Projected deficit threatens Obama's plans Auditors say budget would produce $9.3 trillion in red ink over next decade The Associated Press updated 1:52 p.m. PT, Fri., March. 20, 2009 WASHINGTON - President Barack Obama's budget would produce $9.3 trillion in deficits over the next decade, an eye-popping figure that threatens his ambitious goals to overhaul health care and explore new energy sources, congressional auditors said. The new Congressional Budget Office figures that emerged Friday offered a far more dire outlook for Obama's budget than the new administration predicted just last month — a deficit $2.3 trillion worse. It's a prospect even the president's own budget director called unsustainable. In his White House run, Obama assailed the economic policies of his predecessor, President George W. Bush. But the dismal deficit figures, if they prove to be accurate, would amount to more than four times the deficits of Bush's presidency and raise the prospect that Obama and his Democratic allies controlling Congress would have to consider raising taxes after the recession ends. By the auditors' calculation, Obama's budget would generate deficits averaging almost $1 trillion a year of red ink over 2010-2019. Worst of all, the budget office says the deficit under Obama's policies would never go below 4 percent of the size of the economy, figures that economists agree are unsustainable. By the end of the decade, the deficit would exceed 5 percent of gross domestic product, a dangerously high level. White House budget chief Peter Orszag said that CBO's long-range economic projections are more pessimistic than those of the White House, private economists and the Federal Reserve, and that he remained confident that Obama's budget, if enacted, would produce smaller deficits. Even so, Orszag acknowledged that if the CBO projections prove accurate, Obama's budget would produce deficits that could not be sustained. "Deficits in the, let's say, 5 percent of GDP range would lead to rising debt-to-GDP ratios that would ultimately not be sustainable," Orszag told reporters. Deficits so big put upward pressure on interest rates as the government offers more attractive interest rates to attract borrowers. "I think deficits of 5 percent (of GDP) are unsupportable," said economist Mark Zandi, chief economist at Moody's Economy.com. "It will lead to higher interest rates to the point where it will force policymakers to make changes." Opposition Republicans were quick to respond. 'Wake-up' call "This report should serve as the wake-up call this administration needs," said House Minority Leader John Boehner. "We simply cannot continue to mortgage our children and grandchildren's future to pay for bigger and more costly government." But Obama insisted on Friday that his agenda is still on track. "What we will not cut are investments that will lead to real growth and prosperity over the long term," Obama said. "That's why our budget makes a historic commitment to comprehensive health care reform. That's why it enhances America's competitiveness by reducing our dependence on foreign oil and building a clean energy economy." Obama's $3.6 trillion budget for the 2010 fiscal year beginning Oct. 1 contains ambitious programs to overhaul the U.S. health care system and initiate new "cap-and-trade" rules to combat global warming. Both initiatives involve raising federal revenues sharply higher, but those dollars wouldn't be used to defray the burgeoning deficit and would instead help pay for Obama's health plan and implement Obama's $400 tax credit for most workers and $800 for couples. Obama's budget promises to cut the deficit to $533 billion in five years. The budget office says the red ink for that year will total $672 billion. The worsening economy is responsible for the even deeper fiscal mess inherited by Obama. As an illustration, the budget office says the deficit for the current budget year, which began Oct. 1, will top $1.8 trillion, $93 billion more than foreseen by the White House. That would equal 13 percent of GDP, a level not seen since World War II. The 2009 deficit, fueled by the $700 billion Wall Street bailout and diving tax revenues stemming from the worsening recession, is four times the previous $459 billion record set just last year. The CBO's estimate for 2010 is worse as well, with a deficit of almost $1.4 trillion expected under administration policies, about $200 billion more than predicted by Obama. Long-term deficit predictions have proven notoriously fickle — George W. Bush inherited flawed projections of a 10-year, $5.6 trillion surplus and instead produced record deficits — and if the economy outperforms CBO's expectations, the deficits could prove significantly smaller. Republicans say Obama's budget plan taxes, spends and borrows too much, and they've been sharply critical of his $787 billion economic stimulus measure and a just-passed $410 billion omnibus spending bill that awarded big increases to domestic agency budgets. The administration says it inherited deficits totaling $9 trillion over the next decade and that its budget plan cuts $2 trillion from those deficits. But most of those spending reductions come from reducing costs for the war in Iraq. Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. URL: http://www.msnbc.msn.com/id/29791927/
One of the great goals of Republican rule over the last 40 years has been to hamstring any future Democratic administration with massive amounts of debt specifically so another "New Deal" response to a crisis would be difficult at best.
