Tuesday, February 14, 2012

Obama's proposed budget

President Barack Obama released his 2013 budget proposal yesterday. "This Budget is a step in the right direction," he wrote in the introduction. "And I hope it will help serve as a roadmap for how we can grow the economy, create jobs, and give Americans everywhere the security they deserve."

But that's where the easy reading ends. The rest of the proposal is a mammoth 251 pages of tables, charts, footnotes, appendixes, assumptions, and calculations. Some items are mandatory, others discretionary. Some departments are sub-departments of other departments, making it easy to double count and undercount. Phrases like "discretionary cap adjustment" are used liberally. It's not written with the average American in mind.

After reading about a dozen articles analyzing the budget, I was miffed that none offered a simple table showing how much money the proposal wants to spend, and where. So I did just that, with a little context:

As a percentage of GDP, safety-net programs like Social Security, Medicare, and income security are all above the long-term average -- due mainly to a weak economy and an aging population -- while defense spending is actually below average. All other budget categories are about in line with historic norms, if not below. That's an important point that often goes misunderstood: The majority of government spending that is currently in excess of historic averages is on programs that are very popular with voters, like Social Security. As The New York Times reported this week, about half of Americans live in a household that receives government benefits.

So that's spending. What about taxes? Here's what Obama proposes:

Total taxes are as a percentage of GDP will still be below the historic average in 2013 -- and even that relies on an assumption that various tax proposals like allowing the Bush tax cuts on high-income earners will be allowed to expire. Politically, that's probably not going to happen. And without those reforms, deficits will be much wider. Current tax revenue is far below normal, totaling 15.4% of GDP. If tax revenue were at a historic norm, the budget deficit would be $400 billion lower this year, erasing about one-third of the shortfall.

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