With the media reporting various offers and counteroffers regarding the so-called “fiscal cliff,” one question that no one seems to be asking is what will happen to overall federal spending during the president’s second term. During President Obama’s first term, federal spending increased an extraordinary 20 percent, rising from just under $3 trillion during President Bush’s last year to $3.6 trillion this year. In the budget that President Obama submitted to Congress last February, he proposed to further increase spending for 2013 to $3.8 trillion. The House promptly rejected the president’s proposal by 414-0. Even the Democrat-controlled Senate then rejected that by 99-0 last May. With President Obama now reelected and demanding large tax increases, it is time to ask whether the president is prepared to roll back any of the spending hikes of his first term, to a level below $3.6 trillion.
So far the administration and Congress both seem focused only on the annual deficits for the next 10 years, and guesses about various future scenarios about what might happen by 2023. But the most meaningful thing for this president and this Congress are the next four years — because those are the only budgets they can actually control.
At the end of the Clinton administration, with a Republican Congress, federal spending was only $1.79 trillion. If that level were still in effect today (even adjusted for inflation to $2.4 trillion), there would be no deficit problem. Federal revenues are already in that range. But at the Obama level of spending, there is a record federal deficit of more than $1 trillion per year. To address that problem, the president’s own Bowles-Simpson Commission had called for discretionary spending to be reduced to 2008 levels, and for entitlements to be contained. The president rejected that spending advice last year, and if accurately reported, his proposals during the “fiscal cliff” negotiations appear to increase spending (as well as increase taxes).
Instead of asking this question of whether the president will reverse even part of his first-term spending hike, the national news media appear to be obsessed with the question of whether Republicans in Congress will acquiesce to large tax increases. That puts the cart before the horse.
After four years of extraordinary spending growth and a 50 percent increase in the federal debt, responsible public officials from both parties should legitimately question why they should raise taxes and thereby hurt the economy before even $1 dollar of annual federal spending is actually reduced from today’s level.
When it comes to raising taxes, however, the president has the luxury of actually negotiating with himself, because federal taxes are set to increase automatically across the board in January 2013, even if the president won’t reduce spending at all from its current level of $3.6 trillion per year. Everyone understands the president wants tax hikes, of course, but we still don’t know whether he ultimately will agree to reduce spending from his first-term level.
Before President Obama, the United States had never experienced an annual deficit larger than $500 billion. Since President Obama took office, the United States has never had an annual deficit lower than $1.1 trillion. If that problem is going to be addressed, reducing spending has to be part of the solution. Raising taxes and raising spending levels is not a “balanced” approach to reducing the deficits caused by the current level of federal spending, and it will not solve the debt problem we now face. To the contrary, it would put us on the road to untenable debt levels more like those of Greece than anything seen before in the United States. If the president is sincere in his professed aim of a “balanced” approach of $3 of spending cuts for each $1 of new tax revenue, isn’t it time for him to propose spending reductions below today’s $3.6 trillion, instead of the further spending increases he is reported to have proposed so far?
Jeff Rosen is a Washington, D.C., lawyer and former official in the White House Office of Management and Budget.