President Obama’s proposed federal budget is far too large.
In public statements it has become obligatory to make a smoke cloud about fiscal responsibility, and Obama has done that. “Let’s invest in our people without leaving them a mountain of debt,” he said.
The mountain is already there. As a percentage of the gross domestic product, the mountain of debt is now the highest since the Truman administration. Then it was falling. Now it is rising.
Of Obama’s suggested budget of $3.7 trillion, $1.6 trillion is deficit ― 43 cents of every dollar of spending.
After the panic of September 2008, a budget like that was excusable. But the country is now in the third year of economic despond, and debating the budget for the fourth. Borrowing 43 cents of every dollar begins to look like a bad habit.
The defenders of deficits promote them as economic adrenaline. If it were true, the medicine should have worked by now. In any case, it is not the sort of medicine a country can keep taking.
Politicians of both parties will agree to this, but they do little. President Obama has suggested cuts in future spending that add up to $1.1 trillion over 10 years. But the problem is $1.6 trillion in the first year. The president is proposing to solve one-fifteenth of his problem.
The Republicans in the House propose larger cuts in domestic spending, and some are worth doing. But they leave untouched the military, and particularly the war in Afghanistan. Both parties have left farm subsidies untouched.
Neither party has dared touch Social Security, Medicare or Medicaid. With the deficit at $1.6 trillion, they have to do it. With Social Security, for example, they need to gently scale back the formula for future benefit increases and raise the ceiling on taxable wages.
At some point, Congress should look at tax revenue, which has fallen as a percentage of gross domestic product. Federal spending, however, is at a higher level of GDP than it has been for a very long time. Spending cuts should come first.
A trillion and a half dollars is a big, big problem. A plan to solve one-fifteenth of it wins no prizes.
