The president's budget proposal looks familiar
02/15/16 Filed in: Spending
See reader comments posted at the end.
Last year’s budget proposal (for fiscal year 2016) had a picture of an antiquated highway bridge on the cover, which was meant as a reminder of the need to repair this country’s supposedly crumbling infrastructure. This year’s cover picture is a snow-covered mountain with rugged peaks and an indistinct blue foreground, in Denali National Park, which may be intended to convey an inspiring vision of the future. Budget of the United States Government, fiscal year 2017, Office of Management and Budget, 2/9/16 (download PDF).
Or does the mountain represent government excess of some sort, e.g., debt? Here’s why Republicans mocked Obama’s final budget proposal, Philip Wegmann, dailysignal.com, 2/9/16. Perhaps House Speaker Paul Ryan et al. were being unkind, but we offered a similar thought ourselves a while back. Tongue in cheek, SAFE newsletter, Fall 2014.
. . . why not build a new memorial on another mountain [versus Mount Rushmore] to honor presidents who contributed, by virtue of their staunch support for government spending programs, to the vast expansion of the national debt over the past 100+ years. The current president would surely fit in this category, along with Franklin Roosevelt and Lyndon Johnson. And there should probably be a Republican president on Mount Debtmore as well, perhaps George W. Bush.
Turning to substance, the current budget proposal resembles last year’s edition in several respects: red ink – partisan tone – big government premise. This marks it as a political statement, not a serious proposal, which does not augur well for progress on the fiscal problem before the elections.
I. RED INK - Here is how we characterized the budget numbers in last year’s BP. Reverse engineering the president’s budget, 2/9/15.
Basically, the plan is to hike taxes on the well to do and big business, fritter away the resulting revenue increases, and continue running annual deficits in the $0.5T+ range indefinitely. Not exactly what we were hoping to see.
Some tax cuts (extensions of a slew of expiring tax preferences) were made by the omnibus spending/tax bill in December; proposed tax increases and spending initiatives generally fell by the wayside. Many of the latter items are being proposed again, with the deficit outlook essentially unchanged. Consider the following budget adjustments (totals for 2017-2026), from Table S-2 (effect of budget proposals on projected deficits):
•Proposed tax changes would yield $2.4 trillion in additional revenue. Most of the tax increases would be imposed on upper bracket individuals and corporations, but all Americans would bear the burden of a $10.25 per barrel tax on oil and the increased tax on tobacco sales would be regressive. Labeling most of the increases as “tax reforms” does not make them more palatable.
•Net spending cuts of $1.3T are projected, which includes savings from reducing the provision for Overseas Contingency Operations ($636B), debt service reduction ($476B), and “immigration reform” ($170B). But for these debatable adjustments, net spending cuts would be zero.
•As a result of the foregoing, the projected 10-year deficit would be reduced from $9.8T (adjusted baseline level) to $6.1T. Starting at $616B in 2016, the yearly deficit would bottom out at $454B in 2018 and then begin rising again.
•Increases in gross federal debt would exceed projected deficits due to net increases in government loans and “other transactions affecting borrowing from the public,” resulting in an $8.0T debt increase (to $27.4T as of 9/30/26).
•A growing portion (from 69% in 2015 to 79% in 2026, Table S-5) of outlays take the form of “mandatory” expenditures or interest expense, which are not subject to annual budget scrutiny.
An apology for this dismal outlook might seem in order, but it is actually characterized as fiscally responsible. BP, page 13.
The Budget shows that investments in growth and opportunity are compatible with putting the Nation’s finances on a strong and sustainable path. The Budget ends sequestration and makes critical investments while still addressing long- term fiscal challenges. It keeps deficits below three percent of GDP while stabilizing debt and putting it on a declining path through 2025—key measures of fiscal progress.
Comment: The BP assumes a steady economic growth rate of 2+% and achievement of the Fed’s inflation rate target of about 2% per year. Unfavorable developments (another recession, an inflationary spike that would drive up government borrowing costs, or a new war) could easily result in far higher deficits and/or a financial crisis.
II. PARTISAN TONE – Without belaboring the point, here are a few examples of apparent disdain for the role of the Republican-controlled Congress in the budget process.
The administration’s submission is titled “the Budget of the United States Government;” nowhere is it identified as a budget proposal requiring approval of the legislative branch. At several points in the president’s message (pp. 8-13), the BP is referred to as “my budget.” And throughout the report, there are statements about the BP doing this or changing that, as though it had equal standing with enacted legislation.
