Obama’s ‘down payment’ on fiscal restraint: Less than 1 percent

House Republicans want to cut $100 billion in federal spending this year. Think tanks have produced lists of cuts far beyond that.

And the president? Well, his idea of fiscal restraint is to cut $26 billion…spread over five years. From The Wall Street Journal:

President Barack Obama will call for a five-year freeze on nonsecurity discretionary spending in his State of the Union address Tuesday night “as a down payment toward reducing the deficit,” a White House official said.

The freeze won’t touch some of the budget’s biggest items, such as Medicare, Social Security and defense spending, nor will it apply to homeland-security spending or foreign aid.

You have to love the “down payment” analogy, given how much economic damage we’ve suffered the last few years due, in no small part, to the lack of seriousness banks and borrowers devoted to down payments toward home mortgages. Even if we accept the wrong-headed idea that only nonsecurity discretionary spending is on the table — a view rejected by House Majority Leader Eric Cantor — the president is talking about cutting about 1.1 percent from annual expenditures of nearly $450 billion. Needless to say, $5 billion is a fraction of 1 percent of the entire federal budget.

Some down payment.

Spending about as much as the disgusting amounts of money Washington has been spending is not an improvement. In fact, when a “freeze” keeps in place stimulus-inflated spending levels that were supposed to be temporary, it is for all intents and purposes a spending increase.

We’ll parse the rest of the State of the Union speech after the fact. But for now, let’s just hope that this White House official is simply trying to keep expectations low.

– By Kyle Wingfield

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38 comments Add your comment

John

January 25th, 2011
5:08 pm

You didn’t cite your source for the $26 billion dollar figure but according to the AP, President Obama’s proposal would cut $80 billion a year higher than the level of cuts Republicans want. From the AP…

Moving to keep a campaign promise to slash the federal budget, Republicans controlling the House Tuesday went on record to return most domestic agencies to 2008 budget levels in place before President Barack Obama took office.

The 256-165 vote came on a symbolic measure but is an opening salvo in an upcoming battle over the budget that will pit the House GOP against Obama and the Democratic-controlled Senate.

It came just hours before Obama was to issue his own proposal: calling for a five-year freeze for most domestic agencies at current levels. That’s more than $80 billion a year higher than the level of cuts Republicans want. Obama also reportedly will call for lawmakers to back a five-year plan put forth by Defense Secretary Robert Gates to save $78 billion in defense spending, an idea that has many Republicans anxious.

Peter

January 25th, 2011
5:16 pm

What was Bush’s fiscal restraint ?

Some People are stupid

January 25th, 2011
5:18 pm

Oh we have a source fite. So where is the 26 billion dollar number coming from?

Doug

January 25th, 2011
5:27 pm

Typical conservative make up numbers and then articulate shock and dismay at the number you made up.

retiredds

January 25th, 2011
5:31 pm

Kyle, at least the total conversation is moving toward budget cuts and possibly from there, debt reduction. By the way, that has been the plan all along, it has only been during the last year that the Republicans pushed by the Tea Partyites have been on board. So, Kyle, let’s all get on the band wagon for deficit and debt reduction and who knows we just might get it. After all, 45 years of Democratic and Republican promises (all broken), the nut is so large it can’t be denied.

Oh, and I must remind you, the economy is on track to grow 3.5% to 4% this year. Unemployment will get below 9% by the beginning of 2012 without any Republican ideas or support. I know they (the Republicans) will try to convince Americans that they are responsible for the recovery. It will be interesting to watch how they spin that one.

Why

January 25th, 2011
5:31 pm

Peter: He only had ten fingers.

Kyle Wingfield

January 25th, 2011
5:33 pm

John: The following comes further down in the WSJ article I cited:

“The president’s plan would save about $26 billion over five years, according to the White House budget proposal for the current fiscal year. Those savings would be dwarfed by the $100 billion in cuts for this year alone that many House Republicans are pushing.”

I was trying not to repeat myself, since I’d already paraphrased most of that information.

Also, I think you’ve misread the AP story. When I see that spending would be frozen “more than $80 billion a year higher than the level of cuts Republicans want,” I conclude that his cuts would be shallower than what the GOP has called for, not deeper. Isn’t that what the AP story is saying?

