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Deficit reduction to be gradual
President Barack Obama speaks about his budget for fiscal year 2011, at the White House in Washington, D.C.
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TEXT OF STORY
Tess Vigeland: With a nod to our friends at Sesame Street, today's top story is brought to you by the number 3.8 because it made a twin appearance today. In the first instance it's accompanied by the word trillion, as in the $3.8 trillion federal budget proposed by the White House today. And you'll find the second mention in that same document, where the budget assumes the economy will grow 3.8 percent next year.
Of course, numbers like that do not come without controversy. Marketplace's John Dimsdale reports on the highlights of budget day in Washington.
JOHN DIMSDALE: The budget forecasts a record $1.5 trillion deficit this year, over 10 percent of the entire economy. President Obama is still promising to cut that percentage in half by the end of his first term and get it down to 3 percent of the economy by 2015. But not right away.
PRESIDENT OBAMA: We won't be able to bring down this deficit overnight, given that the recovery is still taking hold and families across the country still need help.
The proposed budget takes a small whack at deficits by capping spending on everything except national security, Social Security, and Medicare. Tax cuts for the wealthy will be allowed to expire.
Josh Gordon at the Concord Coalition, which advocates for lower deficits, says Obama is doing the right thing by not cutting too much now. But:
JOSH GORDON: The real key is setting up the country for the even more difficult choices and austerity that we'll need in the longer term.
To bring the deficit under control, the budget depends on economic growth of 3.8 percent next year and above 4 percent for the following three years. But that depends on consumer spending.
Professor Steve Hanke at John Hopkins University says the rate of government spending has scared consumers into shutting their wallets instead.
STEVE HANKE: The stimulus program is a drag program. People are very worried about government expenditures and whether they're going to pay for them today or in a few years when they ultimately have to pay down the debt.
He says deficit reduction should begin right away.
In Washington, I'm John Dimsdale for Marketplace.
According to republicans, all he has to do is cut taxes to solve the deficit. I bet the more he cuts them, the faster the deficit will be paid off.
In fact, I bet if he cut taxes to zero, the national debt could be paid off by the end of the year.
While takign up the bill for government spending doesn't take the place of jobs as a high priority for savign pennies I do believe it is in the the stack of reasons somewhere. Most of us don't think our government will have enough to pay anything so that adds icing to the cake when talking about saving money. Also another reason for lack of consumer spending is retail price cuts. When Sachs Fifth Ave cut there prices by %75 on everything that put a serious nudge into the consumer mindset. If they can cut prices by that much and still make a profit why should I pay but so much. Truth does not go well with big money and politics. As for Mr. Obama freezing spending on everything except those items mentioned above (as he stated in his State of the Union address) that's a great idea but, those are the three biggest areas of debt. Defense, SS and Medicare equal more than half of the countries debt (both wars have equaled 1 trillion, Social Security hasn't peaked yet because not every baby boomer is drawing or able to draw yet (the ones in there early to mid 50's) and Medicare is what the health legislation was mainly about). To some up the comments made by MY fellow Americans above politicians and, as the Economist have said about consultants are out of touch with main stream America. Democrat, Republician and Independent alike just don't trust government period. Government isn't just suffernig from big spending there suffering from an issue of trust embedded within the American mindset. People forget Obama's largest supporting age group was between 18-29, %66 of his %52 total popular vote according to Pew Research Center and last time I checked most 18 - 25 years olds didn't, as my grandmother would have said, "have a pot to ...in and a window to throw it out of".
Sorry, but the idea that consumers are 'shutting their wallets' because of government spending is simply false. There are many reasons for austerity. Fear of losing your job and decrease in house values are no doubt at the top of the list. Only someone pushing an agenda would give government spending as the primary reason.
Prof. Hanke's claim that the 'stimulus' is a 'drag' on the economy is unsupported by any study or data and ignores reality. No one stopped spending while deficits ballooned ever higher during the fist eight years of the century. People are afraid to spend because they don't know whether they will have a job or their business will survive in the next quarter. I value your efforts to get various points of view, but try to limit the comments to people who have at least some rational basis for their opinions. Maybe a soothsayer, next time.
