Obama budget predicts massive long-term deficits

What happened

President Obama’s $3.8 trillion budget blueprint met immediate resistance from congressional Republicans this week, with each party seeking to avoid blame for deep, structural deficits extending into the next decade. After a $1.6 trillion deficit in 2010, Obama’s 2011 budget, which would begin Oct. 1, produces a $1.27 trillion deficit. Deficits are projected to decline in subsequent years before rising again sharply, driven by escalating Medicaid, Medicare, and Social Security costs. Obama’s budget allows Bush tax cuts to expire for individuals earning more than $200,000 and families earning more than $250,000, raising the top marginal tax rate to 39.6 percent and reducing itemized deductions for top earners. It calls for $39 billion in tax hikes on the oil, gas, and coal industries over 10 years. Republican Senate Leader Mitch McConnell denounced the plan as “more spending, more taxes, and more debt.”

While keeping overall discretionary spending static for three years, Obama proposes a $100 billion jobs package, including tax cuts for small businesses and clean-energy investment, and increased aid for public schools and college Pell Grants. He’s called for $20 billion in total spending cuts, killing the Pentagon’s C-17 cargo plane and reducing subsidies to wealthy farmers. The president’s blueprint now goes to Congress, where it’s sure to be altered. “I welcome any idea, from Democrats and Republicans,” Obama said. “What I reject is the same old grandstanding when the cameras are on and the same irresponsible budget policies when the cameras are off.”

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What the editorials said

Obama would have Americans believe this massive deficit was forced on him, said The Wall Street Journal. But it wasn’t. Federal spending will hit $3.834 trillion in 2011, partly because of such decisions as instituting a $307 billion increase in Pell Grants over 10 years—transforming college into “a universal entitlement” like Social Security. To fund programs such as this, Obama is also hiking capital-gains taxes from 15 percent to 20 percent, said the New York Post. And if you think all those new taxes will wipe out the federal deficit, “dream on.”

It’s past time for wealthy individuals and corporations “to carry more of the burden,” said The New York Times. Meantime, the economic recovery is “too fragile to make deep cuts in government spending.” In the short term, we need deficit spending “to boost growth and put Americans back to work.” In the long term, we’ll have to raise taxes and reform the health-care system to bring down soaring costs.

What the columnists said

This is “the most extravagant budget in U.S. history,” said Rich Lowry in the New York Post. Yet Obama, “unflappable and glib,” talks like he’s a model of fiscal restraint. Sure, he inherited “an ongoing fiscal meltdown” from the Bush administration. “But that doesn’t justify making it worse.”

You wouldn’t know it from the right-wing rhetoric, but Obama’s budget slightly reduces the debt from the disastrous budget left to him by Bush, said Jonathan Chait in The New Republic Online. Conservatives, though, would rather the public believe Obama caused these deficits, which he did not. It was Bush who took office with the U.S. running annual budget surpluses, and it was Bush who cut taxes for the rich, started a ruinous war, launched unfunded programs, ran the economy into the ground, and left us looking at red ink for years to come.

The options before us aren’t pleasant, said Matthew Yglesias in TheDailyBeast.com. To tame this monster, the government must either raise taxes for the middle class, make major cuts in future Medicare benefits, or significantly scale back the military—pulling all our troops out of Japan, for example. Unfortunately, “there’s no political support for any of them.” When Democrats tried to cut Medicare costs in their health plan, Republicans screamed about “death panels.” So what’s the Republican plan for eliminating $1.3 trillion in red ink? said Steve Chapman in the Chicago Tribune. “Let the bidding begin.”