CJ

January 25th, 2011
5:39 pm

Even if we accept the wrong-headed idea that only nonsecurity discretionary spending is on the table…

Actually, President Obama is also proposing $78 billion cut in military spending. In addition, the New York Times is reporting that the freeze that Obama is proposing would save $400 billion over ten years. The administration (I’m guessing Daley) is quoted as saying “In areas outside the freeze, we also will be looking for cuts and efficiencies.”

http://www.nytimes.com/2011/01/26/us/politics/26speech.html?_r=1&partner=rss&emc=rss

Regarding Social Security, it’s worth repeating that it’s doing just fine. But if we want to extended the life of the fund even more, then we could simply raise or eliminate the cap on SS security payroll taxes rather than cutting benefits—an approach preferred by the vast majority of Americans, according to recent polls.

If it’s true that stimulus-inflated spending levels would remain in place (about $200 billion per year, give or take?), then that’s good news. With nearly 15 million unemployed, we need to continue to invest in infrastructure, clean energy, education, and other priorities that will help put people back to work in the short-run and sustain our economy for the long-run. And no, “investing” is not the same as “spending” because with investing, you get the money back—plus returns on that investment.

Again, neither Obama, nor Dems, nor Republicans should not be taken seriously on reducing the deficit until they get serious about health care inflation that is driving up the cost of Medicare. Everything else is nibbling at the edges.

John

January 25th, 2011
5:49 pm

I see where the $26($472 – $446) billion figure comes from but you left out some key elements in the article…such as this figure is based on the current budget propasal (which inclueded both budget decreases and increases in years 2010 – 2015) which was never passed. It goes on to state…

In his budget last year, Mr. Obama proposed cutting nonsecurity spending from $447 billion in fiscal 2010 to $441 billion this fiscal year as some stimulus spending runs out. In that plan, spending would then rise to $446 billion in fiscal years 2012 and 2013. But increases proposed for 2014 and 2015 would have brought that spending back up to $472 billion in fiscal 2015.

John

January 25th, 2011
6:00 pm

Kyle, the AP article is based it’s calculation on currentl levels of funding (which is the level President Obama is calling for a freeze) while the WSJ article is based on a budget proposal that was never passed. The government is operating on a stopgap measure not on the budget proposal put forth last year but was not passed.

You also didn’t mention, President also backs a five-year plan put forth by Defense Secretary Robert Gates to save $78 billion in defense spending which the Republicans don’t seem to be embracing. Of course, we know defense spending is among the largest area when it comes to spending.

Peter

January 25th, 2011
6:02 pm

Gosh..it is amazing now the Democrats are in office we have to have fiscal restraint…….

In the good old Bush years…..well they cut taxes and spent like drunken sailors……

Gosh I guess that is how we got here isn’t it ?

Creating that “Small Government and all ” .

John

January 25th, 2011
6:17 pm

Republicans proposal is to cut $100 billion from President Obama’s current budget. According to the AP article since the budget (which contained some increases) was never passed, the actual savings would be about $84 billion. According to the WSJ’s estimates, President Obama’s freeze proposal woudl be a savings of $26 billion but it does not include the $78 billion in savings in defense spending put forth by Defense Secretary Robert Gates. Add that together and that would be a savings of $104 billion…that’s $20 billion more in cuts than the Republicans’ proposal.

I Report (-: You Whine )-: mmm, mmmm, mmmmm! Just sayin...

January 25th, 2011
6:28 pm

And just think, he’s lying about the 26 billion.

Kyle Wingfield

January 25th, 2011
6:31 pm

@John: First, you’re not right about the $26B coming from $472B minus $446B, because the $26B is a five-year figure and the others are single-year figures.

Second, in order to have a “cut,” you have to compare it to something. If you don’t think the WSJ was right to compare his new proposal to his old one, fine. But in the absence of that old proposal, the freeze is a cut compared to…what exactly? You can’t say it’s a cut from current spending levels, because he’s proposing to freeze current spending levels!

Kyle Wingfield

January 25th, 2011
6:34 pm

John @6:17: You’re still mixing up five-year and single-year figures. The $100B figure is a single-year figure. The $26B and $78B figures (and you’re right, we should include the latter one) are five-year figures.

So even if we accept that the GOP is really talking about $84B in a single year, the president is talking about $21B per year on average.

Kyle Wingfield

January 25th, 2011
6:35 pm

And, for the record: I would consider $100B in a single year to be nothing more than a “down payment” on fiscal restraint.

EJ Moosa

January 25th, 2011
6:36 pm

At this point a freeze is meaningless. $260 billion in interest payments in 2009. Just a slight uptick in rates and that amount is going to skyrocket. And we are not reducing that amount until we have more than a balanced budget.

The budget must be frozen at it’s current levels. And frozen means frozen.

