President Obama’s proposed budget for Fiscal 2012 is oddly complacent for a situation that requires anything but complacency. It would, at best, temporarily stabilize federal deficits and debt (as a percentage of GDP) later in the decade at roughly twice the average over the past 50 years.
This would still leave an underlying structural deficit that would push debt to unsustainable heights in the years beyond the budget’s 10-year outlook. As the budget itself acknowledges, “beyond 2021, the fiscal position deteriorates again mainly because of the aging of the population and the high continuing costs of the Government’s health programs. The publicly-held debt rises unsustainably relative to GDP.”
Yet now that a bipartisan majority of his fiscal commission has issued sweeping proposals to deal with these long-foreseen challenges, Obama has hit the pause button: Not rejecting the recommendations, but not giving them the powerful public boost they need to eventually be enacted.
For the most part, the budget is a spruced-up rerun of previous proposals. In total, the things the President is actually proposing to do would have only a marginal effect on the bottom line. They would cut projected spending by $677 billion, raise projected revenues by $273 billion and lower interest costs by $161 billion for a combined deficit reduction of $1.1 trillion over 10 years. This is dwarfed by a cumulative post-policy 10-year deficit of $7.2 trillion.
Unfortunately, there are no significant cost-saving proposals for Social Security, Medicare and Medicaid. Nor is there a proposal for comprehensive tax reform.
As the President has suggested, this may represent a political calculation that behind-the-scenes discussions will be more productive right now than a high-profile campaign for specific solutions. But the go-slow approach fails to set an action agenda or engage the public.