Obama, a Democrat, said he had inherited the financial mess from his Republican predecessor President George W. Bush, but did not pretend that the budget would please many people.
"Budget day is like tax day -- it's never fun. No matter what, it's big numbers," he said.
REPUBLICAN IRE
Republicans seized on the grim fiscal forecast to criticize Obama's handling of the economy.
Senator Judd Gregg, the top Republican on the Senate Budget Committee, warned the country was sinking into a "quagmire" of debt and said Obama's stimulus plan had failed to create jobs.
"These circumstances call for a bold, game-changing budget that will turn things around, put in place a plan to restrain spending, reduce the debt and tackle the big entitlement programs that are growing out-of-control," he said. "Instead, the president has sent us more of the same."
The budget outlined some expected savings from the reform of Medicare and Medicaid entitlement programs that care for elderly and poor Americans. But his health reforms have stalled in Congress and Obama did not dwell on healthcare in detail.
Republicans complain the projected improvements in the country's fiscal position come mainly through higher taxes and stronger growth, while spending emerges largely unscathed.
Obama plans to allow tax cuts to expire on affluent American families who make more than $250,000 a year, which is expected to raise $678 billion over the next decade.
He will extract $90 billion from big banks with a fee to recoup taxpayer losses for bailing out the industry during the financial crisis during 2008. Scrapping subsidies to oil, coal and natural gas companies will raise a further $40 billion.
Obama also plans to save $250 billion between 2011 and 2020 by curbing 120 federal projects, including $23 billion next year. These cuts included the country's powerfully symbolic space mission to return to the moon, but the White House says it will also invest more in education and research.
Polls show voters are worried by the weak condition of U.S. finances, and Obama plans to create a bipartisan fiscal commission to figure out options on taxes and spending.
GROWTH FORECASTS
Much of the improvement in the fiscal picture is driven by underlying forecasts in the budget for solid economic growth -- which will not necessarily be shared by all economists.
The economy is projected to expand by 2.7 percent in 2010, but then pull at an above-average 3.8 percent in 2011 and rise above 4 percent for the following 3 years.
The budget also assumes unemployment will remain high, edging to 8.2 percent in 2012 from 10 percent this year, while inflation stays mild and interest rates rise only slightly.
Discontent over the jobless rate translated into a slap for Obama's Democrats in an election last month for the U.S. Senate in Massachusetts, costing the party a crucial Senate seat and foreshadowing potentially big losses in the November congressional elections.
Unemployment is a key concern for voters who will elect all 435 members in the House of Representatives and more than a third of the 100 Senate members in November.
To boost jobs, Obama is setting aside $100 billion in 2010 in tax credits aimed at small businesses as well as investments in clean energy and infrastructure, before starting to tighten the country's fiscal belt the following year.
Economists say withdrawing policies aimed at boosting growth too soon helped prolong the Great Depression in the 1930s, a mistake Obama is determined to avoid repeating.
Democrats control both chambers in Congress. But with Republicans united in opposition to Obama's agenda, he still faces a struggle pulling together Democrats -- who badly need to show voters they are taking steps on jobs, but face a voter backlash over aggressive spending to boost the economy.
Reflecting the challenge Obama faced pushing through his domestic agenda in his first year in office, the budget dropped $646 billion in revenues from a cap-and-trade system to curb greenhouse gases -- signaling pessimism Congress will pass a bill with this provision.
(Additional reporting by
Caren Bohan, editing by Frances Kerry)
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Actual pdf of the Budget:
http://budget.house.gov/pres_budgets/fy2010/02.26.09_Summary_Presidents_fy2010budget.pdf
Quote from the Title Page:
"Facing the legacy of deep deficits and an economic crisis inherited from the previous Administration, the President today released an outline of his 2010 budget plan that focuses on economic recovery, strategic investments, and fiscal responsibility".
Obama Budget: $600 Billion-Plus for Health Care Reform in 2010
http://www.huliq.com/1/77865/obama-budget-make-600-million-health-reform-2010President Obama has released his
budget for fiscal year 2010, beginning in October, this morning. Most details of Obama budget are not available yet, but the
Washington Post notes some of the details of the budget that will be announced when the budget is released.
