Thursday, April 14, 2011

Fiscal Insanity Continues IV

The budget crises continues to intensify. On Wednesday, April 13, 2011 the President provided a nice sounding positive rhetorical speech that was vacuous in real intent. The Washington Post in covering the speech ran this article: "Obama announces framework for cutting deficit by $4 trillion over 12 years"

The problem? Obama did not offer a real tangible implementation plan and the allusion to cutting the deficit by $4 trillion dollars is nothing more than smoke and mirrors. Jennifer Rubin wrote: "The president speaks, says very little".

Based on a website that tracks government spending (assuming that the website is accurate) Obama's budget proposals has (will) run-up an increase in the deficit by approximately $5.5 trillion dollars over four years. So in four years you can spend like a drug addict, but then you offer to only "reduce" (whatever that means) the deficit by $4 trillion in 12 years!

But let's go a step further, the phrase "cutting the deficit" seems undefined. Basically a misleading word play. When someone says that they are cutting the deficit that means, to me, an actual reduction in the deficit. According to the website, where I got my data, the US debt by the end of 2012 will be approximately $19.03 trillion dollars. So if Obama is being honest with this assertion of deficit reduction the US debt should be reduced to approximately $15.6 trillion dollars in 12 years.

Note that in 2009 the US debt stood at $14.5 trillion dollars.

Like most politicians, Obama assertion of actually "cutting the deficit" is fanciful. What he appears to be doing, in reality, is claiming that the proposed spending cuts and tax increases would result in a debt that is $4 trillion dollars less than was otherwise projected.

The website that I have been using only goes to 2016, essentially five years from now. $4 trillion dollars divided by 12 years would amount to annual $0.333 trillion dollars "reduction" in projected spending. Multiply that by 5 and we would have an approximate $1.7 trillion dollar "reduction". According to the website, the US debt, based on current projections, would be $24.3 trillion dollars. Obama's "savings" would result in an approximate debt of $22.6 trillion dollars.

For 2011 the projected debt is around $18.1 trillion dollars. By 2016 the debt with Obama's "savings" will rise to to $22.6 trillion dollars. A yearly increase in the debt of around $0.9 trillion dollars. One can hardly call this continued increase "deficit reduction" or even fiscally prudent spending. Obama in 2006 uttered these prophetic words, which he now conveniently "regrets".  "The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure."

So when are we going to see real leadership? To be credible Obama concerning his proposed budget, should have offered specific dollar revenue/expenditure figures for the remainder of FY2011 (which should have been passed by October 1, 2010 (another leadership failure)) and for Fy2012.

As an acknowledgement to Thales750 and Vassago; it is the US House of Representatives that actually passes the appropriations bill. Obama's budget proposal is a recommendation to the US House of Representatives.

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