More Deficit Damage Ahead
Friday afternoon in Washington means it's time to take out the trash:
The federal budget deficit is projected to remain above $1.4 trillion through next year as a result of the current recession, the White House announced this afternoon. The news was both good and bad: the administration originally forecast a $1.56 trillion deficit for this year, dropping to $1.27 trillion in 2011. The new figures: $1.47 trillion this year, but still $1.42 trillion next year. That's an increase of $150 billion.
You can read the full, legally required report on the shabby state of the federal budget here. Budget director Peter Orszag's response? Could be worse!
"The economy remains weaker than we would like, and the unemployment rate remains higher than we would like," Orszag said. Still, he said, that's better than the "outright economic collapse" the administration faced when it arrived in January 2009.
But saying that it could be worse doesn't excuse the fiscal problem, or the near-total failure of Washington legislators to substantively address it. This is hardly the first sign that the federal budget is in terrible shape. And while policymakers have long promised action, the responses from both sides of the aisle have been less than compelling. President Obama has thrown his support behind a delaying tactic that gives him cover until after the election a fiscal commission that's almost certain to prove ineffective. Senate Republicans, meanwhile, are sticking with the long-discredited argument that tax cuts pretty much always pay for themselves and refusing to even begin the discussion about what spending to cut.
And make no mistake: No matter what else you hear, spending (and spending, and more spending, and even more spending) is the problem. But while everyone likes the idea of cutting spending in the abstract, almost no one wants to cut it in specific.
Worse, the single biggest drivers of the problem are the government's commitments to health care spending. But the GOP just spent a year pandering to seniors over Medicare expenditures. And the Democrats just passed a massive new health insurance entitlement that, according to the Medicare's chief actuary, will increase total medical spending over the next decade. Meanwhile, despite the law's billing as "entitlement reform," the Congressional Budget Office is warning that, at best, any small savings generated by the PPACA will only make a "dent" in the long-term budget problem. Overall, though, the law "does not substantially diminish [the] challenge" ahead. And that's assuming it works exactly as well as planned, which may not be a very good assumption.
In short, the budgepocalypse is nigh, and neither party's leadership has any plans to do a damn thing about it. Happy Friday from your friends at the White House!