Is Obama's budget too optimistic?
President Barack Obama laid out an ambitious budget blueprint last week, perhaps one that is too ambitious.
His $3.55 trillion in spending for the fiscal year 2010 that begins Oct. 1 will bring about a $1.7 trillion budget deficit. Unlike the state of Minnesota, which must end each two-year budget cycle in balance, the federal government borrows and pushes off debt to a future generation.
President Obama would cut the size of the federal deficit to $500 billion by the end of his first term, but projections then continue a $500 billion deficit as ongoing. What did President Bill Clinton do to leave a budget surplus for his successor?
There is no doubt that President Obama is serious about getting a handle on the budget, and that the American people understand it. No longer will war costs be held outside the budget; they will now be included in the budget for the people to see and understand. And President Obama will reinstitute pay-go, but probably not soon enough. He will urge for his 2010 budget and on that any additional spending be accompanied by a way to pay for it, through spending cuts or additional revenues. No longer should Washington continue spending money like a drunken sailor.
But much of the new revenues the president proposes is through higher taxes on the wealthiest 5 percent - by allowing tax breaks to them to expire in 2010 as scheduled - or through an new energy tax called cap and trade. It's the later that is the most ambitious and forms a cornerstone of the president's budget.
Under such a system, Congress would set a limit on the total amount of carbon emissions allowed, a so-called cap, and the U.S. Department of Energy would sell permits at auction to allow companies to continue to pollute more than the cap. The administration has set a goal of $646 billion in permit revenues, which we find extremely optimistic considering a new program and that Congress will likely fight it all the way, given special interest pressures from polluting corporations.
But that tidy sum is a lynchpin to the Obama budget, helping to fund other key resources, such as making permanent the tax credit that wage-earners will start seeing in their paychecks starting April 1 as part of the economic stimulus package.
Cap and trade would also be used to fund a $150 million over 10 years research fund into renewable fuels, research that can be done locally and its findings put into practice locally.
President Obama titled his budget well: "A New Era of Responsibility." It is not only time for Americans as individuals to take responsibility for our actions, but also Congress to take responsibility to supply balanced budgets.
If what the president laid out would only come true ... but that will be a steep journey up a long and lonely Capitol Hill.