President Barack Obama presents a budget this week that he claims achieves $4 trillion in deficit reduction over ten years but prioritizes job creation over spending cuts. After four years of multitrillion dollar deficits, the president would reduce the federal shortfall to $900 billion in 2013.
“There’s pretty broad agreement that the time for austerity is not today,” the president’s chief of staff told NBC News’ Meet the Press on Sunday. “The president takes seriously long-term deficit reduction,” he added but warned that if the country “put in austerity measures right now, it would take the economy in a wrong way.”
Opposition Republicans argue that the lack of fiscal consolidation undermines confidence in the market and therefore prevents a recovery from taking root. They also lament the fact that the Senate, which is controlled by members of the president’s party, has failed to enact a proper budget throughout his term, forcing lawmakers to finance the federal government on the basis of emergency legislation.
Last year, the president’s budget proposal was defeated overwhelmingly in the Senate with even nearly all Democrats voting against it because it had virtually no spending cuts embedded in it.
House Republicans put out their own proposal which reduced federal spending by up to $6 trillion over ten years, $4.4 trillion more in cuts compared to the president’s budget. Savings would have been achieved in part by privatizing health support for seniors, a measure which Democrats hysterically rejected.
The president’s budget for the next fiscal year reduces projected budget increases more rapidly than he was previously prepared to do but still foresees $47 trillion in spending over the next decade while citing $1 trillion in “savings” from ending the wars in Afghanistan and Iraq — money that was never expected to be spent in the first place. It also shuns entitlement reforms although ballooning Medicaid, Medicare and Social security costs are largely to blame for long-term deficit projections.
Medicare, which pays health care for seniors, and Social Security, America’s public pension program, will deplete their trust funds in 2024 and 2036 respectively.
Medicaid spending, which subsidizes health care for the poor, has exploded over the past two decades. The program spent $74 billion in 1990 but more than $427 billion last year. Because Medicaid is funded through states governments, its rising costs increasingly crowding out investment in other areas, including education and infrastructure. Yet under the president’s health reform law, some twenty million additional Americans would be eligible for coverage, forcing states to make painful budget decisions.
The same mechanism is at work at the federal level where Democrats’ aim to protect entitlements necessitates deep cuts across departments.
The president’s latest budget would reduce spending for environmental protection, the Food and Drug Administration, the space program and defense. Education, energy and infrastructure, by contrast, would receive more funding as part of the president’s attempt to create an “economy that is built to last” and boost employment.
Congress is unlikely to enact the budget in full because the conservative majority in the House of Representatives is opposed to tax increases while Democrats in the Senate, sixteen of whom are up for reelection in November, don’t want to bear responsibility for reductions.