Even more staggering than the mountains of snow in the capital are the deficits the Obama administration plans for the next decade. Huge spending increases will add about $12 trillion to the national debt for budget years 2009 to 2020. The scariest part is that these deficits are based on unrealistic budgeting assumptions; the real fiscal outlook is much bleaker.
In the proposed 2011 budget, the White House defensively attacks the “irresponsibility of past” deficits. For example, the 2009 budget deficit of $1.4 trillion is blamed on the George W. Bush administration as if President Obama’s $862 billion stimulus package and more than $400 billion supplemental spending bill had nothing to do with it. Mr. Obama’s planned 2010 budget deficit rises to an even higher record level of $1.6 trillion. By comparison, all of Mr. Bush’s deficits from 2002 to 2008 - the seven years during which his team had the most control over the budget - produced a combined deficit of $2.1 trillion.
None of the president’s men seems too worried. On Sunday, Treasury Secretary Timothy F. Geithner told ABC’s “This Week” that the United States “will never” lose its top credit rating despite big budget deficits. But if the fiscal situation isn’t brought under control, higher deficits at some point will lower our credit rating and thus boost interest rates. Try paying off the newly increased debt limit of $14 trillion with a couple percentage point increase in interest rates. That’s how deficits spiral out of control. So much money will be borrowed to pay off the debt that the deficit will grow each year simply from higher interest payments.
The trivial, temporary freeze in some non-security discretionary spending is touted as an example of how the president will control spending. Another purported example is the bipartisan fiscal commission. Page 39 of the budget describes the commission as being “charged with balancing the budget excluding interest payments on the debt by 2015.” The Democrat-controlled Senate decisively rejected such a commission, yet Mr. Obama’s budget numbers assume this commission will specify sufficient budget cuts and tax increases to reduce the deficit to sustainable levels.
Even the supplemental tables buried in the back of Mr. Obama’s proposed budget contain an ominous warning: “The [commission] is projected to stabilize the debt-to-GDP ratio at an acceptable level once the economy recovers.” In other words, if the commission doesn’t make the unspecified cuts in the deficit, the U.S. debt burden won’t be stable.
Budget deficits of 11 percent or 12 percent of gross domestic product are very bad, but ever more tax increases could be even worse by extracting ever more money from the private sector. Big government is an insatiable beast. The only way out of this mess is to cut the size - and thus the cost - of government dramatically.