President Barack Obama has proposed a $3.7 trillion federal budget for fiscal 2012. He claims this budget and his future projections will lower total federal deficits by $1.1 trillion during the next 10 years.
Unfortunately, that is a trivially small amount that still may lead to financial ruin for the country.
Republicans in Congress claim they will cut $100 billion in spending this year with more cuts for 2012. However, even the Republicans are not facing up to the current situation.
The reality is that Obama is moving to make the stimulus spending permanent. Federal spending has jumped by $800 billion per year since 2008 and future budget projections do not show the stimulus spending ever disappearing.
If Obama can get a spending freeze at current levels in the guise of reducing the deficit, he will have tricked the public into a permanent 25 percent increase in the size of the federal government.
Why Republicans are not pointing this out and insisting on large, immediate cuts is beyond me.
Only Sen. Rand Paul, R-Ky., is calling for the removal of the stimulus. He is calling for essentially eliminating the budget deficit in two years by cutting about $500 billion to $600 billion per year for two years in a row. These are the types of cuts that are needed.
Defenders of federal spending claim any cuts will be painful, as we need all this spending. Yet most of this spending was begun under either Presidents George W. Bush or Obama.
To find these increases, I looked at the federal budget and compared 2001 to 2010 for each agency. To be fair, I adjusted 2001 spending upward to account for inflation and population growth since then.
Here are some of the examples I found. Education spending has increased by $60 billion, a 147 percent increase.
The Department of Agriculture is up $52 billion (including a huge increase in food stamps spending).
Spending in the Department of Labor has increased $157 billion (344 percent), which includes extending unemployment benefits.
Transportation spending has increased $25 billion; Housing and Urban Development is up $18 billion; Commerce is up $10 billion (176 percent); State Department spending has grown $16 billion (184 percent); and the Department of Energy is up $17 billion (89 percent).
Holding these agencies’ funding to 2001 levels (increased for population growth and inflation) would reduce federal spending by $355 billion. That would immediately chop the deficit by about one-quarter.
If we next look at the Departments of Defense and Homeland Security, there is an additional $340 billion in spending increases above inflation and population growth.
The wars are half of this increase. But if we cut the other half, we could push federal spending down by more than $500 billion while leaving every agency with as much spending power as it had at the end of the Clinton administration.
How do we get political support for such cuts?
First, Republicans need to accept cuts in defense spending. Second, since it is the actual cuts in programs that cause difficulties, I propose a two-step, bipartisan process.
The Republicans should pass a budget with real, significant cuts in agency budgets as outlined above; $400 billion to $700 billion could easily be cut in this manner in one year.
Then Republicans should let Obama and his Cabinet decide how to cut each agency’s budget. Perhaps this would give each side enough of a win to actually do something that would be good for the country.
Jeffrey Dorfman is a professor of economics at the University of Georgia.
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