For those hoping to avoid another debt ceiling fiasco like that witnessed in the summer of 2011, the president’s new budget is dread on arrival. It virtually guarantees a total impasse on budget negotiations that will end in a debt ceiling crisis by early in the fall.
The president’s 2014 budget proposal includes an alleged $1.8 trillion in deficit reduction over 10 years, $1.1 trillion of which is used to off-set $1.1 trillion in cuts already achieved by the sequester which the president employed shameless scare tactics to derail. In other words, the president, having once already failed to scare Congress and the public into rescinding the sequester, wants to try again.
The president’s budget, after using $1.1 trillion of the alleged $1.8 trillion in deficit reduction measures over 10 years, is left with $700 billion of claimed net deficit reduction. However, the president simply assumes that about $1.4 trillion of his total $1.8 trillion in claimed savings will come from winding down the wars in Iraq and Afghanistan.
No one believes the $1.4 trillion phantom savings number. The actual net deficit reduction proposed is more like zero. Without the proposed $563 billion in additional taxes on the wealthy, which Republican have already rejected, the deficit actually rises under the president’s budget. Its best parts are a cigarette tax boost of $78 billion, along with savings from re-indexing social security worth $230 billion, both over 10 years. The latter is strongly opposed by liberal Democrats.
The president’s budget is in fact a step backward on the road to sustainable fiscal policy. The $180 billion in annual tax increases already enacted earlier this year coupled with the $120 billion in annual spending cuts embodied in the sequester have put the US budget picture onto a sustainable path that leaves the debt-to-GDP ratio at or below 75%. The budget path already achieved during the first quarter of this year is better than what the president proposes.