President Obama released his proposed budget for Fiscal 2016 Monday, setting the stage for a vigorous debate on the right mix of spending and tax policies needed to put the nation’s finances on a sustainable path.
The $4 trillion budget relies heavily on higher revenues to pay for new spending, predictably drawing applause from congressional Democrats and criticism from Republicans.
Concord Coalition Executive Director Robert L. Bixby said that even if Obama’s budget were fully enacted, however, it “would do little more than hold the debt near its currently high level.” That’s because it pays for new initiatives with policies that could be used instead for future deficit reduction.
Under the President’s budget, federal spending would rise from 21.3 percent of GDP in 2016 to 22.2 percent in 2025. Revenues would rise from 18.7 percent of GDP in 2016 to 19.7 percent in 2025. Debt held by the public would decline slightly, dropping from 75 percent of GDP in 2016 to 73.3 percent in 2025.
The President suggested moving away from the current spending caps on defense and domestic appropriations.
“These caps were never intended to go into effect and their wisdom is increasingly suspect,” Bixby said. “However, they were put in place as a substitute for a more rational plan to reduce projected deficits through mandatory spending cuts and tax reform. The President and lawmakers should only move away from these caps if they can agree on a way to make up for the new spending elsewhere.”
The President’s budget is largely a marker, meant to contrast with what congressional Republicans propose. But there may be some areas, such as Medicare payment reforms, where significant agreements are possible.