Today, the Obama administration released its fiscal year 2011 budget. As the Washington Post put it, the proposed budget “calls for billions of dollars in new spending to combat persistently high unemployment and bolster a battered middle class. But it also would slash funding for hundreds of programs and raise taxes on banks and the wealthy to help rein in soaring budget deficits.”
The administration is trying to walk the fine line between not choking off an economic recovery and addressing the country’s long-term deficit and debt problems. And as many news outlets have already theorized, no matter the proposal, the budget is going to be criticized by Republicans for failing to lay out enough in terms of deficit reduction.
Sure enough, Sen. Judd Gregg (R-NH) was on Fox News bright and early to criticize the budget, and lay out his own set of nonsensical deficit reduction steps, including implementing a hard spending freeze today. Watch it:
With this segment, Gregg proved once again that he is the epitome of a deficit peacock: he likes to holler about deficits without actually taking deficit reduction seriously. Of his four proposals that supposedly would reduce the deficit in the long-term, two of them — canceling the stimulus and the Troubled Asset Relief Program (TARP) — would be one-off steps that have nothing at all to do with the long-term fiscal situation, since neither of those programs extend much past 2011. Gregg’s other ideas amount to embracing Medicare savings that he voted against during the health care debate, and putting in place a spending cap that would do great anti-stimulative harm to the economy in the immediate future.
In the administration’s budget, meanwhile, medium-term deficits stabilize in the range of 3.9 percent of GDP. But the administration’s proposed deficit commission — which it is planning to create by executive order — will supposedly be charged with finding a path toward “primary balance” (which is balance excluding interest payments on the debt) by 2015. This closely corresponds to the Center for American Progress’ path toward fiscal balance, which advocated primary balance by 2014 and full balance by 2020. Primary balance, if achieved, would stabilize the debt-to-GDP ratio at an acceptable level and lays the groundwork for full budget balance.
So it’s getting to that last step that still remains the question. And, of course, it will be up to Congress to actually implement the spending cuts that the administration has proposed and to embrace any commission proposals, should they materialize. But this budget — in terms of its deficit impact — is an encouraging start.