The Obama administration's budget is set to make a "down payment" of $634 billion on
health care coverage expansion starting with next year's budget. This, following the
expansion of SCHIP, is another step towards government-controlled health care and is being put in place to increase the number of individuals reliant on government health care. Rather than make a majority of U.S. citizens scale back on "going out", huge cellphone-internet packages, newer cars, etc. in order to purchase their own health care insurance, the federal government is counting on those of the working population to foot yet another bill for those looking for a free ride.
Obama's budget concerning health care reform continues the disturbing pattern that President Bush's expansion of Medicare Part-D and President Obama's own expansion of SCHIP have carried on. Yes, we live in a nation that is fortunate enough to provide for those who are struggling during "in-between" times where health care insurance becomes too much. Doing this will help the nation as a whole and
save money. However, creating a population dependent on the federal government (rather American taxpayers) is not the path America needs to take. I fear, as illustrated in Britain, down the road we will have government officials dictating who is worthy to get what surgeries, procedures, etc., all in the name of "saving resources". It's ironic to me that so many who blamed Bush, FEMA, and others in the federal government for failing to react appropriately during Katrina want the federal government to oversee & provide for their health care.
Higher taxes in the form of cap & trade mandates are also in President Obama's 2010 budget. Cap and trade is a system in which companies are required to "purchase allowances" (read pay taxes) to exceed "pollution limits" (set in place by the taxer themselves, the federal government). The administration claims revenue raised from these taxes will be used for "investments" in "renewable energy", an industry that currently lacks the technology to create a free market and thus, no profit. The administration also acknowledges taxes from companies will be used to help "vulnerable consumers" pay their bills when utility companies pass on the costs. This is yet another tax increase on American tax payers, because it is them that will ultimately foot the bill, as they are at the end of the pass-the-buck line, a line that originates from the federal government.
The Obama administration says the 2010 budget plan released today is only a summary and that a more extensive, "fleshed-out" plan, will be announced in April.
Kyle Godfrey is an M.P.H. graduate student at Armstrong Atlantic State University in Savannah, GA. Originally from Atlanta, GA, he runs the blog
Yellow Limes.
Despite President Obama’s feigned concern about sky high federal spending, escalating budget deficits and mounting government debt, all three are expected to grow much worse under his new budget proposals.
Overall spending will be approaching a record $4 trillion in fiscal 2011, which begins this October, the deficits will still be in the trillion dollar range by the end of this decade and the government’s national debt will continue to climb exponentially as a result of persistent overspending.
“Last year’s budget was historically irresponsible and yet this year’s budget would spend $1.7 trillion more and run deficits $2 trillion greater over the same 10-year period,” Heritage Foundation’s chief budget analyst Brian Riedl told Human Events.
“It’s getting worse. By 2020 we’d still have trillion dollar deficits. It’s quite an amazing budget of fiscal irresponsibility. The national debt would double over the next decade,” Riedl said.
“If this budget is fully enacted, it would drive debt levels to a point where it would seriously risk a financial crisis,” he said. Top economists agree.
The most dramatic manifestation of the administration’s inability, or rather, unwillingness, to reduce spending to more responsible levels, can be seen in the budget’s growing gap between spending and tax revenues which this year will approach an unprecedented $1.6 trillion in red ink. This, despite the White House’s claim that the economy is coming out of its recession when tax revenues begin to rise.
The reason the deficit numbers are getting worse: Obama and the Democratic Congress are spending money faster than the economy and beleagured taxpayers can earn it.
The government’s unprecedented spending under Obama has become a major political issue in the midterm congressional elections that’s driven independents away from the Democrats in droves, plunging Obama’s job approval numbers into the 40s and threatening to flatten the Democrats’ majority in Congress.
But Obama’s budget shows little if any sign of wanting to scale back his big spending agenda, or his proposals to raise taxes on investors, banks, businesses, uninsured Americans who do not purchase health care plans, and upper income taxpayers.