Now, rimrocker, that's a little "out there" even for you. I'm now supporting a lot of what Obama says he wants to accomplish, but to think that Republicans sat back and planned out deficits for the future is as preposterous as saying the Democrats sat back after World War II and planned how to draw the U.S. into wars in order to get Democrats re-elected.
The question is: Will he try to raise taxes, or will he sacrifice portions of his agenda? I think taxes are going up for everyone. Which post recession, probably is a good idea even if he scales back his plans.
I think he does a little of both eventually, but I don't think he raises taxes on people above $150,000 or even $200,000. He would get rightly skewered for going back on that pledge. I think he'd rather postpone energy reform than raise taxes on the middle class. More likely he'll do that and raise taxes on the wealthy a little higher than current proposals.
Spending the extra trillions is part of Obama's plan to change America. There is no stopping it, so get on board. To fund his budget, the country must raise taxes. That's why I am proposing a 100% tax on money earned over the $5 million income mark with no shelters of any kind. People earning $40K or less would not be taxed. From $40K to $100K would be taxed at a flat 10%; from $100K to $250K at 15%; from $250K to $500K at 20% and $500K to $5M at 25%. Corporate top pay should be no more than 250 times the amount paid to the least paid full-time employee (full-time employee being defined as one who works 20 hours or more). All gaming, prostitution, tobacco and pharmaceuticals, including alcohol and mar1juana, should be legalized and taxed. Let the taxin' begin.
Absolutely. A great deal of extra money will be diverted into the tax base so the Congress can waste it at an even greater rate. The silver lining is that the price of movie admission and sporting events will come down in a hurry. Actors, athletes, doctors, lawyers, accountants, corporate chief executives, etc. making more than $5M could easily afford a decent lifestyle, but the excess money would help fund Obama's programs.
If only I made anywhere near $5 Million. Accounants like myself just get to dream of making the money of our clients.
Most of us just dream of that. So, if you get there, sit back and let somebody else drink at the trough. Then heat it up for the next year. Remember, avoiding the luxury tax would be virtually assured in Rocketland.
They’ve got some basic facts confused in that article. Reforming the health care system will save money, huge amounts of it in fact. Also, if the right green energy investments are made it will put the US in a better competitive position going forward. This is like a company modernizing and retooling to adjust to a changing competitive environment. You don’t not do it because it costs you money up front. Not doing it would only put you farther behind. This is a situation where you have to invest money to make more money.
I can't really disagree with you, except that Obama doesn't seem to have an actual plan. He just gave Pelosi and Reid a free rein, which is tantamount to locking two six-year-olds overnight in a candy store. By morning the candy store -- us -- will be wrecked and there will be two really sick kids with big smiles on their faces. Enters Obama, stage left, to shrug his shoulders and declare that he has to take drastic measures to clean up the mess, cat and canary style. Maybe not -- but that is how I see it right now.
Ultimately success will be judged by how well these investments turn out, but also remember that no corporation bats 1.000 with this kind of investment and neither will the government. I think the measure of success will be whether they perform at a level on par with the top corporations. This is long term planning, however, and we can’t expect the green energy investments to start paying off in the short term, but they do need to continue to look promising and hold real promise for very good longer term returns, imo.
