Barack Obama

Obama: The Time for Austerity is Over, the Time to Spend is Now!

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The Washington Post reports that President Barack Obama' budget for 2015—due out March 4—will

will seek tens of billions of dollars in fresh spending for domestic priorities while abandoning a compromise proposal to tame the national debt in part by trimming Social Security benefits.

With the 2015 budget request, Obama will call for an end to the era of austerity that has dogged much of his presidency and to his efforts to find common ground with Republicans. Instead, the president will focus on pumping new cash into job training, early-childhood education and other programs aimed at bolstering the middle class, providing Democrats with a policy blueprint heading into the midterm elections.

But wait, there's more (spending):

Obama would fully pay for proposed new spending in his budget request, administration officials said, including $56 billion for what they called "Opportunity, Growth and Security Initiative." The package, which would be split between domestic programs and defense, will include fresh cash for 45 new manufacturing institutes; a "Race to the Top" for states that promote energy efficiency; new job training programs and apprenticeships; and expanded educational programs for pre­schoolers.

White House officials declined to say Thursday how they would fund the initiative.

More here.

The president's budget proposal will not include any mention of using a "chained" consumer price index (CPI) to restrain increases in Social Security and other entitlement spending. In his plan for 2014, the president proposed spending $3.8 trillion (against receipts totaling $3 trillion).

Expect the GOP "leadership" to bitch and moan about Obama's budget-busting ways while offering up no significant cuts of its own. In the House's 2014 plan, Republicans wanted to spend $3.5 trillon (they antiicipated $3 trillion in receipts as well). Senate Democrats called for $3.7 trillion in spending.

Recall that late last year, both parties agreed to effectively end sequestration and increase federal spending in the near term by about $45 billion this fiscal year and another $20 billion on top of that in 2015.

The Democratic logic behind increasing spending runs something like this: Because we no longer regularly post $1 trillion deficits, we've got no reason not to spend more and more every year. Don't you know that deficit spending helps expand the GDP (which registers virtually all government spending as adding to GDP)? If the government will spend enough, we'll lick this recession/slow-growth phase, just wait and see once slack demand gets taut again. Then we'll slow down spending…and everything will be fine. Just like we did, er, don't look at the chart about spending…

The Republican logic for steadily increasing spending is a bit different. "Fiscal conservatives" (as if) argue that we need to shrink the size, scope, and spending of government while increasing the same. They argue that we always need more defense spending (because CONSTITUTION) and it's morally wrong to make well-off seniors ever pay full price for anything. Besides RONALD REAGAN.

As the Post explains it:

The lack of conflict [over debt limits and ending sequestration] is due in part to the collapse of the deficit as a political issue. While annual budget deficits remain high by historical standards, they have shrunken rapidly over the past few years as the economy recovered and Congress acted to cut spending.

The latest estimates from the nonpartisan Congressional Budget Office show the deficit falling to$514 billion this year and to $478 billion in fiscal 2015 — well below the trillion-dollar deficits the nation racked up during the recession and immediately afterward. But the CBO warned that deficits would start to grow again in a few years.

It is deeply disturbing (to say the least) that the second deficits shrink, everyone in Washington is ready to declare "the collapse of the deficit as a political issue." Persistent deficits lead to increasing levels of debt, which everyone—even free-spending folks such as Paul Krugman—acknowledge is a long term issue.

But hey, if you live in the here and now, the long term never seems to arrive. Like tomorrow in Annie, it's always a day away. Here's the CBO's latest take on the shape of deficits, expressed as a percentage of GDP:

That's not a pretty sight and it doesn't get lovelier when expressed in terms of dollars. The figures will change when the new budget plans are released, but the general trend will continue in the same direction. Below, read left to right across the "Total Deficit" line and you'll see deficits getting bigger again…in the fiscal 2016.

But for now? The deficit—a function of the perennial mismatch between government spending and revenue—is no longer a "political issue." It remains a mathematical one, alas. And one that is going unaddressed by both the GOP and the Democrats, who join together only, it seems, when it comes to spending money that they—we!—don't have.

Fear of persistent deficits and increasing national debt isn't an accounting fetish. It's rooted in the universally accepted notion that once debt gets too big, it can swallow whole economies and often does. Everyone knows that current entitlement spending—especially on Medicare—is unsustainable and a mortal threat to the federal budget (you can toss in Social Security and Obamacare, too, neither of which is paying its own way). With notable individual exceptions, nobody in either party is seriously engaging this problem, which is frustrating as hell.

It may always be today in Washington, but tomorrow is definitely coming—and it doesn't look so good.

Take it away, Candidate Obama, who used this stump speech way back when (2008):

We've lived through an era of easy money, in which we were allowed and even encouraged to spend without limits; to borrow instead of save….

Once we get past the present emergency, which requires immediate new investments, we have to break that cycle of debt.

Present emergency averted! Commencing "immediate new investments"!