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Center for American Progress

STATEMENT: CAP’s Michael Ettlinger on the FY 2011 Budget Proposed by President Obama
Press Release

STATEMENT: CAP’s Michael Ettlinger on the FY 2011 Budget Proposed by President Obama

President Obama is no deficit peacock. His new budget does more than just offer showy platitudinous feathers: it offers serious measures to start to rein in the massive, mostly inherited, federal budget deficit. But neither is he a doctrinaire deficit hawk, bringing down the deficit prematurely, squashing our fragile economic recovery. He continues to support needed investments in the economy. These investments are an imperative for fixing the damage done by the Great Recession of 2007-2009 and to put us on a path to long-term economic growth. The president understands the need to invest in our nation’s future to enable American companies and workers to compete globally in the 21st century.

In particular, the Obama administration’s new budget reflects the president’s commitment to such imperatives for long-term economic growth as health care reform, moving to a clean energy economy and education while still taking steps on the deficit.

Rising health care costs are a drain on our economy. Getting them under control is the single most important step to addressing our long-term fiscal problems while boosting the productivity and prosperity of our workforce. The budget also includes needed investments in clean-energy technology—investments that are vital for the United States to take leadership in one of the most important global economic transformations since industrialization. The budget also shifts funding from lower-priority areas into education with a focus on not just “more” but “better”—offering true reforms to improve the quality of education. These steps are essential to our nation’s long-term economic competitiveness and broad-based prosperity.

These investments, and all of the other worthy programs within the budget, are proposed in the context of a difficult fiscal situation. The administration inherited huge deficits from Bush administration, the result of tax cuts, the failure to pay for two wars, and other unfunded spending—all exacerbated by the collapse of the economy beginning in late 2007. The administration offers a set of measures to address this fiscal problem, most notably a spending freeze on nonsecurity discretionary spending, tax increases, and health care reform.

In addition, the president plans to create a new commission that will have as its goal to design a budget in primary balance by 2015. Primary balance is when government revenues equal government program spending, excluding payments on interest on the debt. A budget in primary balance is one where the basic bills are being paid and overall debt is not increasing. As we described in our report “A Path To Balance,” released in December, we believe that primary balance is an appropriate intermediate target.

Indeed, the year-by-year revenue and spending levels over the next five years that the administration proposes are consistent with the path we outlined. We believe this to be a responsible approach to getting the fiscal situation under control. Further steps will have to be taken beyond 2015, which means the administration needs to be more explicit about the long-run fiscal goals for the country. But the combination of the freeze, tax increases, health reform, and the new commission is a serious first step.

The president also includes funding for added investments in job creation in 2010. Although this will increase the federal deficit this year, it is vitally needed and serves the purpose of deficit reduction. With unemployment still riding high, and economic growth uncertain, it is premature to reduce the budget deficit precipitously. If anything, the investments in job creation in 2010 are short of what might be needed. Economic growth is a key to addressing our fiscal challenges; with economic growth comes revenue and declines in safety-net spending. Spending now to change the momentum of the economy will create self-feeding momentum for 2011 and beyond. That’s money well spent.

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

To speak with Michael Ettlinger, please contact:

Print: Jason Rahlan, 202.481.8132 or [email protected]

Radio: John Neurohr 202.481.8182 or [email protected]

TV: Andrea Purse 202.741.6250 or [email protected]