Budget Deficits + National Debt = Domestic Spending Freeze

The Obama administration is finally getting serious about the nation’s budget deficits and national debt. However some people particularly liberals are screaming that a domestic spending freeze will cut some valuable funding to much needed domestic projects. Still conservatives will argue that it doesn’t go far enough. Therefore it is a win-lose situation for the Obama administration. However it is the right thing to do in order to get the nation’s budget deficits and national debt under control.

Facing voter anger over mounting budget deficits, President Barack Obama will ask Congress to freeze spending for some domestic programs for three years beginning in 2011, administration officials said Monday. The spending freeze would apply to a relatively small portion of the federal budget, affecting a $477 billion pot of money available for domestic agencies whose budgets are approved by Congress each year. Some of those agencies could get increases, others would have to face cuts; such programs got an almost 10 percent increase this year. The federal budget total was $3.5 trillion.

The three-year plan will be part of the budget Obama will submit Feb. 1, senior administration officials said, commenting on condition of anonymity to reveal private details. They said Obama was expected to propose the freeze Wednesday night in his State of the Union address. The Pentagon, veterans programs, foreign aid and the Homeland Security Department would be exempt from the freeze. The savings would be small at first, perhaps $10 billion to $15 billion, one official said. But over the coming decade, savings would add up to $250 billion.

The White House is under considerable pressure to cut deficits — the red ink hit a record $1.4 trillion this year — or at least keep them from growing. Encouraged by last week's Massachusetts Senate victory, Republicans are hitting hard on the issue, and polls show voters increasingly concerned. Still Congressional economists predict a slow recovery and that while budget deficits will decrease in the upcoming years from the trillions back down to the billions, the national debt will continue to grow despite the three year spending freeze the White House is proposing.

Congressional economists are predicting a slow rebound of the economy, with unemployment averaging 10.1 percent this year as the economy grows by just over 2 percent. The latest estimates from the nonpartisan Congressional Budget Office see the economy growing only slightly more next year with an unemployment rate of 9.5 percent. But the CBO also projects that the economy will rebound sharply over the period from 2012-2014. That would be good news for President Barack Obama's re-election prospects. The latest estimates see a $1.35 trillion deficit for the current budget year, dropping to $980 billion next year — but only if a host of tax cuts enacted under President George W. Bush are allowed to expire.

So this year's federal budget deficit will improve slightly thanks to lower spending on the Treasury Department's bank bailout and stronger than expected economic growth, falling to $1.35 trillion from the nearly $1.4 trillion previously projected, according to congressional sources citing a new analysis set to be released Tuesday by the nonpartisan Congressional Budget Office. The deficit is expected to improve over the long run as well, falling to $480 billion in 2015 from previous projections of $560 billion, the sources said.

Therefore the latest congressional budget estimates out Tuesday predict a $1.35 trillion deficit for this year as the economy continues to slowly recover from the recession. The CBO’s report predicts a sluggish economic recovery and continued high deficits that present twin political problems for President Barack Obama and his Democratic allies. The report sees a slow rebound of the economy, with unemployment averaging 10.1 percent this year as the economy grows by just over 2 percent. It would grow only slightly more next year with an unemployment rate of 9.5 percent.

"Economic growth in the next few years will probably be muted in the aftermath of the financial and economic turmoil," the CBO report says. It's a sobering reminder of the fundamental imbalance of the federal government's budget that comes just days before Obama's Feb. 1 budget submission. Therefore Obama’s proposal of a three-year freeze on domestic agency budgets, though the savings would barely make a dent will be a step in the right direction to a degree. Still what the Obama administration hasn’t said they will address is a proposal for tax hikes or cuts to spiraling benefit programs such as Medicare, Medicaid and Social Security.

So while the deficit would slide to $480 billion by 2015, CBO says, but only if tax cuts on income, investments and large estates are allowed to expire at the end of this year. On the other hand, most budget experts see deficits as far higher once tax cuts and other policies are factored in. Thus the 2010 deficit figure is in line with previous estimates and would be a slight decline from last year's $1.4 trillion shortfall. But plans afoot on Capitol Hill for a new jobs bill and a coming Obama request for war funds would add to the total.

