President Obama’s new budget, unprecedented in size, scope and borrowed, money takes the federal government’s finances into uncharted realms. Someone who never ran an enterprise larger than his Senate office staff is asking Congress and the American people to put a lot of trust in his financial savvy.
He proposes spending $3.5 trillion in fiscal 2010, which begins next Oct. 1. (As huge as that amount is, it’s not quite as large as the nearly $4 trillion we’re going to spend in the current fiscal year thanks to the stimulus and bailout money.) The complexity will put a huge strain on Congress, which only now is finishing up budget matters it was supposed to have completed last September.
This year’s federal budget deficit is already headed toward regions unknown — $1.75 trillion, nearly four times last year’s deficit, and previous record holder, of $455 billion. The budget foresees deficits around $1 trillion next fiscal year and the year after which Obama promises to cut the red ink in half to $581 billion in 2012 and $533 billion in 2013. President Bush too promised to halve the deficit before his term was up. Maybe Obama will have better luck.
To get to that point, Obama is counting on a 10-year plan of to trim $2 trillion in spending by eliminating waste, a hardy budget perennial that never seems to materialize, and cutting programs like farm subsidies. But many of these programs have powerful constituencies. Early in his presidency, Bush had a fling at cutting farm subsidies but quickly backed off. Again, maybe Obama will have better luck.
Most dramatically, his budget includes a $634 billion "down payment" to make good on his pledge to extend health care coverage to the 47 million who don’t have it. Half of that will come from raising taxes on Americans jointly earning over $250,000 by letting a Bush tax cut expire and by trimming their deductions for charitable giving and mortgage interest. The other half is to come from curtailing Medicare and Medicaid payments, which will entail taking on yet another powerful lobby, doctors, hospitals and drug companies.
Obama also plans to raise hundreds of billion dollars by selling off pollution permits in a cap-and-trade system to control greenhouse emissions. The money from that would finance the extension of his "Making Work Pay" tax credit of $400 for individuals and $800 for couples and, in a recognition that cap-and-trade would raise price energy prices, finance assistance for low-income Americans facing higher oil and electric bills.
And all of this is contained in just a 134-page outline. The full package is not scheduled to arrive on Capitol Hill until mid-April. But Congress shouldn’t wait. The lawmakers have a lot of work ahead of them.