President Barack Obama unveiled his budget proposals on Monday which include cuts to domestic spending programs and would achieve some $1.1 trillion in deficit reduction over the next ten years.
His budget falls short of balancing the books even in the long run however. This year alone, the federal government is expected to spend $1.6 trillion it doesn’t have on a budget of $3.7 trillion.
The president’s $100 billion in yearly cuts affect mainly welfare provisions, including financial assistance for the working poor, heating benefits and subsidies for community organizing activities in poor neighborhoods. He also proposes a 5 percent cut in defense spending, the elimination of tax exemptions for oil and natural gas producers and additional subsidies for high-speed rail and electric cars.
Two weeks ago, the Congressional Budget Office forecast trillion dollar deficits for years to come. Under current projections, the national debt will have grown to equal 100 percent of GDP by 2021 compared to 40 percent of GDP when Obama took office.
The president recognized that the country is on an unsustainable fiscal path in his State of the Union address but other than banning congressional earmarks and eliminating tax loopholes, he had few solutions to end high deficit spending. Instead, the president called for investment in education and innovation to enhance American competitiveness.
He also proposed a five year freeze in discretionary domestic spending but this excludes entitlements and defense — the largest expenditures of government.
The National Commission on Fiscal Responsibility and Reform which was formed by President Obama in January of the last year proposed deep budget cuts three months ago, including a freeze in government salaries, reductions in farm subsidies and an elimination of earmarks. Entitlements were not exempt from the commission’s recommendations although proposed reforms fell short of actually balancing the books on these programs.
Raising the retirement age and asking doctors if not insurers to share in the burden of mounting health-care costs, as the commission prescribed, will not make entitlements affordable unless their scope is reduced or taxes are raised. Democrats are adamantly opposed to entitlement reform however and the president has pledged to preserve Social Security “forever.” Republicans by contrast are likely to block any tax hike.
Previewing the president’s budget this Sunday, House speaker John Boehner and chairman of the House budget committee Paul Ryan both called for deeper spending cuts. As Boehner put it, “We’re broke. When are we going to get serious about cutting spending?” His members want multibillion dollar cuts to the current budget before the president’s new one is even implemented.