John

January 25th, 2011
6:52 pm

Kyle, as I showed even using the WSJ’s report it you add the $26 billion figure to the plan put forth by Robert Gates to save $78 billion from defense spending, it still adds up to more savings than the Republican’s plan…so Obama’s ‘down payment’ still seems to be a better plan.

Siince Obama’s plan is to place a freeze on current level spending, you cannot compare it to a budget which was not passed. The government is running under a stopgap measure that’s based on the budget that was passed for fiscal year beginning October 2009. That’s what the current level of spending is base on.

John

January 25th, 2011
7:06 pm

@Kyle,

” You’re still mixing up five-year and single-year figures. The $100B figure is a single-year figure.”

I’m not…Republicans proposal is to cut $100B from the current budget. As the WSJ points out that budget has projections for 5 years which is what they use to come up with the $26B figure. So far Republicans to cut $100B a year would mean their porposal would have to be $500B in the current budget. If the budget contains projections for 5 years, you can’t project one proposal to be spread over 5 years and the other proposal not be spread over the same 5 year period. .

poison pen

January 25th, 2011
7:07 pm

Peter, you and all the other liberals seem to forget how much it cost us to protect our country after 9/11
Do you just think that Bush pooped all the Billions and Billions of dollars that this cost?
Sometimes it wouldn’t hurt to put your brain in gear before opening your mouth.

ODDOWL

January 25th, 2011
7:08 pm

Republicans and their abstract economic hypotheticals that are not rooted in reality in any way, shape or form. Reagan, Bush-1 and Bush/Cheney borrowed and spent 20 trillion dollars over twenty years like drunken sailors. Most of that money was given to rich people as tax cuts. The only way we can pay down the debt quickly is by taxing the rich and making massive investments in our infrastructure that will create millions of jobs. Those workers will pay taxes that will help reduce the debt and eliminate the deficit. Share the wealth, tax the rich, pay down the debt.

Kyle Wingfield

January 25th, 2011
7:09 pm

@John: Let’s take the $26B + $78B over five years, an average cut of $21B per year. And then let’s take the Republican plan to cut $100B in a single year. Heck, I’ll even be charitable and accept your $84B figure.

Assume, for simplicity’s sake, a baseline of $1,000B (yes, that’s $1 trillion). And assume that, other than the cuts under discussion, all spending remains constant. In that case, spending under Obama’s $26B + $78B is:
Year 1: $979B
Year 2: $958B
Year 3: $937B
Year 4: $916B
Year 5: $895B
Total spending in those five years: $4,685B

Under the GOP’s plan:
Year 1: $916B
Year 2: $916B
Year 3: $916B
Year 4: $916B
Year 5: $916B
Total spending: $4,580B, or $105B less than the total spending under Obama’s plan. If we assume that they mean $100B when they say $100B, their five-year total is $4,500B.

The fact that the Year 5 total is slightly lower under Obama’s plan is little solace for the fact that he would have spent more in years 1-3 (and in year 4, if we assume GOP cuts of $100B).

Finally, I understand what the current level of spending is based on. The issue I raised is that a “cut” has to have a comparison, a reference point. If not a past budget proposal, then what? Without that reference point, he’s not even cutting $26B over five years.

Kyle Wingfield

January 25th, 2011
7:19 pm

And, I should add, Republicans who make one decent-size cut and then rest on their laurels aren’t going to make me and other conservatives very happy.

John

January 25th, 2011
7:43 pm

“And assume that, other than the cuts under discussion, all spending remains constant. In that case, ”

That’s a flawed assumption without taking into account all other areas of spending. For instace, Obama’s plan is to cut projected military spending…which of course, we know will increase. Without looking at the total budget projections, you really can’t compare the 2.

Dave

January 25th, 2011
7:44 pm

Whether John or Kyle is right, the proposed cuts aren’t a down payment even in the sub prime loan environment that was a big cause of our current situation. Say, it’s $100 billion. That’s less than 9% of the projected deficit – a deficit that is about 30% of the yearly tax revenue the feds take in. Can we keep spending a third more than we take in in taxes? For how long before we are Greece, Ireland, Portugal or Spain? There isn’t a dimes worth of difference between Dems and the GOP when it comes to spending other than where the money, at the margin, goes.

Dave

January 25th, 2011
7:46 pm

Sorry about some of the syntax, I was typing faster than my brain was working.

Peter

January 25th, 2011
7:46 pm

poison pen…. You have forgotten how Bush didn’t pay attention to the threat he was told about…that being 911.

