The deficit rag, oh yes the deficit rag! Those budget gaps can be a 12-digit drag! I’m telling you, that’s the deficit, they really made a mess of it, that’s the deficit ra-a-ag!*
When I was in the seventh grade, my algebra teacher, Col. Maus, told our class that it was impossible for a person to count to a million. So of course, I had to prove him wrong. I made it my personal mission to spend every waking second with pen and notebook in hand, scribbling my way to a million. After a week of practically nonstop counting, here’s what I learned: a million is an awfully freaking big number (and Col. Maus learned that it was a dangerous thing to tell me that I couldn’t do something).
A million is still a big number. But in the last year or so, our collective sense of what’s “big” has become warped. We’ve become quite conditioned to hearing about millions and billions as if they’re nothing. Only they’re very much something.
This is why the staggering amount of our federal deficit is finally getting some attention. We were deficit free in 2001. But in 2011, the deficit is expected to climb as high as $1.65 trillion (yes, trillion). That’s more money than we have circulating today. Yikes.
To see how much that it is in action, you can watch the national deficit and the debt multiply by the millisecond here. It’s pretty cool to watch but be careful, it will hurt your eyes. Trust me.
It’s no surprise, then, what with all of these numbers flying, that the budget for the upcoming year is going to focus on reducing the deficit. Almost everyone in DC can agree that it needs to happen: they just can’t agree on how to do it.
The first shot in the deficit wars was fired by President Obama who introduced his budget to the public this week. The budget includes cuts intended to slash the deficit $1.1 trillion over the next decade. Granted, we grew it that much in a decade but like a credit card, it’s much easier to rack up charges than pay them off.
Here’s how President Obama hopes to whittle down the deficit: cuts in spending and (gasp) raising taxes.
First, the cuts. Cuts constitute about two-thirds of the planned savings. That sounds like a lot. When you take a closer look, though, there’s nothing that stands out as particularly harsh or shocking. It’s all fairly expected, as are the reactions. Some cuts in social programming. Some cuts in military spending – trending pretty close to what Gates recommended – all while boosting military pay and VA care. “Discretionary spending” (not related to security – an important distinction these days) is capped for five years, including a two year freeze on federal civilian pay. All in all, I didn’t see anything that jumped out at me in terms of creating drama – exactly the kind of budget you’d expect from a President who will clearly be seeking a second term. He’s trying to come across as fiscally a bit conservative while still creating warm fuzzies when it comes to spending, for example, by increasing the budget for education and upping medical benefits for vets.
The response is just as predictable: Dems say it’s too much, the GOP says it’s not enough. The Democrats (most notably the Black Caucus and reps from the northeast) have lashed out at cuts in social programs such as those that subsidize heating for low income families. The Republicans have scoffed at the cuts as not enough and are taking aim at existing programs they consider superfluous like public television and rail service.
You’d think that the spending cuts would be where battle lines would be drawn. But that’s not where you’re going to see the most chatter… The remaining one-third in savings for the deficit? President Obama proposes that comes from tax increases.
I know what you’re thinking: didn’t we just have this discussion? Of course we did. If you recall, I pointed out then that the extensions weren’t permanent and most of them were set to expire (again) in just two years. And what’s happening in two years? More elections, including the next presidential election. Not at all coincidental.
So here we are again. The proposed tax increases are the same ones that Congress argued over in 2010. The federal estate and gift tax is front and center: that massive increase in personal exemptions together with a historically low tax rate are at risk to disappear. On the income tax side, President Obama opposes making the tax cuts permanent for families making more than $250,000 per year, while the GOP will hope to make cuts permanent for all taxpayers. The President’s budget also includes the reinstatement of “Pease” limitations which reduced itemized deductions by 3% at the top of the brackets; it’s not, as I noted before, not much different from what happened during the Reagan years. In other words, it’s déja vu all over again.
Those tax breaks for oil and gas companies? President Obama wants to see them go. Congress won’t. They didn’t disappear in a heavily Democratic Congress and they won’t go this time. But the President threw it in the budget anyway. It’s all part of that “adult conversation” he wants Congress to have.
What didn’t make it? Most of the revenue generators that were suggested by the committee whose job it was to come up with ways to reduce the deficit. Despite the headline baiting, there’s no plan to eliminate the home mortgage interest deduction (only the Pease cap, as mentioned earlier). There’s no plan to raise the age for Social Security. No increase in the federal gas tax. In other words: no surprises. It’s a very measured, considered and quite frankly, rather conservative (in the dictionary version of the word, not the current political framing) budget.
But don’t just take my word for it: you can read the 216 page budget yourself (downloads as a pdf).
Your thoughts on the proposals?
(*Kudos if you can name the source of the quote…)
just stupid – they really need to get serious in Washington – But of course there will be just a bunch of fingerpointing and crap.
The quote: A singer on the Simpsons. Don’t think it was a character.
The President’s budget is very political and designed to do nothing but kick the can down the road. Our country needs real leaders ready to tackle the deficit problem and national debt head on. Instead the President wastes our time and his with his chidlish approach to solve nothing.
Some great commentary. Excellent job!
The only large elephant in the room (the silent one) is inflation which will come to kill us all. I agree on “Reagan years all over again”. Lets see how the FED is going to tackle this. We as a nation have to generate a lot of revenue to get rid of this debt(doable) but everyone has to be on board(private business, public companies, congress, president and the average Joe). Very painful but doable. If anyone can its the US. Let’s see if we can actually accomplish this. Only time will tell.
There is one major difference between the Reagan years and now: the President and the military want to cut the military’s funding, and the House of Reps does not!