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Posted at 4:15 PM ET, 02/14/2011

The budget battle of 2011: Deja vu all over again

By Glenn Kessler

"Rather than fight the same tired battles that have dominated Washington for decades, it's time to try something new."
--President Obama, in a quote displayed on the home page of the Web site of the Office of Management and Budget

A brand-new Republican-led Congress demanding serious cuts in the existing-year budget. A Democratic president under assault for increasing the budget deficit. A budget proposal that claims to cut hundreds of programs while leading the nation on a "sustainable path" to deficit reduction

It's 1995 all over again.

The players are different and the numbers are larger but the playbook is the same. President Obama's 2012 budget blueprint--overseen by a man who once was Bill Clinton's budget director (that's Jack Lew in the video above)--looks rather similar to the budget strategy used by the last Democratic president facing an emboldened Republican party.

The Facts

The 1994 midterm election ushered in the Republican revolution led by House Speaker Newt Gingrich (R-Ga.). An immediate priority of the new Congress was eliminating billions of dollars from the existing year's budget--about $16 billion in cuts, or about 3 percent of the overall discretionary budget. (Most of the budget is made up of mandatory programs whose funding can only be changed by new laws, such as Social Security and Medicare, so the real budget fight is over the programs that need to funded year by year, such as defense, education and foreign aid.)

During the first two years of Clinton's presidency, Democrats had passed a deficit-reduction bill that included tax cuts for the working poor and tax increases on wealthy Americans, but few spending cuts--and earned not a single Republican vote. The now-in-power Republicans vowed to pass a balanced budget, and Clinton responded with a budget that essentially dared them to go first. The 1996 budget blueprint claimed Clinton would streamline or eliminate 400 government programs, resulting in savings of $144 billion over five years. He left untouched most of the mandatory spending programs. The result was a "sustainable" path of $200 billion in deficits as far as the eye could see.

Clinton also used some sleight of hand to achieve his claimed savings. He deferred much of the cuts until later in the five-year window--and assumed somewhat higher inflation and growth than most analysts expected, allowing him to claim cuts from a higher baseline.

Clinton's goal was to goad the Republicans into taking the painful first steps toward cutting programs. By the end of the year, the clashing visions of the two parties led to the epic three-week government showdown, which resurrected Clinton's presidency. But the battle (and a gusher of tax revenues from a booming economy) also set the stage for an eventual balanced-budget deal.

Fast forward to 2011. House Republicans are pressing forward with a plan to slice $100 billion from this year's budget, which as a percentage of the discretionary budget is about double the size of the $16 billion sought (and achieved) by the 1995 Republicans. Obama has responded with a budget plan that looks suspiciously like the Clinton budget for fiscal year 1996.

Like Clinton, Obama barely nicks the mandatory spending programs. Like Clinton, Obama claims he will eliminate or reduce hundreds of programs. Like Clinton, Obama wants to increase spending in some areas while claiming to cut in others. Like Clinton, Obama appears to be estimated future inflation and growth at a higher rate than the Congressional Budget Office, making it easier to claim "cuts" in later years. And like Clinton, the overall deficit reduction is less than advertised.

Buried deep in the budget, Table S-2 shows the effect of the budget proposals on projected deficits. For 2012, the anticipated deficit was $1.09 trillion. After adding in the impact of various proposals--tax increases, spending freezes and the like--the net deficit reduction is increase of $11 billion. That's right, the deficit actually increases slightly in the first year as a result of the president's proposals.

While deficit savings are claimed in later years, the budget is rewritten every year, so the first year is the most important. For later years, the most significant savings comes from the administration's assumption that the wars in Iraq and Afghanistan will wind down. In 2013, Obama is assuming $82 billion in savings from "overseas contingency operations"--and total deficit reduction of $79 billion.

In fact, cutting spending for the wars is the biggest revenue saver. Over five years, $443 billion would be saved in that category, compared to $154 billion in savings from the administration's much ballyhooed freeze on nondefense discretionary spending and $188 billion in revenue from tax increases and tweeks to mandatory programs.

