President Obama’s proposed 2011 budget of $3.8 trillion points in the right direction in most areas. It would increase spending on job creation, lending to small businesses and work-related needs, and on education and clean energy — vital keys to counter the recession and build our future prosperity. It also would hold the line on military spending and let the Bush tax cuts expire, as scheduled, for the richest Americans and most coddled corporations.
Still, it’s hard not to blink at the stunning deficit of $1.6 trillion that coming fiscal year’s budget projects. Though that would come down to $1.3 trillion in the following year’s budget, the higher deficit represents an increase of $120 billion over the current fiscal-year’s deficit.
Some of that deficit owes to $260 billion in needed new spending for job-credit and work-related investments. Yet the total budget deficit amounts to around 11 percent of the nation’s gross domestic product. That’s nearly four times the 3 percent level of deficit spending that is generally considered sustainable.
The president made the point himself that this sort of deficit spending, and the lower deficits now in sight through 2020, cannot continue. Indeed, he called on Congress to help him deal with the long acknowledged fiscal, demographic and health care trends that have become the major drivers of government spending. That would put the budget on track to get under 5 percent of GDP by 2013.
The bulk of the new fiscal year’s budget is essentially locked-in by the larger trends in defense, Social Security and Medicare/Medicaid costs, which collectively account for almost two-thirds of federal spending, or $2.4 trillion of the 2011 budget.