Since the global financial crisis exploded in September, the government’s emphasis has been on devising and enacting massive and expensive measures to stabilize the economy.
This week, Americans are getting some sense of the long-term fiscal cost. It’s not a pretty picture.
As President Barack Obama put it to Congress on Tuesday: “That day of reckoning has come, and the time to take charge of our future is here.”
Like its profligate predecessor, the Obama administration seeks to halve the federal deficit. But even under the most hopeful scenario, that deficit will be bigger after four years than a year ago. And that assumes Obama can persuade lawmakers to pass the broad array of spending and tax programs suggested in his speech.
Still, the president deserves credit on at least three fronts.
First, his initial budget, outlined Thursday, seeks to give honest figures that end the Bush practice of optimizing the numbers by omitting such things as the Iraq war and the annual fix to protect middle-income Americans from the alternative minimum tax.
Second, Obama urges long-term changes in health care and energy that would help the government control the budget areas most likely to explode further out of control.
And third, his agenda is faithful to his platform as a candidate, including his vow to take hold of a fiscal crisis dramatically worsened by the economic slump.
Yes, some of it sounds depressingly familiar. Every recent administration has sought and failed to curb federal spending, at least since Lyndon Johnson turned out the White House lights while trying to keep the 1965 budget under $100 billion.
Both parties have been complicit in that failure, especially since Bill Clinton bequeathed George W. Bush a balanced budget promising significant reductions in the $5.7 trillion national debt.
Today, after the Bush tax cuts, 9/11, the Medicare drug program, Iraq, Katrina and this financial crisis, that debt is nearly $11 trillion and headed up.
To achieve his goals, Obama counts on an economic recovery; cutting costs for Iraq and the current emergency spending; lower health care costs; and selective tax increases, including ending the Bush cuts for upper-income taxpayers and increased levies on corporate overseas earnings.
Republicans predictably assail the spending levels and tax proposals. Some decry raising taxes in a recession, though the increases for those with high incomes wouldn’t kick in until 2011.
And Democrats’ fear of Social Security cuts reportedly delayed an administration plan for a commission to look at entitlement costs.
But Obama and other officials stress that the more immediate problems are Medicare and Medicaid, which explains his focus on curbing health care costs. Indeed, Republican Sen. Mike Enzi on Monday confirmed reports that bipartisan, behind-the-scenes talks are under way.
That came at Monday’s “fiscal responsibly summit,” perhaps the week’s most interesting and meaningful event, where there was considerable talk of a “grand compromise” on taxes, discretionary spending and entitlements, including Social Security. Many outside experts believe that’s the best way to fix things.
The sessions, which brought together an eclectic group of administration officials, Obama’s Democratic allies, his Republican critics and outside experts, didn’t seek to resolve the most difficult issues. But there was strong support for a package solution and substantial agreement that the process was as important as the substance.
Rep. John Spratt of South Carolina, chairman of the House Budget Committee, suggested something like the bipartisan commission and up-and-down votes on their recommendations that former House Majority Leader Dick Armey devised for cutting military bases.
Obama seems determined to be realistic. “Everybody here understands a lot of the tradeoffs involved in health care and that there are no perfect solutions,” he said.