Today the Congressional Budget Office released its annual “baseline” budget projections. The good news is that the deficit is projected to fall to the lowest it has been since the beginning of the so-called “Great Recession.” The bad news is that number is still $1.1 trillion – making it higher than any deficit between 1947 and 2008.
The estimate pretty much put the final nail in the coffin for President Obama’s “pledge to cut the deficit in half by the end of my first term in office.” Yea, he said that. We can’t fully explain it, but the two best theories that the office could come up with were (1) his speechwriter was playing a Anchorman-esque practical joke on him, (2) his teleprompter malfunctioned, he got nervous, and gave a black out speech reminiscent of Will Ferrell in Old School. Admittedly, neither are great theories. And apparently we watch too many Will Ferrell movies.
But the point is, not only did he fail to live up to the pledge, he completely ignored it. When Obama came into office the prior year’s deficit was $458 billion. The next four years were $1.4 trillion, $1.3 trillion, $1.6 trillion, and now, a projected $1.1 trillion. Obama didn’t halve the deficit, he occasionally tripled it, and always at least doubled it.
Fortunately, the report isn’t all terrible news. The numbers show that the Republican-held House of Representatives has begun to turn the ship around…slowly. Using levers like the debt ceiling debate and the omnibus appropriations bill Republicans have been able to achieve a remarkable amount of fiscal discipline despite controlling only the House while Democrats have the Senate and the White House.
The CBO’s projections show that federal government spending will actually remain flat over the next two years.
“In fiscal year 2011, total discretionary spending authority – authority provided in appropriations acts to incur financial obligations that will result in immediate or future outlays – dropped by $42 billion; that authority has declined by another $24 billion in 2012,” writes the CBO. “As a result, outlays decreased by 0.1 percent layer year – the first time since 1996 that discretionary outlays had fallen.”
Not exactly reason to throw a party. Especially when you still have Democrats in the House like Rep. Rahall who say stuff like this, “In two years, who knows, we may find a pot of gold at the end of the rainbow.” Gosh, why didn’t we think of that sooner! We could have totally solved our deficit if only we hadn’t wasted so much time tracking bin Laden and focused on finding the Lucky Charms guy!
Despite the utter lack of help that Republicans should expect from Democrats who believe magical creatures are the answers to our deficit problems, there is still much to be done.
Namely, we have to look beyond the discretionary budget to other “mandatory” spending such as Social Security, Medicare, and Medicaid. Yes, we know talking about entitlements is about as popular as former Obama Chief of Staff Bill Daley was with Harry Reid. Hahaha! Too insider? Ok, how about…as popular as Anthony Weiner at a Clinton family barbecue. That’s funny because Weiner’s wife Huma Abedin is good friends with…Hilary…oh never mind.
The fact is we have to reform these programs if we want to achieve fiscal sustainability. The CBO finds that mandatory spending will rise from $2.1 trillion to $3.5 trillion annually in the next decade. Although some of that will be covered by higher revenues as a result in economic growth, we still need to find a way to cut cost or else face a crippling debt crisis.
Fortunately, this isn’t as impossible as it sounds. As Dan Mitchell of the Cato Institute has been yelling about for years now – Washington can let spending rise by 2 percent each year (roughly the amount of inflation) and we would have a balanced budget in about 10 years. That’s hard, but not impossible.
What would make it even easier, as American for Tax Reform’s Ryan Ellis points out, is if Washington would implement policies focused on economic growth. “If real GDP growth was 1 percentage point higher over this window,” Ellis writes, “tax revenues generated would be equal to an additional $2.8 trillion.
So take the good news and bad news in today’s CBO report. But most importantly, keep in mind that we must continue to press for more fiscal responsibility out of Washington if we truly want to avert disaster.