The Budget and the Deficit

Posted March 25, 2009, at 7:43 p.m.

The news last week that the federal deficit could balloon to more than $9 trillion in the next decade will certainly prompt a closer look at President Obama’s first budget, which substantially increases spending. A key task for Congress’ budget writing committees is to evaluate whether major changes proposed by the president in the areas of health care, education and energy, which will require infusions of federal funds, will save money in the long run.

Here’s the phrase from the CBO report that has received the most attention: “From 2010 to 2019, the cumulative deficit under the president’s proposals would total $9.3 billion.” That’s more than four times the current deficit and much higher than the Obama administration’s projections, in part be-cause the economy has worsened since the White House assessment.

Here’s what preceded that assessment: The biggest contributors to the projected 2010 deficit are government spending to stabilize financial markets, funding for the wars in Iraq and Afghanistan and the war on terrorism and tax cuts. In other words, much of the spending was inherited from the pre-vious administration, and, one hopes, will be short term.

Looking ahead to the decade between 2010 and 2019, the CBO noted that the biggest effects on the deficit are projected to come from tax cuts, which total $2.1 trillion as currently proposed. At the same time, spending is proposed to increase by $1.7 trillion.

Already, many Republican lawmakers, and more important, some key Democrats, are calling for less spending. Sen. Susan Collins, a member of the Appropriations Committee, said that while it is appropriate to borrow and spend money to stimulate the economy in the short term, unsustainable debts can’t be allowed to ruin it in the long run. Sen. Olympia Snowe said the president’s budget has “serious problems.”

Democratic leaders in the House unveiled a budget Wednesday that was $100 billion smaller than the president’s. Sen. Kent Conrad, the North Dakota Democrat who chairs the Senate Budget Committee, has said he will put together a budget that won’t run up the deficit.

Such sentiments highlight the pressing need for the president to do a much better job of explaining how his proposals to increase spending now will mean spending less in the future. For example, the president’s budget plan also called for a $634 billion fund to reform the health care system to ex-pand insurance coverage. How much money would be saved through this initiative? Likewise, on energy, he has proposed increased investments in energy development in the U.S. Will this save money by allowing the U.S. to import less oil from other countries? What are the economic ramifications of spending more energy-related dollars in the U.S. rather than sending them to the Middle East?

These are difficult calculations that don’t fit onto bumper stickers, but this is the type of information lawmakers and the public should want before they decide whether the president’s proposals are affordable or not.

Even with the new deficit estimates, the high cost of many of the administration’s proposals should be the beginning of a conversation, not the end. The decision for Congress, many of whom, especially on the Republican side, are skeptical, is not whether overhauling our health care system or in-vesting in new energy sources is necessary — they are — but how much America can devote to this work and how quickly it can proceed.

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