Why the president’s budget is a success

A president’s budget is only as good as the debate that it engenders. After all, Congress doesn’t even have to vote on it, and it rarely does.  

Measured by this standard, President Obama’s budget is a resounding success. Republicans have tagged it as a job-killer. Deficit hawks say it doesn’t go far enough. Budget doves fear the impact of cuts to heating assistance and numerous other programs. 


Even with the criticism, it nudges the debate forward. It brings Democrats to the table with tough but necessary cuts that move away from stimulus spending. It challenges Republicans with long-term investments to unclog highways, expand exports and produce clean energy. And it tees up a debate about entitlements and taxes by making it clear that incremental changes aren’t enough to bring the debt down to previous levels.

The timing of these cuts is right, given the state of the economy. The stimulating impact of the new tax and spending from the bipartisan agreement in December will easily offset the cuts in outlays in 2011. And it will send a signal to the markets that fiscal responsibility is on the front burner.

Republicans should appreciate that the president is leading his own party toward fiscal discipline. A five-year freeze in domestic discretionary spending may not go far enough for them, but they will find it easier to make the inevitable compromise with a president who has his own credibility on cutting spending. They wouldn’t be able to sell a compromise with a president who stands only for spending increases.

The key to a budget deal will be for Republicans to accept some investment in areas of the budget that spur economic growth. Democrats need to hang tough on that point because economic growth underpins the American Dream and also reduces the deficit through lower safety-net spending and more tax revenue.

The threat of government shutdown or a default on federal interest payments will undoubtedly play out over the next few months, but both sides will ultimately have to work together to prevent such mistakes. They will have to put the national interest above partisan interest. The president has taken the first step by moving toward the GOP.

A deal on spending is the price of entry to the big deficit game. The president’s budget will reduce the burden of debt that began to build up under former President George W. Bush. It will steadily reduce the debt from 75 percent of GDP to 72 percent by 2020. But there’s a long way to go to get back to the level of 33 percent in 2001. The coming demographic tsunami will require major changes in both entitlements and taxes, changes which only both parties can do together.

The president hasn’t shown his hand on the long-term debate, but he is watching closely what happens in the Senate. A rapidly growing bipartisan group of senators have started to parse the president’s fiscal commission report and determine what is possible to enact this year. It won’t solve all the problems, but it might just point the way out of the woods.

All this is necessary to avert an economic-growth crisis. The Office of Management and Budget and the Congressional Budget Office project long-term growth in the range of 

2 percent to 2.5 percent, well below what the nation has achieved in the past. At those levels, America will be hard-pressed to remain the world’s economic leader, afford the social-safety net and sustain desirable middle-class living standards.

Increasing growth by just one percentage point – from 2 percent to 3 percent – would have profound consequences. It would mean the difference between nearly full employment and even more crushing levels of joblessness in 10 years. It means an additional $1.7 trillion in economic activity in 2020 alone. It means rising middle-class living standards, affording our safety net and standing atop the world economic ladder.

As the president said in the State of the Union address: “We need to out-innovate, out educate, and out-build the rest of the world. … That’s how our people will prosper. That’s how we’ll win the future.” 

Together with the FY2011 budget, the president has started the nation down the path toward a brighter future for all. That’s a vision of success that no one wants ignore.

Kendall is Third Way’s senior fellow for health and fiscal policy.