President's Budget

I thought this snippet from Greg Mankiw summed up my feelings on the budget fairly well. I usually try to read through anything before commenting on it but when I downloaded the budget and it was over 400 pages I decided there were plenty of other books I'd rather read. That, and after the first paragraph where it stated that the American dream was to become middle class. Not too sure if I agree with that. Anyway, on to Mankiw's comments:

"The troubling feature of Mr. Obama’s budget is that it fails to return the federal government to manageable budget deficits, even as the wars wind down and the economy recovers from the recession. According to the administration’s own numbers, the budget deficit under the president’s proposed policies will never fall below 3.6 percent of G.D.P. By 2020, the end of the planning horizon, it will be 4.2 percent and rising.As a result, the government’s debts will grow faster than the economy. The administration projects that the debt-to-G.D.P. ratio will rise in each of the next 10 years. By 2020, the government’s debts will equal 77.2 percent of G.D.P.

This level of indebtedness has not been seen since 1950, in the aftermath of the borrowing to finance World War II.Making matters worse, these bleak budget projections are based on relatively optimistic economic assumptions. The administration forecasts economic growth of 3.0 percent from the fourth quarter of 2009 to the fourth quarter of 2010, followed by 4.3 percent the next year. By contrast, the Congressional Budget Office predicts growth of 2.1 percent and 2.4 percent for these two years. Lower growth would mean less tax revenue, larger budget deficits and a more rapidly increasing debt-to-G.D.P. ratio.The president seems to understand that the fiscal plan presented in his budget is not sustainable and, as such, is not really a plan at all. That is why the budget prominently calls for a fiscal commission that will be charged with “identifying policies to improve the fiscal situation.” The goal, the budget says, is “to stabilize the debt-to-G.D.P. ratio at an acceptable level once the economy recovers.”

In other words, President Obama’s long-term fiscal strategy is to appoint a commission to figure out a long-term fiscal strategy.