Ten weeks ago, President Obama released his first budget outline entitled "A New Era of Fiscal Responsibility." That publication provided an overview of what fiscal policy would look like during his first term and started the budget process in Congress (passing their budget resolution last week).
We put forth an analysis of this initial outline which commended the administration on its effort to increase transparency and enact statutory PAYGO rules. However, we cautioned the budget attempted to do too much -- not necessarily conducive to reigning in emerging deficits. These concerns were heightened when the Congressional Budget Office released its analysis shortly thereafter. Unlike the President's original budget which showed only large deficits in the immediate term attributed to the economic climate, CBO showed deficits increasing much later in the outyears -- reaching 5.7 % of GDP in 2019 -- and net interest outpacing spending on national defense by that time.
In an effort to address those concerns and begin providing additional details for his budget, President Obama announced today that his administration has identified a list of 121 programs to be terminated or reduced in an effort to procure $17 billion in savings.
First, it is important to put these savings in proper perspective. These cuts -- if they do in fact materialize -- represent only 1.2% of the projected deficit for FY 2010. Certainly, savings within the budget should be attained wherever possible, and it is important to applaud the president for putting such a list forward. Yet, this $17 billion is only a negligible step in getting our finances under control.
Secondly, President Bush put forward a similar list in his final FY 2009 budget last year. President Bush's list targeted 151 discretionary programs worth roughly $18 billion. Upon review of this list, it is obvious that there is some overlap with the one we received today. One can draw from this the glaring conclusion that such programs were not terminated or reduced then and it's likely to be the case that they will continue to exist. Alternatively, the other programs -- where there was no overlap -- demonstrates that individuals will identify "waste" in vastly different ways. These individual programs will be vigorously defended during their review in Congress. Therefore, while President Obama may highlight these programs on paper, members of Congress will have the final say and may well ignore his recommendations.
Perhaps the best thing to come out of today's events was the sobering reminder that much bigger challenges are ahead. This acknowledgment of this came at the end of the President's prepared remarks this afternoon:
Finally, while these steps will help us cut our deficit in half over the next four years, there are looming challenges to our fiscal health beyond that – challenges that will require us to make health care more affordable and to work on a bipartisan basis to address programs like Social Security. What we are proposing today does not replace the need for large changes in non-discretionary spending.