The Obama administration released its 2013 fiscal year budget proposal today, and the numbers are disheartening for anyone expecting the President to offer a serious proposal to put the nation on a path to fiscal stability.
James Pethokoukis of the American Enterprise Institute sums up the proposed budget over at AEI’s blog:
All in all, Obama has proposed some $1.6 trillion in new taxes over ten years, taking tax revenue as a share of GDP to 20.1 percent in 2022 vs. a historical average of 18 percent. And despite all those new taxes, Obama’s plan would still add $6.7 trillion in new debt and make no progress in lowering the nation’s total debt levels as a share of output. The debt-to-GDP ratio is predicted to be 74.2 percent this year and 76.5 percent in 2022.
At the same time, federal spending would never fall below 22 percent of GDP. Indeed, Obama — if he serves two terms — would be the first U.S. president in history to spend 22.0 percent or more of GDP for eight straight years (and then beyond). And keep in mind that these debt and spending numbers claim about $850 billion in savings from unwinding the wars in Iraq and Afghanistan, spending about a quarter of those phony “savings” on highway funding.
And also don’t forget about the rosy growth assumptions of 3.4 percent growth in 2015, 4.1 percent in 2016, 4.1 percent in 2017, and 3.9 percent in 2018. The U.S. economy has only seen a run like that three times in the past four decades. And the Obama Boom is supposed to happen amid rising tax rates, interest rates, and debt? Good luck, Mr. President.
Higher taxes, more spending, more debt, and no long-term entitlement reform plan. Hmm, this isn’t a rosy scenario at all. It’s actually a pretty bleak one.
The most terrifying aspects of this budget proposal (at least to this millennial) is the lack of entitlement reform ideas, coupled with the continuing rapid growth in the national debt during the period preceding 2020. There is little margin for error, as spending in the big three entitlement programs will explode in the following decades as large numbers of Baby Boomers experience declining health. According to multiple reports from the Heritage foundation, entitlement spending will consume all tax revenue if rates are left at historic averages. In the next decade alone, federal healthcare spending is projected to double. If the United States is to have an economy with reasonably low tax rates and continue funding, other federal functions such as defense, Medicare, Medicaid, and Social Security will have to be reformed. The President’s proposals make no effort to address this crucial question.
Republican Rep. Paul Ryan, Chairman of the House Budget Committee, is expected to release the GOP counter-proposal sometime this week. Although neither plan is expected to pass a bitterly divided Congress, the contrasting budgets will reveal the parties’ respective commitments to keeping the nation’s finances in order.