“If you’re in business now and you’re trying to figure out what the future is, you’re looking at health care taxes, you’re looking at capital gains taxes going up, dividend taxes going up.So, is that a great environment in which to expand employment? I think the answer is no,” Senate Minority Leader Mitch McConnell said Sunday on CNN's State of the Union program.
Obama’s fiscal 2011 budget continues to call for passage of his costly government-run health care plan, his cap and trade, climate control tax bill, expanding the federal student loan and grant programs, among scores of other big spending initiatives.
His budget also includes $100 billion more for a second jobs stimulus bill in another vain attempt to bring down the nation’s 10 percent jobless rate after his first $800 billion stimulus bill failed to create the three to four million jobs he said it would last year.
But the prospects of a staggering $1.6 trillion deficit in this fiscal year hasn’t stopped Obama from proposing a lot of new spending in the past week or so: $4 billion for an “infrastructure innovation and finance fund,” $5 billion for an anti-nuclear proliferation program, an additional $3 billion for aid-to- education, and $25 billion more to bail out state governments who have spent themselves deeply into debt.
He is also seeking $250 million to purchase a prison facility in his home state of Illinois to hold terrorist prisoners now incarcerated at the military facility in GuantanamoBay.
The administration makes wildly exaggerated claims that it is moving the spending and deficit numbers in the right direction in the budget plan it is proposing the Congress this week, but short-term claims of lower, though still very sizeable, deficits were being criticized even by some Democraic supporters.
Boasting of a lower deficit by mid-decade that would still be 3.9 percent of the economy’s gross domestic product, presumably long after the U.S. recession ends (before rising again in 2015) amounted to “defining deficits down,” complained Isabel Sawhill, the noted government budget analyst at the Brookings Institution.
“In short, these proposals will still leave us with unsustainable deficits as far as the eye can see. It is depressing to discover that we can no longer even aspire to balance the budget once the recession is over,” the former assistant budget director in the Clinton administration wrote Friday in The Wall Street Journal.
A number of other economists who crunched the numbers in Obama’s budget Monday were also shocked by the smoke and mirrors accounting gimmicks used to show a lower $706 billion deficit by 2014 before it heads back into the trillion dollar range.
“To accomplish this feat, he proposes letting the Bush tax cuts expire and other spending cuts the Congress has rejected in the past,” said University of Maryland business economist Peter Morici.
“More extraordinary, though, the document assumes that real GDP grows at better than 4 percent a year over the four years from 2011 to 2014, and the economy does not encounter a serious recession. If your staff economist tells you that is realistic, fire him. Rosie Scenario wrote this budget,” Morici said in an analysis Monday.
“The United States is facing deficits greater than one trillion dollars for the foreseeable future,” requiring increased debts that run the risk of an international run on the dollar and uncontrolled inflation, he warned.
“A populist government, similar to those that drove Latin American republics into bankruptcy during t he 1970s is in charge,” Morici said.
Notably, none other than the Congressional Budget Office, whose director, Douglas Elmendorf, was appointed by Democratic leaders, is forecasting much lower economic growth numbers than the rosier expectations of the White House.
Testifying before the House Budget Committee last week, Elmendorf said CBO expected the economy to grow by an anemic 1.6 percent in this fiscal year, and warned that next year’s outlook isn’t going to be much better: 1.8 percent.
High unemployment around 10 percent this year and next will further depress the economy and thus revenue forecasts that impact heavily on the budget deficits, he told the panel.
To regain some control over the budget, Obama is counting heavily on his proposals to create a budget-cutting commission that would present Congress with a list of spending cuts and tax increases that it would vote up or down, and a spending freeze in 2011, after the midterm elections.
But the commission idea was rejected in the Senate and the freeze on discretionary spending which would barely make a dent in the deficit, faces a similar fate.
Obama’s freeze plan is “a proposal to raise federal spending 44.3 percent, as opposed to 45 percent” over this decade,” said Republican Rep. Jeb Hensarling of Texas.