I guess Cost Plus Contracts were American’s cross to bear ?

I guess starting a War instead of going after Bin Laden, and the made up WMD’s is what you are alluding too?

And of course rapidly growing the government, and bankrupting America is another Good Republican trait ?

Gee by the time Bush had left office 8 years had almost turned into the second Great Depression….another Republican trait.

Wasn’t Bush going to balance the budget by the time he was out of office ? Ahhhh the things Republican’s all forget about !

Peter

January 25th, 2011
7:48 pm

Wait a minute I also forgot to mention…….the tax credit one got during the Bush years for buying a gas guzzling SUV…now that makes sense…..If your family is in the oil Business…..like the Bush’s !

Peter

January 25th, 2011
7:53 pm

Gee even the Former Fed chairman said …..well the Iraq War was about the oil in Iraq…..

So Republican’s are you enjoying the great gas prices because of that WAR today ?

But of course abortion is KILLING…BUT..Bush prayed to “HIS GOD” before going into the Iraq war…… the God of Oil….. But hey..Mission Accomplished…..America was Bilked !

And of course Americans were killed by the thousands for the “Oil GOD “.

That is Republican ” Family Values ” at their best ! Right along with cutting education, as Republican’s love to do.

I Report (-: You Whine )-: mmm, mmmm, mmmmm! Just sayin...

January 25th, 2011
8:01 pm

obozo is what should be frozen.

get out much?

January 25th, 2011
8:47 pm

well since spending cuts usually equate to service cuts, it will be interesting to see what services are planning to be cut.

Intown

January 25th, 2011
10:37 pm

Cut cut cut yourself right out of power.

Peter

January 25th, 2011
10:47 pm

Hey get out much? ….. It is already all over the internet…easy to find…at least what the Republican’s want to do !

JF McNamara

January 25th, 2011
10:59 pm

Hey Kyle,

Can you and Bookman get together tomorrow and do a joint piece on the State of the Union Address? I already know you’re going to hate everything. He’s going to be okay with everything but might actually offer criticism. Rather than you both just hashing out the same tired party centered articles, why not do a joint posting where you both put things you liked, disliked, and think could be improved.

That way, we get to hear some good (as hard as that may be from you) and bad from you both. It might actually come out centered and unbiased.

Jeremiah

January 25th, 2011
11:58 pm

Great article Kyle.

Peter

January 26th, 2011
12:03 am

Ironically, The Tea Party Created $1 Billion in Earmarks in 2010
By Jay Anderson on Dec 13th 2010 5:14PM

“No more business as usual in Washington!”

“No more unnecessary government spending!”

These were the rallying cries of dozens of Tea Party-affiliated politicians who won their respective House and Senate races last month. Despite these political assertions, all sorts of Tea Party promises were broken on the government spending front in 2010 by members of the Tea Party Caucus in Congress before the midterm elections:

Members of the Congressional Tea Party Caucus may tout their commitment to cutting government spending now, but they used the 111th Congress to request hundreds of earmarks that, taken cumulatively, added more than $1 billion to the federal budget.

According to a Hotline review of records compiled by Citizens Against Government Waste, the 52 members of the caucus, which pledges to cut spending and reduce the size of government, requested a total of 764 earmarks valued at $1,049,783,150 during Fiscal Year 2010, the last year for which records are available. …

Rep. Robert Aderholt (R-Ala.), for one, attached his name to 69 earmarks in the last fiscal year, for a total of $78,263,000. The 41 earmarks Rep. Rodney Alexander (R-La.) requested were worth $65,395,000. Rep. Todd Tiahrt (R-Kan.) wanted $63,400,000 for 39 special projects, and Rep. Rob Bishop (R-Utah) wanted $93,980,000 set aside for 47 projects.

Rep. Denny Rehberg (R-Mont.) takes the prize as the Tea Partier with his name on the most earmarks. Rehberg’s office requested funding for 88 projects, either solely or by co-signing earmarks requests with Sens. Max Baucus (D) and Jon Tester (D), at a cost of $100,514,200. On his own, Rehberg requested 20 earmarks valued at more than $9.6 million.

Peter

January 26th, 2011
12:29 am

Kevin Jordan

January 26th, 2011
1:12 pm

Neither side will do what it takes. The spending needs to be completely slashed. Big, huge cuts. Like by 50%! Think that will happen???

See a recent post on just how much government spending is contributing to this “recovery”. It’s a whole lot!

http://www.precisiontradingsolutions.blogspot.com