Keeping in mind, these figures arrived just hours before the Senate is likely to reject a White House-backed plan to establish a bipartisan task force to recommend steps to curb the deficit. The figures bring continued bad news on the deficit, keeping the pressure on Obama and congressional Democrats to demonstrate they're serious about taking on the flood of red ink.

Thus, the spending freeze, expected to be proposed by Obama during the State of the Union address on Wednesday, would apply to a relatively small portion of the federal budget, affecting a $477 billion pot of money available for domestic agencies whose budgets are approved by Congress each year. Some of those agencies could get increases, others would have to face cuts; such programs got an almost 10 percent increase this year. The federal budget total was $3.5 trillion. The freeze on so-called discretionary programs would have only a modest impact on a deficit expected to match last year's $1.4 trillion. The steps needed to really tackle the deficit include tax increases and curbs on benefit programs like Medicare, Medicaid and Social Security. That's the idea driving the Obama-backed plan to create a special task force to come up with a plan to curb the spiraling budget deficit. But the Senate sponsors of the plan say it's attracted too much opposition from the right and left to prevail.

Republicans say the panel — it would try to develop a deficit reduction blueprint after the November elections for a vote before the new Congress convenes — would lead to big tax hikes. Democratic opponents say they don't want to vote on proposals to cut benefit programs like Social Security without being able to shape the plan. Therefore Obama's three-year spending freeze will be part of the budget Obama will submit Feb. 1. It's likely to confront opposition on Capitol Hill, where a handful of powerful lawmakers write 12 annual appropriations bills. They've gotten used to hefty increases but now are being asked to tighten their belts. House Appropriations Committee Chairman David Obey, D-Wis., declined to comment, his spokesman said. The Pentagon, veterans programs, foreign aid and the Homeland Security Department would be exempt from the freeze.

As stated before the savings would be small at first, perhaps $10 billion to $15 billion, one official said. But over the coming decade, savings would add up to $250 billion which is not a whole lot of money considering that the national debt is nearly $15 trillion plus and might be even higher by then. Thus, it is clear that although the Obama administration inherited a deficit and a high national debt, they have surely added to both and things look to be getting worse if they don’t begin to take steps to do something now. Therefore the spending freeze proposal is bringing angry from the left and criticism from the right that it doesn’t go far enough but right now, it is clear that our nation’s leaders have to reign on spending across the board not just on domestic programs but even foreign programs that are not producing at its highest effective levels.

Even Sen. John McCain, who lost to Obama in last year's presidential election, said he supports any attempt to cut discretionary domestic spending. "We need to do so," he said Tuesday. But in an appearance on ABC's "Good Morning America," the Arizona Republican said Obama "has got to veto bills that are laden with pork-barrel spending, earmarks." Thus on these two issues McCain is right, the Democrats got away with a lot of pork-barrel spending, earmarks, because they layered them in the stimulus bill and last year’s congressional budget which Obama said would be the last time earmarks are included in a congressional budget bill at least under his watch.

Right now more than ever, all political officials in D.C. must get serious about dealing with budget deficits and the national debt which is one the proposed spending freeze is a step in the right direction. However President Obama and his administration can’t just stop there, they must look at cutting spending to certain homeland security projects, the pentagon and foreign aid especially to projects that are effective or perhaps are not working at its highest efficiency levels. It is time for the Obama administration to figure out what works in government and what doesn’t so that wasteful spending is truly eliminated and taxpayer dollars are going toward projects and programs that work effectively and efficiently.

So let the left bark that the spending freeze is unfair and will hurt the American people and let the right bark that it isn’t enough to deal with the mounting deficits and debt but what both don’t understand is that you have to start somewhere and if you don’t than it could lead to deficits and debt that are truly irreversible in the future.

On the Net:
Congressional Budget Office: http://cbo.gov