The 2012 fiscal year budget that President Obama released Monday offers a deficit reduced by a third from 2011 and incremental cuts in non-defense, non-security spending — that is to say, just 12 percent of the budget — that more than offset the spending he proposes to improve America's competitive posture in a global economy. That, by itself, would begin to shift the thrust of the budget from the stimulus spending of the past two years to the deficit reduction track that virtually every segment of Washington, including the Obama administration, agrees is necessary to avert a fiscal train wreck in the next decade.
Yet his proposed budget leaves virtually untouched the lion's share of federal spending — the 88 percent that currently goes to defense, national security and entitlements (Social Security, Medicare and Medicaid). This is the spending that must be addressed if the nation is to significantly cut deficit spending and rising federal debt over the next decade and restore historically sustainable levels of debt (i.e., 3 percent of GDP) and spending.
Given that surface equation, it's fair to assume that Republicans, some Democrats and a host of budget-watch groups and congenital critics will consider the new Obama budget dead on arrival. That may be, but the budget, at least for the next year, is a fair starting point in a still-fragile recovery with slow job growth.
Republicans don't offer anything better. Indeed their cuts would boost unemployment and instability and undermine the recovery. The draconian slashing they now propose would come mainly in the same 12 percent of budget (non-security, non-defense, non-entitlement spending), but their selection of the sorts of programs they would target for cutting is needlessly cruel to the poorest Americans and to state and federal employees, and far less constructive.
They would flagrantly cut food aid to pregnant women and their children, and family planning, for example. Obama, by contrast, would cut less severely and more humanely, choosing targets (i.e., first-time homebuyer tax credits) that don't hurt children, and tax loopholes that favor the well-heeled (i.e., targeted loopholes for fossil fuel industries and corporations with insider influence).
He has, moreover, implemented five-year spending freezes in most discretionary and non-security programs and significant pay freezes for federal employees, and offered a permanent fix for the alternative minimum tax to block its effect on the middle class.
The knock on the Obama budget is that it gives lip service to the need to bring down entitlement and defense spending as a share of spending, but doesn't do any heavy lifting in those areas. But the same can be said of his Republican critics.
Few lawmakers and administration officials want to make the first move on proposing meaningful revisions in third-rail entitlements, whether it's setting back the threshold age for receiving Social Security and Medicare entitlements, or means-testing them to restrict benefits for the affluent, or raising entitlement taxes, however marginally.
If those sorts of cuts come — and they must, given Republican insistence since Ronald Reagan's era of masking their deficit spending by claiming the Social Security and Medicare surpluses — then they must come on the recommendation of a bipartisan panel whose recommendations for achieving long-term financial stability will be subject to an up-or-down congressional vote without amendments.
As it is, the new budget proposal by the Obama administration would total $3.7 trillion for 2012, with a deficit of $1.1 trillion, down half-a-trillion from the 2011 budget. That deficit included extensions of the Bush-era tax cuts, even for the ultra-wealthy top 2 percent demanded by Republicans, along with the second year of the Obama administration's middle-class tax-cuts and stimulus spending to prop up state governments and job growth.
If projections hold true, 2012 would be the last year of deficits over $1 trillion — most of which went for TARP and stimulus spending to avert a total financial meltdown after the financial implosion of 2008 plunged the nation into the deepest recession since the Great Depression. Under current projections, the annual deficit would be down to just over 3 percent of GDP, to $607 billion, by 2015.