When individual discretionary programs are compared over the years in constant 2005 dollars (Table 8.8 in the historical supplement), it is clear that over five years the president's budget blueprint would make only a small impact on the runaway spending of recent years. Here, in inflation-adjusted dollars, is how much was spent on defense and nondefense discretionary in key years over the past three decades--and would be in 2016:

1980 $331 billion
1990 $462 billion
2000 $362 billion
2010 $608 billion
2016 $540 billion

1980 $355 billion
1990 $321 billion
2000 $374 billion
2010 $581 billion
2016 $446 billion

Spending in both categories thus would still be higher than under Jimmy Carter, George H.W. Bush and Bill Clinton.

The Bottom Line

Every president's budget blueprint is a political document. It would be silly to pretend otherwise. Obama's budget reorders some priorities, with little impact on the deficit, and all but dares the Republicans to make politically difficult decisions first. Let the budget battle be joined.

Follow the Fact Checker at Twitter@GlennKesslerWP


A reader wondered what these figures above would be in terms of a percentage of the overall economy (i.e., gross domestic product). I answered below in the comments but thought it would be worth posting as part of the main article as well.

The GDP numbers are in table 8.4 and show, as share of GDP, these results:

1980 4.9 percent
1990 5.2 percent
2000 3.0 percent
2010 4.7 percent
2016 3.4 percent

1980 5.2 percent
1990 3.5 percent
2000 3.3 percent
2010 4.1 percent
2016 2.8 percent

While nondefense discretionary spending would be rather low as a share of the overall economy, the chart also shows that mandatory spending and net interest would grow to 16.3 percent of the overall economy, a new high. That figure shows where the real challenge lies in the budget.

By Glenn Kessler  | February 14, 2011; 4:15 PM ET
Categories:  Barack Obama, Economy, issue context  
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Next: Ryan's claims of trillions in new spending in the 2012 federal budget


Looking at Pres Obama's budget on a macro level, three things jump out.

First, the deficit -- the gap between the red spending line and the blue revenues line -- exploded during the Bush presidency, and it was a function not just of spending, but also of declining revenue thanks to the Bush tax cuts.

Second, President Obama's FY2012 proposal would shrink the deficit, narrowing the gap between spending and revenue that he inherited from the Bush presidency. It accomplishes this by freezing non-defense discretionary spending and by growing revenue by eliminating the Bush tax cuts on the wealthy. Overall, President Obama's proposal would reduce the deficit to about 3.3% of GDP, down from 10% in Bush's final year and the 2011 estimate of 11%.

Third, despite President Obama's proposal for a non-defense discretionary budget freeze, spending as a share of GDP flatlines in 2015 and begins to grow again in 2016. Although the chart doesn't show this, the biggest factor in that increase are health care costs.

Bottom-line: although there's ample reason to doubt that short-term deficit reduction is a worthy priority, for better or for worse, this budget does accomplish that priority. (Whether you believe the budget's assumptions and projections is another issue.)

Nonethless, Republicans are already whining that it doesn't do enough to reduce spending, but while their plan would spend less, it would ultimately create a bigger deficit because they refuse to address the revenue side of the equation.

Moreover, instead of working with Democrats to confront health care costs, which are our biggest long-term deficit problem, Republicans want to repeal health care reform -- putting our fiscal future in even greater jeopardy.

So while there's a good argument to be made that President Obama is overemphasizing the important of short-term deficit reduction, the fact is that Republicans are going to fight tooth-and-nail for a set of priorities that will make fiscal matters even worse, not just over the next five years but in the long-term as well. (And that doesn't even take into account the fact that their policies would target the people who need help the most.)

The fact that Republican priorities will dig us into a deeper fiscal hole shouldn't surprise anybody who was paying attention during the eight years of the Bush presidency. And for anybody who forgot, just look at the chart at the top of this post to see what happens when we try their ideas.


Posted by: DrainYou | February 14, 2011 5:32 PM | Report abuse

Why the surprise. What would expect from a tax and spend liberal? He is a liar, Case closed.

Posted by: nomobarry | February 14, 2011 5:45 PM | Report abuse

Here's the "facts" mr. kessler. The country is a bigger country right now than it was 30 years ago. You can't compare dollars, even inflation-adjusted dollars. Additionally, some things the government pays for, like health care or education, have increased in price far faster than inflation. If you want to make a fair comparison, adjust federal spending by GDP or per capita. Calculate inflation adjusted for the cost of the services government pays for. You're fudging the numbers.

Finally, the budget is a political document, not just in the out years, but in all years. When was the last time the president's budget actually reflected federal taxes and spending for the year?