The BP lauds purported accomplishments during the president’s years in office, such as: making the US economy “an engine of job growth and economic expansion” (p. 15) - reining in “healthcare cost growth” by enacting the Affordable Care Act (p. 18) - nurturing the American spirit of innovation (p.22) - reducing the “number of people in households that faced problems paying medical bills . . . by 12 million from 2011 to 2015” (p. 67) - reducing “the rate of violent crime to levels not seen in decades” (p. 74) - reducing “overall unauthorized Southwest border crossings [to] near the lowest levels in decades” (p. 77) - US leadership of “the global coalition that will destroy ISIL [ISIS]” (p. 82) - “improving Government efficiency [so as] to maximize the value of Federal spending” (p. 117). In our view, much of this purported progress is bogus.
When results can be cited, the president is given lots of credit. Thus, he “worked with congressional leaders from both parties” to enact the Bipartisan Budget Act of 2015. BP, p. 19. Or “under legislation signed into law by President Obama in December, $3.5 billion in New Markets Tax Credits will be available annually through 2019.” BP, p. 61.
When administration policies were delayed or blocked, political opponents are blamed for the outcome. Notably, “congressional Republicans sought to use the Nation’s full faith and credit as a bargaining chip” in 2011, and again in 2013, thereby “driving down consumer confidence and driving up uncertainty. The Federal Government shutdown in October 2013 created further uncertainty and reduced growth in the fourth quarter of 2013 by 0.3 percentage points.” After that, fortunately, “policymakers started to move away from manufactured crises and austerity budgeting, helping to lay the groundwork for job market gains and stronger growth.” BP, p. 19.
Several court challenges are in process against administration programs touted in the BP. Such challenges are downplayed or ignored instead of conceding that opponents might possibly have a point.
Re a judicial stay of executive branch changes in immigration policy, it is said that “the Administration will continue fighting to implement” said changes and that “the Supreme Court of the United Sates has accepted DOJ’s petition to review” the stay. BP, pp. 75-76.
As for the EPA’s Clean Power Plan, which would force reductions in carbon emissions from existing power plants with major implications for this industry and the overall US economy, pending legal challenges are ignored and critics are effectively dismissed as misguided. BP, p. 24.
As we have made significant progress addressing climate change, the economy has continued to grow, evidence against the tired claims that we must choose between these critically important priorities. Economic output has reached all-time highs while carbon pollution has dropped to its lowest level in nearly two decades.
Ironically, the Supreme Court (in a 5-4 decision) granted a stay of the CPP (the US Court of Appeals, DC Circuit had previously declined to do so) on the same day that the BP was submitted to Congress. Although the White House and EPA are attempting to portray this development as a temporary setback, legal challenges to the CPP could well outlast the current administration. White House defiant after Supreme Court halt of power plan, John Siciliano, Washington Examiner, 2/9/16.
When it comes to what role the Supreme Court will play in these cases, of course, the outlook was clouded by the sudden death of Justice Antonin Scalia – one of the staunchest conservative justices. Battle lines are already being drawn as to whether Scalia’s replacement should be chosen by the current president or by whomever is elected to succeed him.
III. BIG GOVERNMENT PREMISE – A bias in favor of growing the government was suggested in our review of the previous BP. Given the irresponsible fiscal path that was (and still is) being proposed, we reasoned, there was only one way in which the president and his supporters could have managed to get so many things wrong. A recurring theme in the president’s budget, 2/16/15.
Our theory: they are not focused on ensuring the nation’s safety and economic wellbeing, but rather on expanding the size and power of government. And to the extent this goal cannot be supported with sound reasoning, the BP analysis falls back on evasion, misdirection and intellectual intimidation. Read on to see how this was done.
Little appears to have changed this year. Consider this telling quote of the president (date and venue not indicated), which appears at the start of the section about “The Government of the Future.” BP, p. 95.
In this democracy, we the people recognize that this government belongs to us, and it’s up to each of us and every one of us to make it work better... We all have a stake in government success—because the government is us.
Fine, but if the federal government truly belongs to Americans, why does it so often do things we do not want it to do? And why does the federal government assume more and more responsibilities that were previously left to state and local governments or the private sector, while our individual freedom and independence atrophy?
Certainly, no sense of restraint is exhibited in the BP, nor are any areas identified in which the federal government should butt out and let Americans make their own decisions. The delusion behind Obama’s budget, Kim Holmes, dailysignal.com, 2/10/16.
We live in an age that suffers from delusions of governmental grandeur. It is often assumed that there is no problem that government cannot solve, provided there is enough will and money to tackle it. That is, after all, one of the central premises of Obama’s presidency. *** [From] the bottomless well of government compassion *** hundreds of thousands of government programs spring forth not only to ease every person’s discomfort, but to eliminate all the nasty inequalities of the human condition. From bullying to income inequality to rectifying the temperature of the Earth’s atmosphere—you name it—there is no condition government can’t at least “address,” which of course is not the same thing as solving it. [The word “address” is used frequently in the BP, appearing on 60+ pages thereof. There are only 4 or 5 references to solving problems.]
