“An economy built to last.” That’s the latest campaign them that President Obama is trying to sell the American public on. It was a defining part of his State of the Union Address and it’s a message he attempted to carry through his recently released 2013 Budget.
The problem is it’s wrong.
A more apt title would have been “A Deficit Assured to Last,” because despite record tax increases Obama’s budget would never balance. As in ever.
The reason is political cowardice. Anyone who has been paying attention knows that the primary driver of our deficit in the coming years is continual growth in the cost of government entitlements and the rising interest payments that result. In 1975 spending on Social Security, Medicare and Medicaid made up 27 percent of all government spending. Today that same figure is 46 percent. Moreover, it’s only projected to get worse.
“Under CBO’s two scenarios, all of the projected growth in primary spending as a share of GDP over the long term stems from increases in mandatory spending, particularly in outlays for the government’s major health care programs: Medicare, Medicaid, the Children’s Health Insurance Program (CHIP) and insurance subsidies that will be provided through the exchanges created by [Obamacare],” the CBO wrote in its most recent Long Term Budget Outlook.
Given their status as the most important budgetary items in terms of deficit impact you’d think they would figure prominently in the President’s budget. You’d be wrong. Indeed, Obama hardly mentioned them and made almost no changes to their long-term trajectory.
The reason is simple. Entitlements are considered to be the “third rail” or “sacred cow” of Washington. Politicians don’t touch them because it risks backlash with voters who benefit from the programs.
This is fundamentally dishonest. Without change, the government programs that people have come to rely on will inevitably be weakened. As deficits become more unsustainable and programmatic trust funds run dry entitlement benefits will have to be cut, taxes will have to dramatically increase, or some combination of the two. And the longer we wait the more dramatic (read: painful) those changes will have to be.
It is not as if the Obama Administration is blissfully unaware of all of this.
During congressional testimony last week, Treasury Secretary Timothy Geithner admitted that Obama’s budget would result in untenable fiscal burdens on future generations.
“Even if Congress were to enact this budget, we would be left with – in the outer decades as millions of Americans retire – what are still unsustainable commitments in Medicare and Medicaid,” he said.
What is all the more amazing is that Geithner said almost the exact same thing in testimony last year.
“With the presidents plan, even if Congress were to enact it, and even if Congress were to hold to it, we would still be left with a very large interest burden and unsustainable obligations over time, “Geithner said in 2011.
In other words, President Obama was made aware by a member of his Cabinet, a man that he fought to keep in his inner economic circle despite letting everyone else go, that his last budget wouldn’t solve the fundamental economic problem that America faces. And then, given an entire year to ruminate on the matter and come up with some solutions, he punts…again. And what’s worse, he sells it to the public with the tagline “an economy built to last.”
More like an “economy doomed for last.”