President's plan panned - Do the numbers add up in emergency budget proposal?

President Obama is continuing his campaign rhetoric, repeating that we need a balanced approach to our country’s fiscal demise.

Before my retirement, I held a position that included building budgets. When we worked on our budgets, the term balance had an entirely different connotation. In my work, the budget consisted of two sides — the income or revenue side and the expenditure side. In the finished product, the two had to balance. This is what we called a balanced budget. Where is the balance in the president’s balanced approach?

 It seems that the entire speech-making I hear coming from the president concerns mostly the revenue side of his budget. He wants to raise $960 billion over the coming decade ($96 billion annually) by raising taxes on the wealthy. According to the Washington Post, he would raise another $650 billion ($65 billion annually) by other new taxes and $50 billion ($5 billion annually) in stimulus spending. The latter most likely comes from printing or borrowing money, which would add to the deficit and increase the debt. The Washington Post also reveals he plans spending cuts in the amount of $400 billon ($40 billion annually). This amounts to $4 dollars of increased taxes for every $1 in spending cuts. This ratio should be reversed in order to lower the deficit and reduce the debt.

 Numbers such as those in President Obama’s plan are often misleading because the government uses baseline budgeting. Remember when the president announced in his State of the Union speech, “We have already agreed to more than $2 trillion in cuts and savings.” Because we have a budget of almost $4 trillion, that should make us overjoyed. But, what’s the rest of the story? Are we really cutting the budget in half?

HERE’S HOW baseline budgeting works. If the government’s budget is projected to grow by $100 billion and instead only grows by only $75 billion, they have cut or saved $25 billion. Note however, that it still grew by $75 billion. Think of it this way. If you expect to gain 50 pounds on your new diet and instead gain just 25 pounds, have you lost 25 pounds?

 What’s wrong with the revenue picture? Assuming recent tax cuts and all other fiscal policies and entitlement programs remain the same, the following discussion is formulated by utilizing CBO information and projections. In 2001, revenue was 19.5 percent of Gross Domestic Product (GDP) and expenditures were 18.2 percent (a surplus). By 2011 revenue was 14.8 percent of GDP and outlays were 24.1 percent (a deficit).

If we continue the current rate of spending along with the expected increase in unfunded liabilities, the CBO’s projection for 2021 will be 18 percent of GDP (a bit above normal) for revenue and 25 percent for expenditures (a growing deficit). With no reforms to entitlement programs, by 2035 the CBO projects the revenue to remain at 18.4 percent but expenditures to skyrocket to 33.9 percent of GDP (huge growth in deficit).

If the 2035 CBO projections are correct, federal expenditures will be 86 percent higher than they were during the Clinton era. However, notice the revenue will remain about average or a little above. From an analysis of these figures, it shows there is no shortage of revenues. The revenues beyond 2011 will predictably increase slightly but expenditures will explode. Therefore, we can assume it’s a spending rather than a revenue problem.

 Some say the Bush tax cuts are responsible for a growing deficit problem. However, when the Bush tax cuts were in place, revenue rose in comparison to GDP from 18.2 percent in 2006 to 18.5 percent in 2007. If revenue actually increased, obviously a spending problem caused the deficit to grow during this period.

THE ELECTION is over. It’s time to abandon campaign rhetoric and get down to doing what is best for the country. Considering the information furnished by the CBO and presented above, it seems time would best be spent on balancing the budget by lowering spending rather than concentrating so much time and effort on tax increases.

 One of the reasons the country is $16.3 trillion in debt is because, for too long, the federal budget makers have refused to balance the budget (revenue matching expenditures) and have run an annual deficit. Each year, our deficits have been adding to the national debt. We’ve added another $305 billion since crossing the $16 trillion mark in August 2012 (three months).

We could easily compare this to people misusing their credit cards. If they spend and only pay the minimum on what they have charged each month, it continues adding to their total debt. Many people have found themselves in the same position as the federal government. They owe more than they can possibly afford to pay, often resulting in bankruptcy. The best way to resolve this is to quit spending and charging.

 The country is headed for a real train wreck if we do not switch to a different track, and it could make the so-called Fiscal Cliff look like child’s play. The government cannot possibly collect enough taxes to balance the budget at the current rate of spending and, at the same time, pay off the national debt. It will require holding the line on spending, including unfunded liabilities, and this is going to be the hardest part of all.

 When the president’s new plan calls for $1.6 trillion in new taxes, (up from his previous $800 billion) which includes $4 in new taxes for every $1 in cuts, it completely misses the mark. This ratio is just the reverse of what it should be to signal any seriousness in tackling a financial meltdown.

On top of that, he wants Congress to abdicate its constitutional responsibility of providing the funding for all federal expenditures. He wants to abolish the “debt limit,” which would give him carte blanche when it comes to spending.

This fits with his view of the Constitution as being a document that “is not a static but rather a living document and must be read in the context of an ever-changing world.” The changes he seems to have in mind, unfortunately, are those which increase his own eminence, avoid the Constitution, and bypass Congress.

Lester D. Still is a resident of Kalispell.