The Obama Budget's Economic Message
April 15, 2013
President Obama recently released his budget for 2014. The budget reflects the priorities of his administration and makes certain choices that reflect his leadership and vision for the country. Despite Obama's claim that the budget should be satisfactory to everyone, the budget fails to inspire private-sector confidence, says David Malpass, a deputy assistant Treasury secretary and legislative manager for the 1986 Tax Reform Act in the Reagan administration.
- The latest budget does not balance and was released far too late for it to matter.
- The budget outlook would put government spending on a path to rise by 60 percent between 2012 and 2023.
- The budget envisions that the increase in spending will be offset by private sector taxes, which would boost revenue by 113 percent over the same time period.
Even with the significant rise in revenues, deficits would still require the government to borrow enormous sums of money to fund its unrestrained spending. Within the next 50 years, labor force growth will shrink, which will drive slower growth for the foreseeable future.
- To prepare for slower growth, the Obama administration must show spending restraint instead of proposing a budget that leaves gross debt at more than 100 percent of gross domestic product (GDP) in 2020.
- The proposed budget would also require Congress to raise the national debt limit beyond $25 trillion as the country assumes a $5.3 trillion 10-year deficit with $744 billion in 2014 alone.
- The budget assumes unrealistic economic conditions -- like a 3.6 percent GDP growth rate in 2016, a $1.25 trillion surge in taxes between 2012 and 2016, and an impossibly low interest rate of 1.2 percent in 2016.
All of these economic assumptions are unrealistic given the current state of the economy. The proposed budget does not make any tough choices, but instead continues current trends.
- By continuing current initiatives, the budget locks in Clinton- and Bush-era priorities and fails to update the budget for the 21st century.
- The proposal cuts defense spending from 4.3 percent of GDP in 2012 to 2.4 percent of GDP in 2013, and alludes to tax reform and tax increases.
- The budget also includes a small adjustment to entitlements, which is more symbolic than substantive.
The budget falls short in delivering an insightful view for the future of America and should be opposed by Democrats and Republicans alike.
Source: David Malpass, "The Obama Budget's Economic Message," Wall Street Journal, April 10, 2013.
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