Budget Ambition

President Obama’s Fiscal Year 2012 Budget Gets the Goal Right

Michael Ettlinger explains why long-term deficit reduction requires patience and planning, not political theater.

The 2012 budget on display at the U.S. Government Printing Office. (AP/Jacquelyn Martin)
The 2012 budget on display at the U.S. Government Printing Office. (AP/Jacquelyn Martin)

Critics are attacking President Barack Obama’s federal budget plan from several directions. Some are angry that the proposal takes some tough steps to reduce discretionary spending to begin tackling the federal deficit in FY 2012 starting in October this year. Others, however, are attacking the president for not reducing the budget deficit fast enough and far enough. In the latter category are, particularly, the members of the president’s expired deficit commission.

My colleagues at the Center for American Progress will be examining the discretionary spending cuts recommended by the president in the coming days—analysis that will weigh those cuts against the draconian measures that Republicans in the House of Representatives want to make in what remains of this current fiscal year. My beef here is with the deficit purists from the president’s deficit commission who are lamenting his “failure” to adopt more of the ideas that came out of the commission’s deliberations, and in particular, to slash the deficit to the extent the commission chairmen recommended. The fact, however, that the ideas that came out of the commission were pretty much “dead on arrival” from the start suggests that the president is exactly right in offering a more modest and achievable path.

Raising taxes and reducing spending are the two politically most difficult things for our democracy to do. A divided government such as we face now makes it doubly hard. Progress is possible but the answer will have to be crafted with respect for the tremendous political challenge that deficit reduction presents. While the impatient purists would like to see plans to solve the nation’s long-term problems right now, trying immediately to completely solve our substantial long-term budget challenges would both make success unlikely and be largely pointless because other presidents and Congresses will have much to say about the budgets of the future.

The president, in the budget plan released today, is right to begin taking concrete actions that will lead to deficit reduction. While reducing the deficit too fast would choke our nascent economic recovery and undermine the president’s top priority of job creation, the country does need to show the world how we are going to get our fiscal house in order.

The president started down this road last year when he tasked his National Commission on Fiscal Responsibility and Reform to develop policies to achieve two goals. The first was to bring the budget into primary balance by 2015 so that revenues equal spending except for interest on the debt. The second was to meaningfully improve the country’s long-term fiscal outlook.

These were the right two goals. It gave the commission the opportunity to develop recommendations that could be put in place now that would make it more likely that future Congresses and presidents would succeed in having low or no deficits. The more specific goal of primary balance was also well chosen. In fact, the Center for American Progress recommended it in our report “A Path to Balance.” At primary balance the level of national debt is generally not increasing relative to the size of the economy. That’s no small accomplishment. The national public debt was 62 percent of GDP in 2010 and is likely to be at 90 percent in 2020 if nothing is done. Stabilizing it at the 2015 level, which is likely to be about 76 percent of GDP, would be a significant improvement.

Another virtue of primary balance is that you can see it from here. The tax and spending changes to achieve that goal would be tough, but they are imaginable. The target year for the goal of primary balance, 2015, is also right. It’s far enough away that we should be clear of the Great Recession but soon enough that current measures can have a substantial impact.

The commission failed late last year to garner sufficient votes to approve a plan for either of its goals. There’s a lesson to be learned here. The commission was overpopulated by the “take your medicine and like it” crowd: deficit hawks with strong views on taxation and spending who aren’t inclined to tweak those views in deference to the views of the public or other policymakers. This surely contributed to the decision of the commission chairmen—reflected in their proposal—to suggest such hugely unpopular ideas as raising the retirement age for Social Security and slashing the value of the mortgage interest deduction. It also led to the recommendation that the deficit be reduced in 2015 to far below—almost $200 billion—the amount needed to hit their assigned target of primary balance.

The problem with such aggressive deficit reduction is that it is extremely hard to imagine a Democratic president, a Republican House, and a filibustered Senate being able to agree on how to do it. There are deals to be had, but above a certain level of deficit reduction one can’t hit the target without getting into each party’s “untouchables,” or programs and tax measures that are completely off the list of what’s possible for them.

This doesn’t doom us forever. But before we get to the deeper deficit reduction we need, policymakers are going to have to move their lines in the sand and start bringing their constituents along with them. And that’s going to take some time and probably another election with these issues squarely on the table and a renewed mandate for the president.

The president offered today a plan to come close to primary balance by 2015 and hit it by 2017. This would stabilize debt at 76 percent of GDP. Obviously nothing the president proposes is going to just sail through Congress. But it’s a plan that is a reasonable starting point for discussion with a goal around which agreement can be had. That’s more than can be said for the proposal offered by the commission’s chairmen.

The point here isn’t that the president’s plan or one the Center for American Progress offered in December aimed at the same goal are better plans than what the commission chairs offered. The point is that there’s room to develop plans that aren’t beyond the pale if one doesn’t bite off more than one can chew. It’s not easy, but it’s conceivable that one can come up with something that the Republican House, the filibuster-bound Senate, and the president could agree on if the goal is one that doesn’t mandate putting bull’s-eyes on each party’s most cherished priorities. The president and Congress would do well to keep that point in mind as they hash out the budgets for 2012 and beyond.

Michael Ettlinger is Vice President for Economic Policy at American Progress.

See also:


The positions of American Progress, and our policy experts, are independent, and the findings and conclusions presented are those of American Progress alone. A full list of supporters is available here. American Progress would like to acknowledge the many generous supporters who make our work possible.


Michael Ettlinger

Vice President, Economic Policy