AP’s Andrew Taylor hits the media cyberwaves with the news that today’s CBO analysis of Obama’s 2011 budget plans would generate deficits totalling $9.8 trillion over the next decade…. $1.2 trillion more than predicted. But just as Harry Reid sluffed off a job loss of 36K last month as “a big day in America” Taylor also attempts to soften the blow.
The agency says its future-year predictions of tax revenues are more pessimistic than the administration’s. That’s because CBO projects slightly slower economic growth than the White House.
The deficit picture has turned alarmingly worse since the recession that started at the end of 2007, never dipping below 4 percent of the size of the economy over the next decade. Economists say that deficits of that size are unsustainable and could put upward pressure on interest rates, crowd out private investment in the economy and ultimately erode the nation’s standard of living.
Ignoring the numbers, and keeping in the spirit of the “hope and change” mantra, Taylor razzle dazzles the reader by saying the budget avoided decisions on Medicare and Medicaid cuts that can’t keep up with the rising costs of providing medical services to the elderly and the poor. Of course, none of this is cured in O’healthcare, BTW…
Additionally Taylor expresses his skepticism that the GOP members of the “deficit commission” Obama created by Executive Order when a supermajority Congress rejected the same entity, would agree to going along with proposed tax increases.
Taylor is also quick to note the cost of extending the cost of the Bush tax cuts… $ 3 trillion over the decade… which Obama wishes to extend to what he defines as “the middle class”.
What seems to be missing in Taylor’s AP report is the increased spending by Congress and this administration…. What is it with the media and their bashing of tax cuts? Why do they insist it’s such a fiscal sin to allow Americans to keep their cash, while silently giving a nod of approval to out of control spending?
It’s a simple solution… keep the tax cuts, and cut Congress’ allowance, fer pity’s sake!
But back to the CBO, and the source of Taylor’s somewhat bizarre interpretation. CBO’s Elmendorf’s letter to Appropriations Committee Chair, Sen. Daniel Inouye has some truly harsh phrasing:
* If the President’s proposals were enacted, the federal government would record deficits of $1.5 trillion in 2010 and $1.3 trillion in 2011. Those deficits would amount to 10.3 percent and 8.9 percent of gross domestic product (GDP), respectively. By comparison, the deficit in 2009 totaled 9.9 percent of GDP.
* Measured relative to the size of the economy, the deficit under the President’s proposals would fall to about 4 percent of GDP by 2014 but would rise steadily thereafter. Compared with CBO’s baseline projections, deficits under the proposals would be about 2 percentage points of GDP higher in fiscal years 2011 and 2012, 1.3 percentage points greater in 2013, and above baseline levels by growing amounts thereafter. By 2020, the deficit would reach 5.6 percent of GDP, compared with 3.0 percent under CBO’s baseline projections.
* Under the President’s budget, debt held by the public would grow from $7.5 trillion (53 percent of GDP) at the end of 2009 to $20.3 trillion (90 percent of GDP) at the end of 2020. As a result, net interest would more than quadruple between 2010 and 2020 in nominal dollars (without an adjustment for inflation); it would expand from 1.4 percent of GDP in 2010 to 4.1 percent in 2020.
The fuzzy math problem? Revenues are down if Obama extends the tax cuts to those with incomes less than $200K for singles, or $250K for couples. The mandatory outlay is up $1.9 trillion over the decade, about 1/3rd of which stems from Obama’s proposed health care changes. The rest is in refundable tax credits and Pell Grants (education).
No doubt about it… Obama’s pipe dream visions of “remaking America” are more expensive than our wallets… and his campaign promises… can fulfill.
In Elmendorf’s letter:
If the President’s proposals would be enacted, the resulting $1.5 trillion deficit for 2010 would be $140 billion more than the shortfall that CBO projects under current law (see Table 1). Those policies would reduce revenues by nearly $60 billion and boost outlays by more than $80 billion relative to the current-law baseline.
In 2011, the $1.3 trillion deficit under the President’s budget would be $346 billion
more than the deficit that CBO projects in its March baseline. The cumulative deficit
over the 2011–2020 period would equal $9.8 trillion (5.2 percent of GDP), $3.8 trillion
more than the cumulative deficit projected in the baseline. Of that difference,
roughly $3.0 trillion stems directly from proposed changes in policy and another
$0.8 trillion results from additional interest on the public debt.
Additionally, Obama’s proposed changes to tax laws also decrease revenues by $1.4 trillion, as well as increasing spending.
What CBO does say is a real revenue getter … sans any real details and taking the admins legislative proposal on faith… is health *insurance* (not cost) reform. That would be the completely unpredictable, and non-existent at this writing, budget reconciliation bill of supposed health insurance (not costs) reform. Or what may be left of it after both CBO and the Senate Parliamentarians take an axe to non-budgetary meaures included.
The President’s budget includes a placeholder of $743 billion in related revenues between 2011 and 2020. Because the Administration did not provide the details of the underlying legislative proposal, for the purposes of this analysis CBO assumed that the policies would have the effect set forth in the budget.
Yet another revenue grabber is fees on financial institutions. The last proposal in the plus, as opposed to the spending column, is a revamping of the ARRA Build America Bonds program…. a subsidy to state and local governments at 35 percent of their interest costs on taxable government bonds issued to finance capital expenditures. The program is to be expanded, but the subsidy lowered to 28 per cent.
Spending? What this admin and Congress do best?
On the outlay side of the budget, the President’s policies would increase spending (relative to CBO’s baseline projections) by $81 billion in 2010 and $2.3 trillion between 2011 and 2020. Outlays would average 24.1 percent of GDP over the next 10 years— well above the 40-year average of 20.7 percent. The Administration’s proposals would boost mandatory outlays by $72 billion in 2010 and by $1.9 trillion from 2011 to 2020.
~~~The proposal effect with the largest effect on mandatory spending is the one to expand health insurance coverage and make other changes to the health care system. The President’s budget estimates that such legislation would increase mandatory spending by $6 billion in 2010 and $593 billion between 2011 and 2020—about $150 billion less than the added revenues assumed to result from such legislation. As in the case of revenues, that estimate of outlays is a placeholder calculated by the Administration; pending the development of detailed legislation, CBO has incorporated that placeholder in this analysis.
Again we play with figures, based on no real bill and no real legislation. But what we do know is even the optimistic figures provided are way out of the ballpark of reality.
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