Posted by: jkubie | February 14, 2011 6:00 PM | Report abuse

Fiscal policy must be dealt with to keep the recovery going and promote job creation. Gradual as it has been it is still improving and must be encouraged

The Republican budget proposal is just CYA of their own and the corporate owners backsides. They have no interest in helping the economy --what they are proposing will slow the economy.

All BS All the TIME from the Republicans but funny that they have some Teabagger tigers by the tail or vice versa!


Posted by: DrainYou | February 14, 2011 6:15 PM | Report abuse

Jkubie makes a fair point. The GDP numbers are in table 8.4 and show, as share of GDP:

1980 4.9 percent
1990 5.2 percent
2000 3.0 percent
2010 4.7 percent
2016 3.4 percent

1980 5.2 percent
1990 3.5 percent
2000 3.3 percent
2010 4.1 percent
2016 2.8 percent

While nondefense discretionary spending would be rather low as a share of the overall economy, the chart also shows that mandatory spending and net interest would grow to 16.3 percent of spending, a new high. That shows where the real challenge lies in the budget.

Posted by: glennkessler | February 14, 2011 6:19 PM | Report abuse

Here's the simple fact- we can't afford Obama or his budgets. The man simply doesn't understand that we are out of money. This budget is past the point of ridiculous into sublime. Shut the whole darn govt down. I've had enough of this farce that it's time for an "Egypt" int this country. When we march on Washington with pitchforks and torches maybe Obama will finally understand that he really should have listened.

Posted by: Desertdiva1 | February 14, 2011 6:23 PM | Report abuse

The defense and security spending is way more than just DOD- you have to add in all the agencies they hide it in- dod, homeland stupidity, veterans admin and pensions, 145 other fed security forces, the three letter intel agencies and departments, not including the extra war appropriations for iraq, afghan, and border wars and doe- a useless agency that has twn national labs that as far as I can see do nothing more than dod research (founded in 1976 with one mandate get us off foreign oil- they've done one of the worst jobs in history!).....

The number is more like- (one of my previous posts in WAPO)-

With dod, homeland security, veterans admin and extra war appropriations the defense budget is upwards of $1.4 TRILLION just this year.....end these senseless and unethical wars and quit maiming and killing hundreds of thousands and bring our troops home and close nearly all foreign bases and cancel all weapons programs and we can save at least $600-700 BILLION.....

BTW- $1.4 TRILLION is nearly $4 BILLION A DAY! Total is more than 2 times rest of world defense spending and approx. 20 times the next largest defense spender China who has a pop nearly 4 times the united states....what is wrong with this picture.....

Politicians in the USA better heed the warning of Egypt WE THE PEOPLE are sick and tired of wasting our tax dollars on war........and the deficit is mostly becuase of this and bailing out the same crooks who trashed the economy- banksters, wall streeters, oil crooks.....all need to take notice the times they are a changin' either reform and reduce or resign and get out of DC......

Posted by: ticked | February 14, 2011 6:32 PM | Report abuse


I don't think you are reading Table S-2 correctly, the $11 billion is the net of proposals.

Posted by: sidfink43 | February 14, 2011 7:01 PM | Report abuse

So what is new? Remarkably educated Americans want lower taxes, better services, and no deficit. Until we Americans are willing to pay for what we ultimately want, we will continue to pass the buck to our kids and our grandkids.

Posted by: jim24 | February 14, 2011 7:55 PM | Report abuse


President Obama projects that the gross federal debt will top $15 trillion this year, officially equalling the size of the entire U.S. economy, and will jump to nearly $21 trillion in five years’ time.

Amid the other staggering numbers in the budget Mr. Obama sent to Congress on Monday, the debt stands out — both because Congress will need to vote to raise the debt limit later this year, and because the numbers are so large.

Mr. Obama‘s budget said 2011 will see the biggest one-year jump in debt in history, or nearly $2 trillion in a single year. And the administration says it will reach $15.476 trillion by Sept. 30, the end of the fiscal year, to reach 102.6 percent of gross domestic product (GDP) — the first time since World War II that dubious figure has been reached.

In one often-cited study, two economists have argued that when gross debt passes 90 percent it hinders overall economic growth.

Posted by: charlietuna6661 | February 14, 2011 7:59 PM | Report abuse

To sidfink43:

Re S-2, that's right--the net impact of the proposals is to increase the deficit by $11 billion in 2012. That was the point I was trying to make: There is no real deficut reduction in the first year of the budget.

