As is apparent to anyone who has paid any attention lately, the economy is challenged. The situation is so difficult that the latest forecast from the Congressional Budget Office (CBO), issued prior to the Stimulus bill, indicates that the deficit for the current year would be nearly $1.2 Trillion. The CBO’s estimate of the impact Stimulus bill is to increase the deficit by another $185 Billion for a new total $1.4 Trillion.
This weekend in his weekly radio address, President Obama spoke about the need to get the deficit under control. With a deficit of at least $1.4 Trillion this year, President Obama set out a goal of reducing the deficit to a mere $533 Billion by the end of his first term. Simply amazing, or maybe not.
According to that same CBO forecast, the projected budget deficit for the last year of Obama’s first term, FY 2013, was projected to be $257 Billion. Yeah, yeah, I know. That nasty stimulus bill really jacked the future deficit up right? According to the CBO’s analysis, the increase is $28 billion in 2013 for a total of $285 Billion.
Well, that’s odd! Yes, but that’s not all.
In the same CBO forecast, they gave the estimated change to the deficit for a variety of other actions.
You may remember that Obama has promised to remove troops from Iraq within 16 months? You may also remember that Obama promised to make Bin Laden “Job #1”. I think it’s safe to say he’ll have that solved in the same 16 month period and because Bin Laden is the only trouble maker in the region, we should be able to pull the troops out of Afghanistan, certainly by 2013. The CBO forecast shows an alternative benefit of $30 billion if the total number of troops in Iraq and Afghanistan are reduced to 30,000 by 2013. He shouldn’t need that many but I suppose a token force is OK.
The CBO forecast assumes that the “Bush tax cuts” are allowed to expire, something that Obama has promised, so you don’t need an adjustment there.
The AMT gets fixed each year so that new folks aren’t pulled into it. While I doubt Obama will continue this because of his need to trap the few taxpayers left into higher brackets, I’ll be generous and take the $45 Billion, including interest, impact against the deficit.
That leaves us at a projected 2013 deficit of $290 Billion. That looks to be more than 45% less, $243 billion below, the audacious target President Obama has set for himself. Huh? The CBO tells us that discretionary spending, that which Congress can control without changing things like Medicare, Social Security etc., will be $1.220 Trillion in 2013. For the budget deficit to grow $243 Billion over the latest, adjusted for the Stimulus plan, forecast by the CBO, Congress will need to increase their discretionary spending by 20% over the assumed increases for inflation, growth and GDP adjustments. In the CBO’s forecast, discretionary spending is only expected to increase by $36 Billion over Obama’s term. If discretionary spending does increase by $243 Billion over the rate that the CBO has projected, it will grow at a rate that is 675% higher than that projected rate.
In November of 2008, while yet simply PEBO, Obama stated:
We will go through our federal budget – page by page, line by line – eliminating those programs we don’t need, and insisting that those we do operate in a sensible cost-effective way.
I guess this is yet another Obama promise that came with an expiration date.
On the plus side, a couple of additional announcements like this and Obama’s planned increase in the capital gains rate won’t be very news worthy. What capital gains will be left to tax?