The scope of contemplated government action is evident from the table of contents (pp. 5-7), essentially running the gamut of human activity. Here’s a condensed recap:
•INNOVATION TO FORGE A BETTER FUTURE: 21st century clean transportation plan; doubling clean energy R&D; investment in water technology; tackling climate risk; preserving and protecting public lands and oceans; leading international efforts to cut carbon pollution and enhance climate change resilience; revitalizing American manufacturing; advancing biomedical research; investing in civil space activities; addressing challenges in agriculture.
•OPPORTUNITY FOR ALL: Improving access to high-quality, affordable early education; putting students on a path to college and careers; promoting college affordability and completion; training Americans for the jobs of the future; helping workers balance work and family; helping all workers save for retirement; helping workers who lose their jobs and reducing job loss; addressing wage stagnation and helping low-wage workers; closing tax loopholes for the wealthy, imposing a fee on large financial firms, and making sure everyone pays their fair share; fixing America’s broken business tax system [by net tax increases!]; partnering with communities to expand opportunity; [addressing] housing and homelessness; strengthening efforts to help poor families succeed; implementing the ACA and improving healthcare in America; strengthening Medicare, Medicaid and CHIP; transforming the nation’s healthcare delivery system; investing in public health and safety and the healthcare workforce; addressing the high cost of drugs.
•NATIONAL SECURITY AND GLOBAL LEADERSHIP: Destroying ISIL; combating global terrorism; securing the digital economy for all Americans; strengthening federal cybersecurity; securing the digital ecosystem; supporting the transition in Afghanistan; countering Russian aggression and supporting European allies; supporting the Central American regional strategy; advancing the rebalance to Asia and the Pacific; growing partnerships in Africa; building the [military] force of the future; maintaining technological superiority; strengthening space security; making the military more effective and efficient through defense reforms; mobilizing the private sector to advance sustainable development; addressing humanitarian needs; advancing global health; supporting Let Girls Learn; building strong democratic institutions; improving veteran access to quality care; speeding the processing of disability compensation claims and appeals.
•A GOVERNMENT OF THE FUTURE: Delivering smarter IT; strengthening federal cybersecurity; delivering world-class customer service; reshaping the way government engages with citizens and communities; expanding shared services to increase quality and savings; buying as one through category management; shrinking federal real property footprint; benchmarking agencies; reforming federal background investigations; modernizing infrastructure permitting; increasing federal spending transparency; opening government-funded data and research to the public to spur innovation, entrepreneurship, and job growth; opening data to spark innovation; fueling the economy by bridging the barriers from lab-to-market; unblocking the full potential of today’s federal workforce and rebuilding the workforce we need for tomorrow; setting goals and tracking performance; using evidence and evaluation to drive innovation and outcomes; reorganizing or consolidating federal programs to reduce duplication, and identifying cost savings.
There is very little discussion of the achievability or relative importance of these objectives. All of the issues enumerated are seemingly of high priority, and all of them must be addressed. Twice as much is said (240 words) about sage grouse protection (p. 33), for example, as about the US strategy for responsibly winding down the 15 years and counting war in Afghanistan (p. 86).
Does it really make sense for the federal government to tackle all of these issues on the taxpayer’s dime, ensuring an eventual fiscal crisis, or should the government be considerably more selective? The question, we think, basically answers itself.
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Congressional Republicans have made clear that the BP will be given short thrift, e.g., House and Senate budget committees don’t intend to schedule a hearing for OMB Director Shaun Donovan to pitch the president’s proposals. Ryan: Obama budget a “manual for growing the government,” Joel Gehrke, Washington Examiner, 2/9/16.
Some observers see this reaction as disrespectful and defensive, a sign that the Republicans have no constructive ideas to offer. Republican budget tantrum, New York Times, 2/9/16.
The best way for Republicans to dispel such criticisms would be to offer a better budget plan of their own, but at last report they were having trouble agreeing on what such a plan would look like. If developments warrant, we’ll report on the GOP position next week.
The budget problem is so discouraging, I don't see how you do it. Thanks. – SAFE member (DE)
The left loves debt because it allows them to spend and spend on social programs without raising taxes, and if the system crashes they just blame conservatives. And lower bracket voters will always vote for tax increases, thinking that someone else will have to pay. – SAFE director
Good job. - SAFE director