Magazine article Mortgage Banking

President Obama Releases FY 2012 Budget Plan

Magazine article Mortgage Banking

President Obama Releases FY 2012 Budget Plan

Article excerpt

On Feb. 14, the Obama administration released its budget proposal for the government's 2012 fiscal year, and the document includes $3.7 trillion in spending with $2,6 trillion in revenues. That would leave the federal government with a $1.1 trillion deficit (or roughly 7 percent of gross domestic product [GDP]) for FY 1012 if the plan were adopted as is. However, the Congress has already signaled it has its own ideas for much deeper cuts.

The administration tackled cuts to discretionary spending, but left the larger areas of the budget (entitlement and tax reform) largely unaddressed.

The Committee for a Responsible Federal Budget (CRFB) had this to say about the proposal: "Though we applaud the president's recognition of the need to focus on fiscal reforms, this budget does not go nearly far enough. If both the president and Congress continue to focus their attention on the discretionary parts of the budget, we will fall dangerously behind on the need to put in place critical entitlement and tax reforms."

Over a 10-year period, the administration proposes a total of $1.1 trillion in savings. But even so, according to CRFB, over the decade, deficits would still total $7.2 trillion (for an average of 3.7 percent of GDP) and the national debt would reach $19 trillion (77 percent of GDP).

The deficit hawks at CRFB did single out some parts of the Obama budget for praise. "The president's budget has plenty for people to be positive about, including what appears to be a serious effort to control domestic discretionary spending. The budget includes a five-year, non-security discretionary spending freeze which saves $400 billion over the decade, and it includes over 150 specific discretionary spending cuts (totaling $25 billion next year) to help achieve the goal. Additionally, it limits defense spending over the coming decade."

However, the CRFB concluded, "This budget fails to meet the administration's own fiscal target, it fails to tackle the largest problem areas of the budget and it fails to bring the debt down to an acceptable level."

As for missing the administration's own fiscal goals, the CRFB said, "The administration does not achieve either of the fiscal goals it established for its own fiscal commission. For one, the budget does not reach primary balance in 2015. Instead, at just over $600 billion, the deficit remains more than $100 billion away from primary balance. Secondly, the budget does not make meaningful improvements to the long-term fiscal outlook. Few of the policies in the budget would have a substantial effect on the trajectory of spending or revenues outside of the 10-year window. …

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