President Obama released his Executive Budget for 2012 earlier this week and it immediately received a loud Bronx cheer from some Republicans and many political pundits. The reason they shout: it doesn’t go far enough in slashing federal spending and reducing the federal deficit, now estimated at $1.6 trillion. Obama’s $3.7 trillion budget and fiscal plan would knock roughly $1.1 billion of accumulated debt over the next decade.
The budget doesn’t touch the big three entitlement programs of Medicare, Medicaid, or Social Security, which have increased dramatically over the years. Federal expenditures on Medicare and Medicaid programs are projected to grow to about 10 percent of GDP by 2035 from the current level of about 6 percent.
The report issued last December by the National Commission on Fiscal Responsibility and Reform has identified these entitlement programs as one of its three legs of fiscal reform in solving the deficit – the other two being cuts in discretionary spending and tax reform. Any serious discussion of comprehensive fiscal reform must include an overhaul of these programs. Doing so, however, will require a serious political-gut-check .
A recent poll by the Pew Research Center shows that American attitudes on government spending are changing – we’re becoming more open to the prospect of cutting federal spending on some of our favorite programs. Still, only 12 percent of Americans want Medicare spending cut, for example.
Despite the hue and cry from some quarters, I don’t think the Obama budget is such a bad opening proposal. And, a proposal is precisely what it is since Congress will have a say in what eventually gets adopted.
No, it doesn’t completely close the massive fiscal hole created by funding economic stimulus programs, increasing spending on wars, and lowering taxes over the past decade. In fact, it makes rather miniscule progress in this area. Until we get a handle on spiraling costs of entitlement programs, it’s unlikely we can make significant progress.
But, the Obama budget does take a swipe, albeit a small one, at cutting discretionary funding and at increasing federal revenue. Even former U.S. Senator Alan Simpson (R-WY), who co-chaired the president’s Commission on Fiscal Reform, recognized in an interview with NPR that the budget includes “. . . a lot of our stuff. . .stuff that the American people don’t see.”
It also recognizes the importance of investing in our over-extended and worn-out infrastructure by increasing spending on roads and bridges. It pumps new funding into development of high-speed rail and mass transit, and increases spending on clean energy and water projects – all areas in which Arizona could stand to benefit. The budget reserves $37.5 million for expansion of light rail in Mesa.
Some other highlights of the Obama budget include:
- $27 billion in loan guarantees for small businesses
- Assistance for innovative businesses to obtain early-stage financing and funding for technical assistance and grants for underserved markets
and regional economic strategies
- $10 billion for interoperable public safety broadband network
- $5.4 billion for energy R&D
- Increased investment in renewable energy by 70 percent
- Additional loan guarantees for nuclear power and innovative energy efficiency and renewable energy projects
- Provides $30 billion over 6 years for a National Infrastructure Bank to invest in transportation projects
Investments like these, together with a reshuffling of budget priorities (some 200 existing programs will be reduced or eliminated) are aimed at improving America’s global competitiveness and positioning the country for sustainable long-term economic growth.
Let’s face it, the federal government and the State of Arizona face very similar budgetary dilemmas. People (i.e. voters) like it when government spends money on stuff from which they derive benefit. They like taxes low and they don’t like the idea of government running up the credit card. Incurring more debt simply means that future generations must pay it off – which means higher taxes. At the state government level, The Pew Research poll shows that the majority of people want neither cuts to state funded programs nor higher taxes to close budget shortfalls.
So, it remains a problem not easily solved and requires our policymakers and elected officials to make difficult choices. The president’s commission on fiscal reform put it this way:
“Our challenge is clear and inescapable. . . Our businesses will not be able to grow and create jobs, and our workers will not be able to compete successfully . . .without a plan to get this crushing debt burden off our backs. The problem is real. The solution will be painful. There is no easy way out. Everything must be on the table.”
And, while Mr. Obama hasn’t put everything on the table in his 2012 budget, at least it’s a spoonful of progress into the tea cup.
