The 192-Page Federal Budget: Drilling Down

The news media covered all the top line information about the new White House budget. Expenditures will be $3.8 trillion, if the package is approved. The deficit will be $1.6 trillion in fiscal 2010, and remain high at $1.3 trillion in fiscal 2011. The forecasts from the Administration are that by 2020 the federal debt will be $18.6 trillion which is projected to be 77% of GDP. The debt was 53% GDP last year. None of the figures based on estimates for financial events over the next ten years are worth much. The Congressional Budget Office and The White House already have deficit numbers that are different by several hundred billion each year from now until 2020.

The President will push his idea of freezing increases in discretionary programs that are 17% of GDP and claims that these actions will save $250 billion over the decade which has just begun. That is no better than a rounding error because the economy could throw the budget forecasts off by hundreds of billions of dollars in any one year. The biggest differences among all the models about how the economy will perform are the projections for unemployment. There is no way to guess that for the next quarter. An estimate that goes forward several years is nearly useless.

The budget proposal has $100 billion in money to create jobs for the 2011 fiscal year. Small businesses will get some of this and so will states and municipalities. The primary concern about whether these programs will work is that the $787 billion stimulus package from last year did so little to create jobs, and many economists believe that its effects will begin to wane this year.

The important unaddressed problems with federal spending are not handled in any important way in the President’s proposal. Social security, Medicare, and Medicaid take up a larger and larger part of the country’s expenditures each year. There are no proposed brakes on those increases. Cutting those programs would be too politically radioactive.

A look inside the 192-page budget proposal shows how many moving parts it has, many of them quite mad and nearly beyond comprehension. The White House plan eliminates or cuts 120 major programs by 2011 which will save $23 billion next year. The IRS should get more receipts from people who make more than $250,000 a year, if those people stay employed.

The hard part of analyzing the numbers in the budget forecasts is that even when effects of TARP, the costs of employment programs, healthcare modifications, and home default troubles are teased out, there are many initiatives which are impossible to analyze.

The Agriculture Department will improve and restore 200,000 acres of wetlands. It would seem that might be something that could be deferred, but the wetlands in question might deteriorate too much in the meantime.  The President’s National Ocean Policy which sets up coastal zone management as part of the Department of Commerce budget might be a cost that could be eliminated, but that might cause some portions of the sea to boil.

The costs of the Department of Defense are almost always hard to gauge and often difficult to justify. The 2011 expense request includes $159.3 billion for “contingency” operations which are almost entirely the wars in Afghanistan and Iraq. The separate budget for national intelligence has similar provisions for the wars.

The budget for the Department of Education has $210 million earmarked for Promise Neighborhoods which are meant to integrate school reform with strong families. These programs are hard to measure, so it is hard to decide whether it can be postponed without doing substantial harm to the nation’s teachers and students. The Department of Health and Human Services plans to spend $290 million to provide health centers to the underserved. The effects of this program are probably just as hard to measure as the school reform program is.

The Interior Department budget has $620 million to buy new land for public parks. The DOT budget sets aside $527 million for the President’s multi-agency Partnership for Sustainable Communities. The EPA will provide grants for States and Tribes to administer delegated environmental programs at $1.3 billion, the highest level ever.

There is not a single program on this list, or most other lists of projects that could be taken from the budget document, that is not important in some way and in need of money to advance some cause which is significant to the federal government, at least as it is made up today. The problem, which may be insurmountable, is that the President would like these programs to be funded in the same year just as every president before him has wanted for his budget.

The trouble in 2010 is that the money is truly not available and some of the programs in the budget are not essential to the future of the US, its citizens, or its allies now or in the foreseeable future.

As long as this budget along with any other presented over the next ten deficit-plagued years has a $6 billion five-year investment program for NASA, nothing of any substance will be done to bring federal government in line with expenses. The effort to put a dog on Mars will end up causing higher taxes for people who are only 15 years old today when they turn 25.

Douglas A. McIntyre