Meanwhile, Obama and the Democrats went on a spending binge in the hopes that the more that they spent of federal money, the better the chances that the economy would recover. As Stephen Moore writes,
The White House had predicted that the $814 billion stimulus would yield not just an unemployment rate of less than 8% but also a gross domestic product by the end of 2010 of $15,200 billion. Instead, as Republican Rep. Darrell Issa of California points out, "the latest figures, released this month, fell short by some $400 billion." Mr. Issa calls this Mr. Obama's "Keynesian misadventure."And this week the President delivered his budget to the Hill. And he took a pass on doing anything to address the problem of increasing federal debt or doing anything about the entitlements. Dana Milbank describes how Obama just pretended that these problems don't exist.
Ironically, the White House is now warning that proposed GOP budget cuts could harm the economy by pulling back on the spending that never created the promised jobs expansion in the first place.
Obama's budget proposal is a remarkably weak and timid document. He proposes to cut only $1.1 trillion from federal deficits over the next decade - a pittance when you consider that the deficit this year alone is in the neighborhood of $1.5 trillion. The president makes no serious attempt at cutting entitlement programs that threaten to drive the government into insolvency.So why not do anything about our "fiscal nightmare?" Politics, pure politics.
Contrast that with the proposal by the heads of Obama's fiscal commission, who outlined a way to cut $4 trillion from deficits through 2020, rein in entitlement spending, overhaul the tax code and reduce the government's debt load. As commission co-chair Erskine Bowles, former chief of staff in Bill Clinton's White House, told The Post's Lori Montgomery, Obama's budget is "nowhere near where they will have to go to resolve our fiscal nightmare."
The best explanation the White House has come up with, uttered privately, is that Obama didn't want to step out too far with politically unpopular cuts before congressional Republicans propose their own. And it's true that Republicans haven't yet committed to including entitlement reforms in their own 2012 budget. But even that doesn't justify Obama's feeble budget document, which squanders the little momentum built up by the fiscal commission.This is not what leadership looks like. This is what political opportunism looks like. WSJ explains the cynicism in Obama's budget proposal.
How unserious is this budget? Although the White House trumpets $2.18 trillion in deficit reduction over the next decade, those savings are so far off in the magical "out years" that you can barely see them from here. More than 95% of the savings would happen after Mr. Obama's first term in the White House is over, and almost two-thirds of the promised deficit reduction would arrive after 2016. Pretending to cut deficits by pushing all real cuts into the future is Budget Flimflam 101.Ah yes, change no one can believe in - simply keeping on doing the same thing, only more of it.
From hard experience, we know that what matters are the cuts and reforms a White House is willing to make now. The Obama budget doesn't cut a penny from the deficit in the last seven months of fiscal 2011. Over the next three years—through 2013—the spending reductions in this budget add up to a paltry $20 billion net, out of a projected $3.5 trillion deficit. That's a 0.57% reduction in red ink and less than what the feds spend every two days.
As for Medicare, Medicaid, Social Security and other entitlements, which account for roughly 60% of federal expenditures, the proposed savings are close to zero. The President would allow these programs to continue on automatic pilot, meaning they nearly double to $2.7 trillion in 2021 from $1.4 trillion in 2010.
Every serious analyst agrees that the time to fix these retirement programs is before 75 million graying baby boomers start collecting the benefits and voting as beneficiaries rather than as net payers. Meanwhile, Medicaid spending would grow by 115% over the next decade thanks to that renowned deficit reducer, ObamaCare.
The proudest White House boast is that its budget would cap domestic discretionary spending at current levels for five years. These are programs ranging from NASA to the Washington Metro to school lunch programs to wind turbine grants, which overall and including stimulus expanded by more than 80% in Mr. Obama's first two years. This spending freeze would cut these programs from 2011-2013 by a grand total of $14 billion.
But the Obama fantasy is still alive. His budget assumes annual economic growth of 4% from 2012 to 2014. No one else is predicting that sort of economic growth. And the very policies that Obama has endorsed will guarantee that we will not be seeing that level of growth any time soon.
We'd love to see that happen, because deficit reduction depends above all on economic growth to generate more tax revenue. But those growth targets would be undermined by the sizable tax hikes in Mr. Obama's budget. After 2013 the capital gains and dividend tax rates would rise to 20% from 15%, and the highest income tax rate, paid mostly by noncorporate businesses, would rise to 39.6% from 35%. The Administration foresees a $700 billion windfall, but history shows that higher rates are unlikely to yield anywhere near that amount.What Obama lacks in leadership, he makes up for with political cynicism. He puts forth a unicorns and rainbow budget and then waits to slam Republicans when they put forth an adult budget. Perhaps that opportunistic political maneuvering will work once again. And we'll dig ourselves a deeper fiscal hole. But hey, Democrats will get some good campaign ads and slogans. And isn't that all that matters?
The budget also proposes roughly $300 billion in new taxes on energy companies, multinationals and banks. So much for the new detente between the White House and business. When including all the tax increases, there is more than $1 of new taxes for every $1 of future spending cuts.