It’s that time of year again - the time when the White House prints up 535 copies of the president’s plans for the national budget to be carted to the landfill after a brief stop at Capitol Hill along the way.
Yet President Obama’s fiscal year 2013 budget deserves a close reading before it is relegated to the dustbin.
Presidential budgets sometimes have a real impact. Congress always produces its own spending plans, but when there is a strong working relationship between the president and Congress, what comes out bears at least some resemblance to what went in. Presidential priorities may be rearranged, but they are considered.
When the relationship between the president and Congress breaks down, however, there’s usually little point in even taking the time to open the presidential budget, since it’s unlikely to have any meaningful consequences. That was the case last year. Following the Republican takeover of the House in 2010, it was clear that Congress was going to focus on setting a course to reduce federal debt and deficits. Obama barely paid lip service to those considerations with his proposed five-year freeze on some discretionary domestic spending. His 2012 budget, in fact, would have added $8 billion to the projected deficit for the year. The document was, predictably, forgotten virtually as soon as it was delivered. Obama and Congress then went on to spend the next seven months arm-wrestling over the federal debt ceiling and spending levels.
I don’t expect the budget Obama sent to lawmakers yesterday to gain any more traction. In fact, it is likely to receive even less serious consideration on Capitol Hill. Sen. Mitch McConnell, who leads Senate Republicans, said he will personally introduce the president’s budget in the Democrat-controlled chamber, as he did a year ago - when the White House budget was rejected 97-0.
This year’s presidential budget was not written for lawmakers; it was written for voters. I believe Obama has produced an honest blueprint of where he would like to take the country over the next four years if given the opportunity.
The president refuses to consider any serious reductions in spending. Over the next 10 years, the president would trim only $638 billion from Medicare and Medicaid, agriculture subsidies, federal worker retirement funds and other similar programs. Meanwhile, he would plunk down nearly $500 billion for new transportation projects over the same period. In the short term, which is the only term that really matters in federal spending decisions, Obama would pump an additional $350 billion into what he calls job-creating measures.
On the revenue side, Obama would impose $1.5 trillion in additional taxes on businesses and upper-income taxpayers over the next decade. That $1.5 trillion would barely be enough to cover the current year’s red ink, as Obama now predicts a deficit of $1.3 trillion. Accumulated federal debt, already north of $15 trillion, would continue its relentless climb toward $20 trillion and beyond, though the president’s projections would not have it reach that benchmark until after he leaves office.
Lest anyone think the president has given up his quest to beat up Wall Street at every turn, the budget calls for a $61 billion “financial crisis responsibility fee,” to be paid by the largest financial companies over the course of the next 10 years. There is no similar “responsibility fee” levied against Fannie Mae or Freddie Mac, which are now effectively arms of the administration. Or against the Federal Reserve, which, with its easy-money policies, sought to artificially sustain short-term growth for most of the past decade as part of a general war on thrift. And it should go without saying that, in the Obama blueprint, no responsibility rests with Congress and the executive branch, which established the tax policies that encouraged individuals to overspend and over-borrow against their dwellings. Nor is any accountability assigned to those borrowers themselves, who also happen to be voters that Obama wants to court.
The White House contends that the president’s budget would bring the deficit down to $901 billion in the fiscal year that starts in October. Even giving this estimate far more credit than it is due, the proposed budget is still a long way from aligning federal spending with federal resources. The man who wants to continue leading the country for the next five years has virtually nothing to say about how he would address the unsustainable finances of Medicare and Social Security, nor of Medicaid, which is steadily swallowing budgets at both the federal and state levels.
House Republicans will soon offer their own spending blueprint. Their plan has no more chance of passage this year than does the president’s, but it is at least likely to offer a plausible approach toward creating a more sustainable government. House Budget Committee Chairman Paul Ryan, R-Wisc., has been willing to take the political heat and to do the heavy lifting that the president, like most lawmakers of both parties, has shunned for too long. Ryan’s approach builds on the recommendations of Obama’s 2010 deficit commission. The president himself stopped talking about that commission and its work long ago.
So the president’s budget, while a policy fantasy, reflects political reality. The chief executive who has presided over four years of unbridled spending and debt has no intention of changing course. At least he pays us the courtesy of saying so. What happens next is up to voters.
Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s recently updated book,
Looking Ahead: Life, Family, Wealth and Business After 55. His contributions include Chapter 1, “Looking Ahead When Youth Is Behind Us,” and Chapter 4, “The Family Business.” Larry was also among the authors of the firm’s book
The High Achiever’s Guide To Wealth.
