Balancing the Future

President Obama presented his budget plan ("A New Era of Responsibility") to Congress yesterday, and as you might expect it's controversial. There's really not much in the 10 year "blueprint for our future" that we did not already know, but it's the first realistic budget we've had in a long time and it's sobering, to say the least.

Obama has said he wants to restore "a sense of honesty and accountability to our budget." This means his budget includes expenses not included in recent years: little things like the cost of the war in Iraq or the annual fix to the Alternative Minimum Tax (AMT). As President Obama said to Congress, "for seven years, we have been a nation at war. No longer will we hide its price."

Even apart from leaving out major expenses, the Bush administration had a tendency to overlook obvious problems and paint an "optimistic" picture for taxpayers. The budget Bush prepared a year ago for the 2009 fiscal year (starting October 1, 2008) included a deficit of $407 billion, and projected a balanced budget by 2012. At the time, the Democratic staff of the Senate Budget Committee pointed out that the 5 year budget omitted almost a trillion dollars in cost from the war in Iraq and the annual AMT fix.

A lot has happened in the last year, but even the mid-year review in late July, 2008 only increased the projected 2009 deficit to $482 billion, and projected a budget surplus by 2012! Keep in mind that Congress had already provided the initial $70 billion in Fannie/Freddie bailout funds, $29 billion in loan guarantees to allow Bear Stearns to be "saved," and we were only weeks away from the $700 billion Troubled Asset Relief Program (TARP). This was at best incompetent, and at worst dishonest.

The Obama approach is a big change from the fictitious budgets we've had in recent years, and Republican opposition is already lining up. One of the points of contention will be Obama's plan to allow the Bush tax cuts for wealthy Americans to expire in 2010. Hedge funds are upset because their special loopholes will be closed. Lobbyists are coming out of the woodwork and swarming around our nation's capital to be certain they don't have to make any sacrifices.

President Obama deserves credit for giving us a clear picture of what we are facing, but as it stands, the 10 year plan is unacceptable. Over this period, it projects an increase of $7 trillion in our National Debt. Even allowing for the cost to bring our economy out of a serious depression, rescue the financial system, and pay ongoing costs as a result of the war(s), this is excessive.

Maybe a realistic 10 year plan will make us all realize the consequences of the past 8 years, and begin an honest discussion about who we are as a nation and what we plan to leave our children and grandchildren.