Obama’s budget balancing act
President Obama’s budget for the next fiscal year arrives at an unusually difficult time for Washington. The economy grew with surprising vigor in the last three months of 2009, but much of that growth came from companies cutting their inventories less deeply than before. Meanwhile, more than 10% of the workforce remains unemployed, and that percentage is expected to remain stubbornly high all year. Tight credit markets make it hard for businesses to get loans, but Washington is borrowing at a record-setting clip.
Obama’s $3.8-trillion budget tries to strike a balance between the short-term struggles and the long-term fiscal problems. His blueprint for the fiscal year starting Oct. 1 incorporates $100 billion worth of targeted tax cuts and spending aimed at creating jobs, as well as billions in additional funding for education, research programs and clean energy. It also calls for a three-year cap on some discretionary spending and a series of tax increases on the wealthy and selected businesses. The combination, officials say, would help Obama keep his pledge to cut the annual budget deficit he inherited in January 2009 (about $1.3 trillion, or 9.2% of the economy) in half by the end of his term.
It’s worth remembering that Congress, not the president, decides how much to tax and spend, and lawmakers typically follow their own muse on disputed budget issues. That’s why the details of Obama’s plan aren’t as important as the path he has laid out for Congress as the economy moves from sluggish recovery back to health. And on that issue, we wish the president had confronted the long-term problems with the same ambition he has shown for some of his other priorities.
The slow pace of the recovery has become Washington’s top priority, as it should be. Nevertheless, Obama did not show Congress how to achieve even the modest amounts of deficit reduction he’s called for after the economy rebounds. His proposed spending cap and tax hikes would fall well short, leaving the government with huge deficits that start rising again in 2015.
Obama has called for a bipartisan commission to recommend steps to close the gap between his tax and spending plans and his fiscal goals. We don’t object to convening a commission, but it won’t have much chance of succeeding unless the president prepares the public for what lies ahead. Unlike the current tide of red ink, which resulted largely from wars and a deep recession, the deficits later this decade will be driven by rising healthcare costs and a growing number of retirees. It’s easy to see why the administration, which has been lambasted for the Medicare cuts it proposed as part of healthcare reform, wouldn’t want to fight more such battles before it had to. But the least the president can do is lay out options that illustrate the kind of tough choices we face. Otherwise, the commission’s recommendations won’t be worth the paper they’ll be printed on.