Posted by Larry M. Elkin, CPA, CFP®
It’s that time of year again - the time when the White House prints up 535 copies of the president’s plans for the national budget to be carted to the landfill after a brief stop at Capitol Hill along the way.
Yet President Obama’s fiscal year 2013 budget deserves a close reading before it is relegated to the dustbin.
Presidential budgets sometimes have a real impact. Congress always produces its own spending plans, but when there is a strong working relationship between the president and Congress, what comes out bears at least some resemblance to what went in. Presidential priorities may be rearranged, but they are considered.
When the relationship between the president and Congress breaks down, however, there’s usually little point in even taking the time to open the presidential budget, since it’s unlikely to have any meaningful consequences. That was the case last year. Following the Republican takeover of the House in 2010, it was clear that Congress was going to focus on setting a course to reduce federal debt and deficits. Obama barely paid lip service to those considerations with his proposed five-year freeze on some discretionary domestic spending. His 2012 budget, in fact, would have added $8 billion to the projected deficit for the year. The document was, predictably, forgotten virtually as soon as it was delivered. Obama and Congress then went on to spend the next seven months arm-wrestling over the federal debt ceiling and spending levels.
I don’t expect the budget Obama sent to lawmakers yesterday to gain any more traction. In fact, it is likely to receive even less serious consideration on Capitol Hill. Sen. Mitch McConnell, who leads Senate Republicans, said he will personally introduce the president’s budget in the Democrat-controlled chamber, as he did a year ago - when the White House budget was rejected 97-0.
This year’s presidential budget was not written for lawmakers; it was written for voters. I believe Obama has produced an honest blueprint of where he would like to take the country over the next four years if given the opportunity.
The president refuses to consider any serious reductions in spending. Over the next 10 years, the president would trim only $638 billion from Medicare and Medicaid, agriculture subsidies, federal worker retirement funds and other similar programs. Meanwhile, he would plunk down nearly $500 billion for new transportation projects over the same period. In the short term, which is the only term that really matters in federal spending decisions, Obama would pump an additional $350 billion into what he calls job-creating measures.
On the revenue side, Obama would impose $1.5 trillion in additional taxes on businesses and upper-income taxpayers over the next decade. That $1.5 trillion would barely be enough to cover the current year’s red ink, as Obama now predicts a deficit of $1.3 trillion. Accumulated federal debt, already north of $15 trillion, would continue its relentless climb toward $20 trillion and beyond, though the president’s projections would not have it reach that benchmark until after he leaves office.
Lest anyone think the president has given up his quest to beat up Wall Street at every turn, the budget calls for a $61 billion “financial crisis responsibility fee,” to be paid by the largest financial companies over the course of the next 10 years. There is no similar “responsibility fee” levied against Fannie Mae or Freddie Mac, which are now effectively arms of the administration. Or against the Federal Reserve, which, with its easy-money policies, sought to artificially sustain short-term growth for most of the past decade as part of a general war on thrift. And it should go without saying that, in the Obama blueprint, no responsibility rests with Congress and the executive branch, which established the tax policies that encouraged individuals to overspend and over-borrow against their dwellings. Nor is any accountability assigned to those borrowers themselves, who also happen to be voters that Obama wants to court.
The White House contends that the president’s budget would bring the deficit down to $901 billion in the fiscal year that starts in October. Even giving this estimate far more credit than it is due, the proposed budget is still a long way from aligning federal spending with federal resources. The man who wants to continue leading the country for the next five years has virtually nothing to say about how he would address the unsustainable finances of Medicare and Social Security, nor of Medicaid, which is steadily swallowing budgets at both the federal and state levels.
House Republicans will soon offer their own spending blueprint. Their plan has no more chance of passage this year than does the president’s, but it is at least likely to offer a plausible approach toward creating a more sustainable government. House Budget Committee Chairman Paul Ryan, R-Wisc., has been willing to take the political heat and to do the heavy lifting that the president, like most lawmakers of both parties, has shunned for too long. Ryan’s approach builds on the recommendations of Obama’s 2010 deficit commission. The president himself stopped talking about that commission and its work long ago.
So the president’s budget, while a policy fantasy, reflects political reality. The chief executive who has presided over four years of unbridled spending and debt has no intention of changing course. At least he pays us the courtesy of saying so. What happens next is up to voters.
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