An early sign that congressional Democrats and Republicans were not serious about attacking the federal budget deficit came last fall when Congress passed up hundreds of billions in revenues by extending tax cuts for the wealthiest 2 percent of taxpayers.
Another sign was the deafening silence from Congress that greeted the report of the president’s commission on deficit reduction, a compilation of practical, if politically painful, steps to getting the federal budget back into something like balance.
NOW COMES President Barack Obama’s $3.73 trillion budget for the federal fiscal year that begins next Oct. 1. The projections in that budget should act something like a scared-straight program on Congress.
The Obama administration projects a deficit this year of $1.6 trillion, the largest dollar amount ever and at nearly 11 percent of GDP, the highest mark since World War II. Obama’s budget projects the deficit dropping to $1.1 trillion next year and then, under an extremely optimistic set of assumptions, falling to just over $600 billion from 2013 until 2018, when it would start to rise again because of increasing demands on Social Security and Medicare.
Obama achieves this temporary reprieve from red ink by counting on $1.6 trillion in new revenues from tax increases over the next decade. He also would save $400 billion over five years by a five-year freeze on domestic programs and a five-year $78 billion cut in Pentagon spending.
The Republicans weren’t having any of it. Said Senate GOP leader Mitch McConnell, “Americans don’t want a spending freeze at unsustainable levels. They want cuts, dramatic cuts.”
ACTUALLY, THEY DON’T. When confronted with specific cuts, they find they actually rather like government spending. A recent Pew poll confronted people with a choice of cuts or increases in 13 categories of federal spending; in all but two of them they said they wanted an increase in spending.
As happens in Washington, the two sides are arguing beside the point. The part of the budget they are intent on cutting, non-defense discretionary spending that includes most domestic programs, is only just over 12 percent of federal spending. It will be maximum pain for minimal gain.
The real drivers of federal spending — Social Security and Medicare at more than 40 percent and defense at more than 23 percent — remain largely off limits, one reason the deficit commission’s recommendations were so studiously ignored.
Congress must shortly confront two critical budget matters. By March 4, it must vote to extend a resolution funding continued federal operations for the year or risk a government shutdown and later this spring to increase the government’s borrowing authority or risk the U.S. defaulting on its debts.
THE HOPE IS that these issues will force the two parties to come to some kind of grand bargain on tax and entitlement reform to finally solve the problem of recurring deficits. But like some of the president’s economic assumptions, that may be overly optimistic.