Our celebrity president is taking some time away from TV appearances and campaigning to actually submit his budget for the upcoming year. He is already in violation of the law that required him to present his plan to fix our economy on February 4, but the country has its timetable, and he has his.
The president is said to be “frustrated” that Republicans won’t work with him on the economy. But it’s hard to work with someone who hasn’t shown any interest in tackling the long-term fiscal problems our country faces. If President Obama thinks Speaker Boehner is a tough adversary, wait until he hears from rank-and-file Republicans in the speaker’s caucus.
President Obama’s budget will be unveiled later this month. Here are a few things to expect from it:
The budget will not propose any solution to the country’s long-term fiscal imbalance. The flaw in Obama’s position has always been that his tax increases on the “wealthy” will not appreciably change our long-term budget problems. Incorporating the revenue from his tax increase at the end of last year will still leave huge budget deficits in the out years. That is because entitlement spending, especially on health care, will continue to spin out of control and Obama refuses to propose anything substantive to change this pattern. In his State of the Union address this January, he actually proposed spending more, not less, on a variety of initiatives.
The economic assumptions in the president’s budget will be unrealistic. In the Reagan years, the media would refer to Reagan’s growth assumptions as a “rosy scenario.” Actually, the economy hit Reagan’s high growth numbers more often than not. Since Obama is immune from press criticism and accountability, his budget is not labeled as “rosy,” but it should be. His budget document will surely project growth assumptions far in excess of what this administration has ever achieved so as to make the out-year deficits look better. The economy has never grown 3% in any year of his presidency, and anything above that in this budget is indeed a “rosy scenario.”
President Obama will continue to advocate more tax increases. The president’s “balanced” approach to deficit reduction is to increase taxes now and vaguely promise spending reductions far into the future, certainly beyond his time in office. So he will propose a slew of new taxes that he will label as “loophole closings” on wealthy individuals and companies, most of which couldn’t even pass the Democratic Senate. However, it will satisfy his political imperative of making the deficit look better in the long run.
The budget will ignore rising interest rates. Our historically low interest rates have enabled Obama to finance his huge deficit spending with minimal increases in debt service. The Fed helped mask the real costs of his deficits until after Obama was safely re-elected. But this policy cannot be maintained forever. Eventually the Fed will stop buying the federal government’s bonds, and interest rates will rise, as will inflation and the cost of all of the federal entitlement programs linked to inflation, such as Social Security payments. The future cost of financing Obama’s debt will be huge. Don’t expect the budget to deal with that possibility in any serious way.
There was a time when serious people paid attention to a president’s budget because it gave voice to his priorities and set the national conversation for the year. No longer. When President Obama even refuses to submit a budget, it tells you all you need to know about how seriously he views it. His last two presidential budgets were voted down in the Democratic Senate (2012) and the House (2013) unanimously. This one will see a similar fate.
Our country’s fiscal future continues to spin out of control without any serious leadership from the White House.
Frank Donatelli is the chairman of GOPAC, an organization dedicated to educating and electing a new generation of Republican leaders. He previously served as political director for President Ronald Reagan.