An OMB Watch Statement on President Obama's Fiscal Year 2011 Budget Request

PRESS STATEMENT
-For Immediate Release-
February 2, 2010

Contact: Brian Gumm, (202) 683-4812, bgumm@ombwatch.org [1]

An OMB Watch Statement
on
President Obama's Fiscal Year 2011 Budget Request

WASHINGTON, Feb. 2, 2010—President Obama has sent his budget request for fiscal year 2011 to Congress. Far from bringing change, it at best tinkers with federal priorities while perpetuating the wrong budget agenda.

On the positive side, the president spares the most vulnerable among us from the impacts of budget cuts, includes spending to create new jobs, progressively taxes those with the highest incomes, begins to close some tax loopholes, and calls on banks to pay their share of the bailout. Also, the president’s budget is fully transparent on war spending and other initiatives.

On the negative side, the president does little to fund fully the vital national programs that help financially stabilize families and protect all Americans from harm caused by contamination of the environment, our food supply, and consumer goods. His three-year freeze on non-security discretionary spending to reduce the deficit and debt is like attempting to empty the ocean with a teaspoon. It misses the major structural problems: entitlement spending and health care, in particular, as well as growing tax expenditures. Moreover, by focusing cuts on domestic discretionary spending, it ignores the waste, fraud, and abuse in military contracting, not to mention the accelerating cost of two wars. While most observers expected that revenue erosion caused by the ruined economy would result in a gaunt fiscal situation, the president, in his dedication to reduce the deficit, has emphasized the wrong priorities.

There is a time and place for deficit reduction, but many economists do not recognize Oct. 1 of this year as an auspicious date to begin that process. Indeed, the president’s budget anticipates unemployment will remain above normal until 2015, not falling below 8 percent until 2013 (9.2 percent in 2011 and 8.2 percent in 2012). But reducing the deficit and fully funding the nation’s priorities are not mutually exclusive goals.

We applaud the president’s desire to increase revenues by closing a few loopholes in the tax code, eliminating subsidies for the oil and gas industry, and letting costly tax cuts for those earning over $250,000 expire. However, the needs of the nation are great and require an even more robust revenue stream. President Obama at once touts $250 billion in spending cuts through a freeze in domestic spending that affects all Americans, but he loses that same amount through his estate tax proposal, which affects the wealthiest, multi-million dollar estates in this country. If the president chooses to put an emphasis on deficit and debt reduction, there are alternate areas of the federal budget that deserve scrutiny. Len Burman, in a Washington Post column [2], points out one way, which few ever discuss: address the growing use of tax expenditures. These expenditures are tax breaks that have become a hidden form of spending. Burman notes that if Obama were to extend his three-year freeze to tax expenditures (starting in 2013 so as to not harm the economic rebound) by capping them, he could save $3.5 trillion.

OMB Watch enthusiastically endorses the tax cuts and spending programs intended to boost job growth and help middle-class families. These proposals are a reminder that the federal government plays an important role not just in coming to the aid of lower- and middle-class families, but that it is also an essential ballast that keeps the nation’s economy on course. Job-creating legislation can and should be enacted for FY 2011, and at the same time, existing federal programs that help American families through tough economic times should be expanded or at least broadened to adjust for increased loads.

As the lower- and middle-classes struggle in a hostile economy, the president has unwisely made freezing spending in “non-security” programs a cornerstone of his deficit-reduction strategy. Although the president has not called for many cuts in programs that shield vulnerable populations from the ruinous economy, and in some instances has requested modest funding increases, he is sending the wrong message. By sparing spending on so-called “security” programs from the scalpel, the president is signaling that the defense industry is indispensible, free of inefficiencies, and a more important investment than the people of this nation. “Security” includes food on the table, research to protect diseases, housing, and other investments in our people and infrastructure.

In the president’s budget, the Department of Defense will see its funding grow by over $18 billion – a sum larger than the entire discretionary budgets of the U.S. Environmental Protection Agency and the Departments of Energy, Interior, and Labor. This is a shame, as the $708 billion Defense Department budget contains bloated weapons programs that soak up hundreds of billions of dollars, as well as pools of funding for contractors that work tirelessly to maximize their profits by extracting every possible penny from the government.

President Obama is correct in one budgetary respect. There is a real danger that in the coming decades, spending increases will swamp the federal budget, and with it the entire economy. This imbalance, however, is driven by the rapidly rising cost of health care, not by domestic discretionary spending. Confronting this situation will require drastic changes in how we deliver health care, and a continued commitment on the part of the president and Congress to reform the health care system is essential to this effort. Freezing domestic discretionary spending, especially with cuts to programs that protect all Americans, while sparing the programs which cost the taxpayers the most does nothing to correct the long-term structural imbalance and serves to hamper the prosperity of most of the nation’s citizens.

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OMB Watch is a nonprofit government watchdog organization dedicated to promoting government accountability, citizen participation in public policy decisions, and the use of fiscal and regulatory policy to serve the public interest.