Saturday, April 9, 2011

Budget For 2012 Will Be Much More Difficult Than the Budget for 2011

As the clocked ticked towards midnight last night and the country held its breath, the Republicans and Democrats reached a compromise agreement at the final possible moment on funding the federal government for the remainder of fiscal year 2011. Had they failed, vast elements of the federal government would have closed their doors, hundreds of thousands of federal employees would not have been able to collect their paychecks, and the lives of millions of people would have been disrupted.

Some might say that this agreement is evidence that the two political parties have not entirely lost their willingness to compromise on critical issues, and that what we saw last night should therefore give us a glimmer of hope. Perhaps so. But a pessimist might take the opposite view. After all, if it is this difficult for them to come to an agreement on whether to cut $40 billion rather than $36 billion (either of which would amount to only about 3% of the budget deficit for fiscal year 2011), how much more difficult is it going to be for them to tackle the budget for fiscal year 2012?

If this is the amount of political rancor caused by the possibility of cutting funds for National Public Radio, how much political rancor is going to be caused by the possibility of cutting funds for Medicare, Medicaid, Social Security, and the military? There was no suggestion by either side of substantial changes to current tax policy during the shutdown standoff; how much more bitter would the debates have been had changes to tax policy been put on the table?

The big budget battles are yet to come, and the episode we have just gotten through has been merely a preview of the main attraction. Everybody better hold on to their hats.


  1. I'd be interested in a similiar overview of the Democratic candidate for President.

  2. Budget Problems
    The deal agreed to by the GOP and Democrats averted a government shutdown and included $38.5 billion in budget cuts. These are the headlines we awoke to on Saturday, April 9th. The President, the Republican Speaker of the House and the Democratic Senate Majority Leader had worked out a compromise that saved the government. Congress actually got something done, the President showed some leadership and they finally have started to fix the budget problem.
    Could it actually be true?
    Don’t be naive! Its political sleight of hand and the media has been tricked. We’ve gotten great coverage of Obama at the Lincoln Memorial to show that the government is still open. Pages of newsprint are discussing the pros and cons of things that will be cut (or not cut) by this deal.
    Here’s what they actually did. They passed a budget that, according to the CBO, projects the government will collect $2.228 trillion and spend $3.708 trillion. That means we’ll have to ask the Chinese to LOAN us another $1.5 trillion. They did this knowing that they have already charged up $14.26 trillion. We also owe another $5 trillion to cover Freddie Mac and Fannie Mae liabilities that the magicians have used sleight of hand to keep off the books. This also does not include the $45.8 trillion in unfunded liabilities for Social Security, Medicare and Medicaid. That’s over $65 TRILLION we owe and they are bragging because they are only adding another $1.5 TRILLION this year.
    This is a serious problem and we need serious leaders to deal with it. Remember that in 2012.