2012 Budget: “Debt on Arrival”


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Alabama Senator Jeff Sessions described President Obama’s proposed 2012 budget as “debt on arrival,” a pithy assessment of a plan that seems to have virtually no chance of being passed. The $3.73 trillion spending plan exceeds the Republican’s budget target of $2.9 trillion by more than $800 billion. Recall that, even with majorities in both houses of Congress last year, the president had a tough time getting his 2011 spending bill passed. With the GOP in control of the House and with national anxiety over unsustainable national debt rising, it’s hard to see how this plan is going to go anywhere.

The Washington Post’s Ed O’Keefe broke down some of the details. Though the plan is supposed to ultimately cut the deficit by $1.1 trillion over the next ten years, that figure falls far short of the $4 trillion in deficit reduction that the president’s own debt commission said was necessary to avoid fiscal catastrophe over the course of the decade. Additionally, most of the $1.1 trillion in deficit reduction comes on the back of $1.6 trillion in new revenue, most of that coming in as the result of higher taxes. The wealthy, businesses, the oil and gas industry, financial institutions and hedge funds would all be subject to higher taxes if this budget were to be passed.

Perhaps most importantly, the president’s proposal does nothing to address the two-headed 800 pound gorilla lurking in the room: Medicare and Social Security, the massive entitlement programs that account for the bulk of federal spending. Most everyone acknowledges that the federal budget cannot be brought under control until someone is willing to step on those two third rails of American politics. The president’s proposed budget makes it clear that he wants and expects Republicans to take the first step in that direction, a political consideration that may prove important when it’s time to play the blame game after cuts are made.

Will the GOP actually have the courage to make a stab at entitlement reform in a counter-proposal? House Majority Leader Eric Cantor says they will. In an interview posted at his website, Cantor responded to a question about whether or not the GOP’s proposed budget would include entitlement reforms this way:

Your question about the budget itself and the entitlement inclusion, yes, we will include entitlement reform provisions in our budget, again, unlike the President, and unlike Harry Reid who doesn’t even admit there needs to be any reform of Social Security.

We are going to lead. That is why I said the President missed an opportunity to lead today, to try and address the biggest fiscal challenge we have. And so we are going to lead and include that in our budget.

Some observers think that there is a reason that the president’s proposed budget seems to be so out of step with the mood of the nation: it’s not so much an actual proposal as it is a negotiating ploy. As Chris Stirewalt observed at Fox:

By entering his opening bid on spending so high, Obama is hoping to produce a final result that preserves some of his agenda. Yes, the administration knows that money for high-speed trains and solar panels will likely get shaved off, but as in any negotiation, the administration has come to the table with some padding built in.

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  • Chezwick_Mac

    Dick Morris occasionally gets something right…and he did on Hannity last night, saying that if Obama is re-elected in 2012, the prospect of spiraling debt to stratospheric levels means that any hope of ever getting control of the problem goes out the window. Just servicing the debt interest will soon be gobbling up ever larger portions of the federal budget, diverting money that could have been used for paying off the principle. If interest rates rise, which is likely given profligate spending and a weak dollar, the debt interest will grow that much higher.

    In short, the 2012 elections are as critical as any in our history. The very survival of the Republic hangs in the balance. If only our liberal friends and family members had a clue.

    • Jim C.

      I thought the "survival of the Republic" hinged on the 2004 elections. Then the 2008 elections. This must be the really, REALLY important one.

  • Rifleman

    Gee, maybe he should try those "negotiating ploys" on our enemies some time.

  • riverfred

    Obozo want to bankrupt the U.S. blame it on corporations and remake the U.S. into a socialist country that will cause ever lasting high unemployment and inflation. Obozo studied the "Alinsky Model."

  • USMCSniper

    The U.S. Treasury website today reported that as of last Friday, the last day of 2010, the National Debt stood at $14,025,215,218,708.52. It took just 7 months for the National Debt to increase from $13 trillion on June 1, 2010 to $14 trillion on Dec. 31. It also means the debt is fast approaching the statutory ceiling $14.294 trillion set by Congress and signed into law by President Obama last February. The federal government would have to stop borrowing and might even default on its obligations if Congress fails to increase the Debt Ceiling before the limit is reached. And if they do the Nationa Debt will reach $15,000,000,000,000 by January 2012,

  • Patrick Henry

    A Republican senator, whose name escapes me, recently proposed the Full Faith and Credit Act, which would require the Treasury to service the debt (rolling over bonds that have reached their maturity) before any other bills are paid, which accounts for about 10% of current revenues. If the Democrats are truthful about fearing a default, they would pass this bill. But if they did, they would lose powerful leverage over weak-kneed Republicans in the budget negotiations.

    Even if Congress and the president "cut" spending by $1T, $2T, or even $3 trillion over the next 10 years, that's not enough. We need the cut $2 trillion each year! If investors stop buying bonds, we either default or print money, both of which will cause hyperinflation. If you think retirees will react badly to slashing their COLAs or paying higher deductables, wait until the middle class can't afford to buy enough food and gas when prices skyrocket. I fear this will get ugly before we can realign our budget to match reality.

  • joe

    You can’t cut deficits by taxing everyone to death. When you tax job creation and try to take away what people are leaving their children, then you are taxing the wrong people. What you need to do is cut spending on entitlements. We can’t continue to spend money we don’t have.

