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Posted by on Feb 23, 2009 in Economy, Politics | 1 comment

Cutting Budget Deficit A Shaky Promise

President Barack Obama on Monday took initial steps to school Congress and the American public on his first budget which includes the goal of cutting the nation’s budget deficit in half by the end of his first term.

As Yogi Berra is said to have uttered, it’s deja vu all over again. Former President George W. Bush promised the same thing with abysmal results. Is Obama falling into the same trap?

The only broad outline Obama touched in reaching his goal is reducing government waste. Deja vu. He said that during his presidential campaign. That job, he said, is being delegated to Vice President Biden and each member of his cabinet.

Deja vu. Former President Bill Clinton assigned his vice president to “re-invent” government by streamlining pork and fat from the budget. A high tech economy worked for a brief period before that bubble imploded.

Obama said that the bank-rescue plan and the broader economic stimulus program are necessary not merely to jolt the economy but because the country has “long-term challenges — health care, energy, education and others — that we can no longer afford to ignore.”

“But I want to be very clear,” he said at a White House economic conference involving legislators, business and labor leaders and others. “We cannot and will not sustain deficits like these without end. Contrary to the prevailing wisdom in Washington these past few years, we cannot simply spend as we please and defer the consequences to the next budget, the next administration or the next generation.”

The deficit that Obama inherited is estimated at $1.3 trillion or more for 2009. More specific clues to the president’s thinking may be discernible later this week, when he proposes his first budget, for the federal fiscal year that will begin on Oct. 1. “We’ll start by being honest with ourselves about the magnitude of our deficits,” he said, chiding former President George W. Bush, unmistakably if not by name, for “a series of accounting tricks.”

“We’re not going to be able to fall back into the same old habits and make the same inexcusable mistakes,” he said. One such bad habit has been “the casual dishonesty of hiding irresponsible spending,” Obama said, citing the Bush administration’s technique of “budgeting zero dollars for the Iraq war — zero — for future years, even when we knew the war would continue.”

Sooner or later, the president said, tough choices will have to be faced in dealing with the spiraling cost of health care, “the single most pressing fiscal challenge we face, by far,” and to assure the long-term solvency of Social Security.

The deficit is the year-by-year gap between what the federal government spends and the revenue it takes in. So even if the annual deficits are cut, the total national debt will continue to grow.

It now stands at just over $10.8 trillion, according to the Department of the Treasury. Of that amount, about $6.5 trillion is owed to individuals, corporations and governments and other lenders both domestic and foreign, while $4.3 trillion is owed for Social Security benefits, military and civil service pensions and other government programs.

President Clinton, never bashful to offer his advice to anyone, has suggested Obama become more positive that the economy will rebound.

But, putting a happy face on slashing the deficit defies logic at this point in our history. It doesn’t seem credible. It is a promise leading to failure.

Cross posted onThe Remmers Report

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