Obama takes aim at the deficit

What happened

Faced with a staggering $1.5 trillion shortfall in this year’s budget, President Barack Obama vowed this week to cut the annual federal deficit in half in four years, while ushering in a new era of fiscal responsibility. Obama’s budget plan for fiscal 2009 projects that the deficit will be progressively reduced to $533 billion by withdrawing U.S. troops from Iraq in 2010, raising taxes on people earning more than $250,000 a year, and slashing waste and inefficiency from federal programs. Obama inherited a $1.3 trillion deficit from President Bush, and his stimulus bill and bailouts will this year add $200 billion in red ink. “We can’t generate sustained growth without getting our deficits under control,” Obama told Congress this week. “Everyone in this chamber—Democrats and Republicans—will have to sacrifice some worthy priorities for which there are no dollars.”

Expenditures likely to be cut, the White House said, are education programs that have proved to be ineffective, Cold War–era weapons systems, some privately managed Medicare plans, and large subsidies to agribusiness. Tax cuts instituted by Bush will remain, except on the top 2 percent of all taxpayers, whose tax rate would rise from 35 percent to 39.6 percent in 2011. Republicans attacked the tax hikes as foolish, especially during a recession. “The last thing we should do is raise taxes on families and small-business owners,” said Sen. Pat Roberts of Kansas.

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What the editorials said

Perhaps the best thing about Obama’s budget plan is its honesty, said The Philadelphia Inquirer. For years, the Bush administration used “accounting gimmicks” to hide the costs of the war in Iraq, along with other large expenditures. Bush’s last budget, for example, estimated the deficit at $407 billion, but he then asked for $257 billion more to fund the wars and provide unemployment benefits and federal disaster aid. Obama, at last, will “stop the charade.”

We’ve all heard these kinds of promises before, said TheEconomist

.com. Every president has vowed to go through the budget line by line and eliminate waste, but Obama “will find it just as hard as his predecessors to kill programs with powerful congressional backers.” Meanwhile, he’s proposing to provide near-universal health-care coverage, permanent tax cuts for workers, and investments in alternative energy and education. How does he achieve all this and halve the deficit?

What the columnists said

“Behold the ambition of President Obama,” said Rich Lowry in the New York Post. Rather than simply declare the return of big government, “he’s after a grander prize.” Obama wants to make government activism across all sectors of life synonymous not with liberalism but with “common sense and pragmatism.” To achieve that, he’s willing to pay lip service to fiscal responsibility and deficit reduction.

If Obama is serious about reducing federal spending, said Peter Grier in The Christian Science Monitor, he’ll have to take on the holy trio of entitlement programs—Social Security, Medicaid, and Medicare. Projections show costs for those programs going off the charts in coming years. Social Security can be fixed fairly easily, by adjusting the retirement age and rate at which benefits increase, but limiting Medicaid and Medicare spending will require true reform of the entire health-care system—“an explosive political issue.”

Promising to cut deficits may be “smart politics right now,” said Robert Reich in Salon.com, but it won’t be possible if the economic slump gets worse—and it likely will. In future years, we’ll need another round or two of stimulus to pump more cash into the economy, making reduced deficits impossible. In November 2012, Republicans will say Obama reneged on his deficit-reduction promise, and he’ll bitterly regret ever having made it.

What’s next

Riding high in public-opinion polls, Obama has political capital and is eager to use it. Early in a term, said Robert Greenstein of the liberal Center on Budget and Policy Priorities, “the president has a window to make bigger changes than he may be able to get later in his term.” But by promising both expensive new initiatives and a conservative fiscal regime, Obama appears to be mounting a political high wire. For the moment, at least, the White House seems to think the president is working with a safety net. As one senior aide told The Wall Street Journal, “People are rooting for him.”