Posted by: glennkessler | February 14, 2011 9:04 PM | Report abuse

Bring the most of military home and have them doing infrastructure jobs, cut the military budget in half and that would reduce the Red ink appreciably.

When I look at the chart and remember the ways that the REpublican presidents Bush, Bush and Reagan ran up the deficit I'd be a fool to think that the Republicans ahould be trusted with the budget. I get a better feeling of economic security from the Clinton people than any of the Republicans that I've ever heard.

Posted by: glenglish | February 15, 2011 3:53 AM | Report abuse


The reason I made the comment was that your headline implied, at least to me, that the deficit projected for FY2012 was expected to be higher than the deficit projected for FY2011 by $11 billion. In fact, the deficit is projected to actually decrease from a projection of $1.645 trillion in FY2011 to $1.101 trillion in FY 2012.

The $11 billion is the impact of proposals from the Adjusted Baseline Budget and you are right that these proposals add to the deficit, but if your believe the numbers in the budget (which is a huge if) the deficit is substantially reduced.


Posted by: sidfink43 | February 15, 2011 7:57 AM | Report abuse

A ridiculous article not only focusing only on spending (sounds like GOP) but not adjusting the figures for higher gov't health care, food stamp, unemployment, current commodity inflation, etc. Worse yet missing is the overall picture which is revenue, i.e. the % of GDP tax revenue produces, the lowest since the Korean war.

Posted by: jameschirico | February 15, 2011 8:39 AM | Report abuse

sounds like desertdiva forgot to take their crazy pills this morning! "shut the whole darn gov't down"! haha...what will that accomplish?

Posted by: rmk1122 | February 15, 2011 8:48 AM | Report abuse

Why the surprise. What would expect from a tax and spend liberal? He is a liar, Case closed.

Posted by: nomobarry
That "liar" is your president whether you like it or not so you'd better hope he does the right thing. As far as a "tax and spend liberal" you conveniently ignore the fact that your "tax and spend" ex-President got us into this hole to begin with. Obama inherited this mess; how he succeeds at fixing it is yet to be seen however, i don't see the GOP doing much more than flailing their arms and BSing people like you who fall for it, hook, line and sinker. They are objecting to Obama's budget plan, as can be expected, without a plan of their own. A little hard on the credibility side. At this point, Americans have gotten used to the fact that the GOP will spend all of its energy objecting to the opening of an envelope if Obama is involved. All of you folks who voted for this "change" last November, I ask, how's this change working out for ya? Have you seen that new job yet?

Posted by: sassafrasnewport | February 15, 2011 10:06 AM | Report abuse

This is Bush's fault. Obama should not have to cut spending at all...We should tax the wealthy, people making over 100k a year. If you make 250K, then you should be taxed 70%, or taxed at a rate to where it is equal to someone making about 50k? this would be way more fair, and I agree with the administration when they want to redistribute the wealth like this...The rich supported Bush, so they should have to pay for this mess. Obama would have never gone to war, he would never have hurt innocent people. He would never made the poor suffer at the expense of the government graciously letting the wealthy keep more of the people's money. When are the wealthy going to realize they can't keep stealing from the government by not paying their fair share of taxes?

Posted by: Bosoxfan | February 15, 2011 11:49 AM | Report abuse

It is time for some facts on corporate taxes.

The total of corporate income taxes in the US for 2012 is projected to be only 329 billion.

For context, Wall Street compensation in 2010 was 135 billion for only 25 publicly trade finance companies. Exxon alone had profits of 30 billion on revenues of 383 billion. They paid no corporate income taxes in 2009

And we need to cut corporate income taxes?

Posted by: FoundingMother | February 15, 2011 12:44 PM | Report abuse

I agree that deficits and debt are important, but the economy and joblessness are IMPORTANT.
Why do I think that? Because a growing economy with low unemployment will cut our deficit IN HALF, without raising one tax, or cutting one program.
If we have to carefully and selectively increase the debt to get the economy going better, and get more people back to work, it is a very good idea. The government does not, and should not, run the economy, but it is a player, and a powerful one that can help the private sector to grow more rapidly.

Posted by: OldUncleTom | February 15, 2011 12:57 PM | Report abuse

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