  • thomas paine

    if Obama is re-elected in 2012, the prospect of spiraling debt to stratospheric levels means that any hope of ever getting control of the problem goes out the window

    i used to be concerned with spiralling debt in the 1980s, but republicans told me that i just didn't understand economics, and that reagan had proved that "deficits don't matter"

    the reagan era deficits were so bad that the percentage of the federal budget dedicated to debt service went up to 10% for a few years around 1990-1992

    tell me – when did republicans ever do anything serious about the deficit? when has america ever paid down any of the debt? how much of the federal budget is not medicare, social security, or defense? what federal government benefit that you – personally – recieve are you willing to give up? your medicare? your social security? your veterans benefits? federally maintained interstate highways?

  • thomas paine

    reading over these comments, i don't think you guys even know the difference between the debt and the deficit

    • Jim C.

      Look at Texas. Rick Perry, attempting to get his name out there for presidential consideration, was making the rounds of all the shows several months ago, bragging about Texas's success vs. the terrible economic position of other states. Well, it just came out long time Republican-controlled Texas has a $25-27 BILLION deficit–and they're still cutting taxes (after having grabbing 12 billion up in federal stimulus while authoring a book about federal overreach).

      I mean, cognitive dissonance is a heck of a convenient condition. All you have to do is say the right things. Is Perry angling for President because he doesn't want to be around when the bill comes due?

  • USMCSniper

    What we should be doing is: Monetarism today is mainly associated with the work of Milton Friedman, who was among the generation of economists to accept Keynesian economics and then criticize it on its own terms. Monetarism is an economic theory which focuses on the macroeconomic effects of the supply of money and central banking. Formulated by Milton Friedman, it argues that excessive expansion of the money supply is inherently inflationary, and that monetary authorities should focus solely on maintaining price stability. This theory draws its roots from two almost diametrically opposed ideas: the hard money policies that dominated monetary thinking in the late 19th century, and the monetary theories of John Maynard Keynes, who, working in the inter-war period during the failure to restore the gold standard, proposed a demand-driven model for money which was the foundation of macroeconomics. Friedman focused on price stability, which is the equilibrium between supply and demand for money. IN PRACTICE THIS LEADS TO LOW INFLATION AND LIMITS THE GOVERNMENT INTERVENTION TO PRINTING WORTHLESS MONEY,

  • thomas paine

    "supply side economics", still promoted by the republican party, is merely a variation on Keynesianism. There is a good reason that it is "taught in every school across the globe". However, I detect nothing in your comments that would give me confidence that you understand what it is.

    I invite you to tell me about a government existing on the face of the earth that does not practice some form of demand stimulation when economic activity is flagging. as a matter of fact, I invite you to describe a government that practices economic policies that you fully approve of – please describe why, and how they are successful

    • USMCSniper

      That is precisely the problem Mr Paine because it fails every time! Keynesian economics had its chance, it was tried, it failed, and all the nations in massive debt are everywhere. As the saying goes ”The definiton of insanity is doing the same thing over and over again and expecting different results.” Ironically, the one economic system that has not been tried in over a century as an answer to economic woes is laissez-faire capitalism, that is economics without government interventionn into the market other than contract enforcement and the protection of individual rights. For a brief, shining moment in the history of mankind, human ability was unleashed upon the world and it seemed that mankind was finally on the road to the glorious destiny we had always dreamed of. But that potential triumph was halted by intellectuals of every continent embracing Keynesian economic philosophies and socialist political philosophies because they imagined it was their manifest destiny to rule. Well, those failed policies have run their course as indicated by the massive unemployment and debt. And I, for one, believe it is time to give capitalism and freedom another chance.

      • thomas paine

        the one economic system that has not been tried in over a century as an answer to economic woes is laissez-faire capitalism, that is economics without government interventionn into the market other than contract enforcement and the protection of individual rights.

        i don't think you know much about the period of time when this was tried. why do you think it was abandoned? what can you tell me about the history of the time? (not much, apparantly, since you think "individual rights" were protected)

        in short, you are very fond of glittering generalities, and short on history and details

        • USMCSniper

          I should know better than to debate with the intellectually incompetent who seem to be either unwilling or unable to abstract ideas into their logical, and observed in this case, results in reality. I shall simply refer you to this page that is glaring evidence of the failure of Keynesian economics that even a non-colleague like you can grasp, unless of course you have a capacity for evasion that approaches infinite elasticity.
          http://www.usdebtclock.org/

          • thomas paine

            aha!

            whenever right wingers are unable to answer an argument, they start acting like 11 year olds calling names

            either defend your points or don't, rick, but please act like an adult

          • thomas paine

            aha!

            whenever right wingers are unable to answer an argument, they start acting like 11 year olds calling names

            either defend your points or don't, rick, but please act like an adult

          • thomas paine

            aha!

            whenever right wingers are unable to answer an argument, they start acting like 11 year olds calling names

            either defend your points or don't, rick, but please act like an adult

          • USMCSniper

            You really did ride that little yellow bus to school when you were young didn't you?

          • thomas paine

            "little yellow school bus"?

            excuse me, i'm not interested in conducting this discussion on a 7th grade level

            here, if you are really serious about learning something and conducting a serious debate, try reading these articles
            http://en.wikipedia.org/wiki/Keynesian_economics
            http://en.wikipedia.org/wiki/Paradox_of_thrift

            they should help to clarify your misconceptions about the nature of keynesianism and the failure of the classical model

            as you can see, i remain optimistic that you can recover from your fit of pique and resume an adult conversation

            have fun!

          • thomas paine

            i guess when USMCSniper can't defend his arguments

            i refuse to believe that anybody that insubstantial could ever have been in the marines

          • thomas paine

            i guess when USMCSniper can't defend his arguments

            i refuse to believe that anybody that insubstantial could ever have been in the marines

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