Obama’s lofty budget goals

The United States will have a deficit of $1.75 trillion in fiscal 2009.

When discussing a number with that many zeros, the amounts begin to feel meaningless. But what it does mean is that our debt will be 12 percent of our GDP; our debt will be more than one-tenth the size of our entire economy. It will be the largest deficit we have had relative to our economy since World War II.

This would seem to be horrifying. Few students here likely feel the government puts enough money into financing higher education. Surely some students on campus fear the ballooning deficit could derail many of the progressive programs they fought for in 2008 – just as the students who fought against them probably hope it does.

That’s why the draft budget Barack Obama unveiled last Thursday might seem to be a contradiction.

On one hand, Obama plans to cut the deficit to only – yes, only – $533 billion in 2013.
But he also plans to move ahead with most of his ambitious projects, like subsidizing the health care of low-income Americans.

Health care reform could rack up huge government expenditures over the next few years, but the budget has few details on it.

Given that much of the plan will be up in the air until it actually makes its way through Congress, that makes sense. But given the risks, Obama should be overbudgeting for it.

Money has been promised for the disabled and the unemployed, investments in alternative energy and extra deployments to Afghanistan.

An extra $250 billion is being set aside in case more bank bailouts become necessary. Students, many of us may be relieved to know, also made his list.
How does Obama plan to pay for these new programs while simultaneously slashing our debt? Much of the answer lies in tax increases.

Former President Bush’s 2001 tax cuts would expire for the 2 percent of richest Americans. Tax deductions such as those for local taxes, mortgage interest and charitable gifts will be limited for the highest earners.

More concerning is a plan to change the tax code requiring corporations to pay U.S. taxes on foreign-sourced income; they currently pay taxes to whichever company they are operating in. This could create a situation in which the operations of many U.S. corporations are double-taxed.

Obama also hopes to use a cap-and-trade program for carbon emissions to generate revenue, starting in 2012. As with health care, the details of this plan have yet to emerge.

Obama clearly views this recession as an opportunity to make big changes. That might be disingenuous. It is certainly risky.

The Obama administration has based its draft budget on economic forecasts that are somewhat rosier than many private ones.

The administration counters that these differences are small, but a deeper recession will not just sap the government of more revenue. It may raise calls for another stimulus or more bailouts.

The budget is reminiscent of Obama the dreamer, from early in his campaign, rather than the calmer and more moderate figure that emerged right before he took office.

But Obama will need those moderate instincts when it comes time to fill in the budget’s missing details.