Budget: The First Round in A Long Battle

House Speaker John Boehner wants to know “when are we going to get serious about cutting spending?” Perhaps today’s the day. The White House will formally release its 2012 budget plan later this morning, complete with a reported $1 trillion-plus in cuts.

That’s a big number and it has some Republicans scrambling over worries that Obama may be poised to take the lead in slashing Washington’s corpulent spending. Roughly two-thirds of Obama’s cuts will reportedly come from reducing domestic spending. E.J. Dionne Jr. calls it the “war over E2I2… the battle lines will be drawn on investments in — or, as Republicans would say, spending on — education, energy, infrastructure and innovation, thus E2I2.

For all the talk of pursuing fiscal rectitude in the country, there’s reason to wonder how much the public will swallow of domestic spending cuts in a time of high unemployment and sluggish job growth. The Pew Research’s latest poll of public opinion advises that while there’s a strong desire for keeping spending increases on a leash, there’s not much appetite for cutting. “The public’s views about federal spending are beginning to change,” the Pew survey reports.

Across a range of federal programs, Americans are no longer calling for increased spending, as they have for many years. For the most part, however, there is not a great deal of support for cutting spending, though in a few cases support for reductions has grown noticeably. The survey also shows that the public is reluctant to cut spending — or raise taxes — to balance state budgets.

But that doesn’t change the fact that even with the President’s proposed cuts, the budget deficit would rise to $1.6 trillion—a new high.

Still, the main drivers of growth in domestic federal expenditures—Social Security and Medicare—are left more or less untouched in the new White House budget proposals. According to McClatchy Newspapers:

Obama largely will ignore the recommendations of his own bipartisan budget commission, which in November urged more than $4 trillion in cuts to projected deficits over the next decade. He will not propose any changes in the biggest domestic spending programs–entitlements including Social Security, Medicare and Medicaid–which the commission said must be revised if the debt is ever to be tamed.

No matter, since the President’s budget proposal is destined to be the first round in a long battle. But if there’s any hope of making progress with the all-important long run trajectory of the fiscal deficit, a Willie Sutton moment is required eventually. “To solve our financial problems, you have to reform entitlement programs, you have to cut defense and other spending, and you have to engage in comprehensive tax reform to generate more revenue,” says former Comptroller General David Walker. For the moment, those are still theoretical considerations.

About James Picerno 894 Articles

James Picerno is a financial journalist who has been writing about finance and investment theory for more than twenty years. He writes for trade magazines read by financial professionals and financial advisers.

Over the years, he’s written for the Wall Street Journal, Barron’s, Bloomberg, Dow Jones, Reuters.

Visit: The Capital Spectator

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