2/19/2011

Geithner says that Deficits are unsustainable under President's plan



Sen. Jeff Sessions: “…Under your budget, the interest increases each year. It was $187 billion in 2009, under your proposal it increases to $844 billion”

Treasury Tim Geithner: “Senator, absolutely, it is an excessively high interest burden, it’s unsustainable”

Sessions: “Well it’s your plan. That’s the plan the President submitted.”

Geithner: “You’re absolutely right that with the president’s plan, even if Congress were to enact it, and even if Congress were to hold to it and reduce those deficits to three percent of GDP over the next five years, we would still be left with a very large interest burden and unsustainable obligations over time”

Sessions: “It’s not acceptable. I’m sorry, but that’s not a plan for winning the future, that’s a plan for losing the future…”

Remember headlines such as this in early 2009? "President Barack Obama's pledge to cut deficit in half a huge challenge" or "Obama vows to cut huge deficit in half" These were promises for the 2013 budget. The projected budget deficit now for 2011 is $1.65 trillion. So much for the deficit getting smaller over time.

The White House projected Monday that the federal deficit would spike to $1.65 trillion in the current fiscal year, the largest dollar amount ever, adding pressure on Democrats and Republicans to tackle growing levels of debt. . . .

It would equal 10.9% of gross domestic product, the largest deficit as a share of the economy since World War II. . . .

The deficit would decline in fiscal year 2012 to $1.1 trillion, or 7% of gross domestic product, under Mr. Obama's plan, as a year-long payroll tax holiday and an extension of federal jobless benefits expired, administration officials said. By 2017, the budget plan says, the deficit would be shaved to $627 billion, or 3% of gross domestic product. . . .

At $1.65 trillion, the administration's projection for the 2011 deficit is significantly larger than the $1.48 trillion estimated by the non-partisan Congressional Budget Office a few weeks ago. In fiscal year 2010, the deficit was $1.29 trillion. . . .




So one question is why isn't Obama really cutting spending? One possibility is that he just wants to make any Republican cut seem excessive. Possibly someone such as Obama confidant Cass Sunstein would argue for framing the issue. Making the gap between the Republicans and Democrats larger might be Obama's way of limiting the size of Republican cuts. Let's put it this way: how can $61 billion in budget cuts from a $1.65 trillion in deficit be extreme and result in forcing a budget shutdown? That is just a 3.69 % cut in the deficit. WIth $3.729 trillion in spending, this cut represents just a 1.6% cut in spending. (The White House puts the spending at $3.819 trillion.) All this concern about cuts is occurring despite the Federal government having grown by about 28 percent from 2008 to 2011 (netting out TARP and FDIC payments).

The Washington Post describes these cuts as: "House approves dramatic cuts in federal spending in 235-189 vote."

USA Today says: "House votes for big cuts in government spending."

The Associated Press: "House Passes Sweeping Cuts to Domestic Programs"

The Washington Examiner: "House vote to slash budget could lead to government shutdown"

The Economist: "Outrageous Cuts"

Of course, the $53 billion that Obama wants to put into high speed trains would almost completely offset these "dramatic cuts."

Look at the rhetoric over the shutdown.

Geithner said that the cuts would "undermine and damage our capacity to create jobs and expand the economy."

From CNN:
Sen. Chuck Schumer, the influential Democratic message man, labeled the cuts "extreme ideas."


From the LA Times: "But the vote, coming after 4:30 a.m. Eastern time following an all-night session, set the House on a collision course with Senate Democrats and the Obama administration. Both camps have dismissed the House package as extreme, especially with the economy still on such uncertain footing."

"A government shutdown would be a disaster for our nation and for our economy," Boxer said in a statement.
"It is our job to work together for the good of the American people, and that's why I call on my Republican colleagues to take the government shutdown option off the table," Boxer said. . . .


The claim is that because the Republicans are trying to cut government spending by 1.6% they are forcing the government to be shutdown.

Republican Speaker John Boehner has even refused to rule out a government shutdown if Republicans don’t get the spending cuts they want. . . .


Part of the anger is that some of the programs are being cut a lot more than 1 percent: "the measure cuts the Environmental Protection Agency's funding by a third." But that is after a nearly 50 percent increase in the EPA budget between 2008 and 2011.

Perhaps then it is not too surprising that Americans don't hold Geithner in high esteem.

Treasury Secretary Timothy Geithner is at the heart of the Obama administration's decisions about the economy, the issue voters consistently rate as most important, but more than one-third of voters now say they don't know enough about him to venture an opinion of the longtime government official.
A new Rasmussen Reports national telephone survey finds that only 24% of Likely U.S. Voters have at least a somewhat favorable view of Geithner, consistent with surveys for the past two years. Forty percent (40%) have an unfavorable opinion of him. These findings include six percent (6%) who view Geithner Very Favorably and 23% who regard him Very Unfavorably. But 36% have no opinion of the powerful Cabinet secretary. . . .

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1 Comments:

Blogger Chas said...

Markie Marxist sez: "Of course, the deficits are unsustainable! If they were sustainable they wouldn't be wrecking capitalist America, would they? That just wouldn't be common communist sense, would it? Ha! Ha! All your capitalism crushing deficits are belong to us, but you capitalists have to pay for them! Ha! Ha!"

2/19/2011 6:01 AM  

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