On Monday, President Obama announced his new budget plan for 2012, totaling $3.7 trillion. The White House claims that it will cut deficits by $1.1 trillion over the next decade, and the majority of these savings will come from spending reductions. The budget was immediately attacked by both the left and the right. The right mostly claimed that it would not cut enough; the left claimed that it would cut certain programs that are necessary. Both are right to an extent, but both are also wrong to an extent. The budget does need to go further, especially given the deficit that has reached over one trillion dollars annually. The budget proposed by Obama will not put a significant dent in the deficit, although it is a start. However, there are some programs that need to be preserved, which is where the left does have a point. Some of the cuts proposed by the Republicans, and especially the Tea Party, can cause people to actually die- and I wish I was joking. Let’s take a look at the main highlights of Obama’s budget:
5 year freeze on non-security discretionary spending- estimated savings of $400 billion over 5 years
2 year freeze on federal civilian worker salaries- estimated savings of $40 billion over 5 years
Elimination of tax breaks for oil, gas and coal companies- $46 billion over 10 years
Cuts to the Department of Defense budget- $78 billion
There were more smaller cuts in the proposal that touched a large spectrum of departments. You probably noticed that I just mentioned oil, gas and coal companies, and you’ll see Obama’s energy policy as I mention the new investments in the budget:
Increase of funding for renewable energy by 70%. The government will provide loan guarantees of $36 billion for nuclear energy and $2 billion for renewable energy. This is keeping in line with Obama’s goal of doubling the share of electricity that clean energy sources provide by 2035.
Increase funding for vehicle technologies by 80% to help reach the goal of having 1 million advanced technology vehicles on the road by 2015.
These first two may seem like large numbers, but they’re actually not. Currently so little is being spent on alternative energy and similar projects that even doubling funding for them won’t cause spending to increase significantly, especially in the context of the entire budget.
Obama also wants to cut the corporate tax rate in the United States and compensate for this by closing tax breaks for special interests. Once again, this makes sense. Who would want to start a company in a country that has the highest tax rate in the world?
Provide $556 billion for a new infrastructure program over 6 years. $50 billion will be spent right away to provide jobs for a faster economic recovery. $53 billion will be spent over the next six years to fund the construction of high-speed rail, to help meet the goal of 80% of Americans having access to it within 25 years. Most developed European countries have high speed rail, and now even China has it! Our infrastructure is in a terrible state and it needs investment if we want our economy to grow.
I won’t go into detail about every other thing mentioned in the budget. However, I will point out the lack of entitlement programs being mentioned in the budget proposal. That is rather worrying, and I hope that entitlement programs will be reorganized as part of a larger budget reform. Those programs are the key to financial recovery, especially since they take up more of our budget than anything else. Touching those programs is something that no politician wants to do, but it’s something that has to be done.
Republicans are probably having a fit about the spending increases, or investments, included in the budget proposal. Rather ironic that they tend to be the party that most supports “growing out of the deficit” through lower taxes. However, incentives to develop alternative energy is not just good for the economy, it’s also good for the environment and for security, as our oil tends to come from the places that are among the most unstable in the world, as seen by the recent revolutions in northern Africa and the Middle East. Increased spending on modernizing our infrastructure and cutting corporate tax rates will encourage businesses to start here instead of overseas, and our economy will grow, which is, and should be, one of our top priorities. This budget proposal may not be perfect, but it definitely is a good start. Adding proper entitlement programs and additional defense cuts will set us further along the road to solving our budget problems.