Welcome to the new fiscal reality in Washington. Obama has inadvertently chained himself to fiscal restraints that could very well flatten federal spending for the rest of his term and as long as Republicans don’t undo the process by agreeing to his demands for a “balanced” approach to the 2014 budget, additional cuts will continue. All Republicans need to do is enforce the budget laws Obama has already agreed to.
According to the Congressional Budget Office, annual outlays peaked at $3.598 trillion in fiscal 2011. After Obama’s first two years in office, many expected that number to hit $4 trillion by 2014. Instead, spending actually fell to $3.537 trillion in 2012 and is on pace to fall below $3.45 trillion by the September 30, the end of this fiscal year. The $150 billion budget decline of 4% is the first time federal expenditures have fallen two years in a row since the end of the Korean War.
This reversal from Obama’s spending binge in 2009 and 2010 began with the debt-ceiling agreement between Obama and Boehner in 2011. The agreement set $2 trillion in caps on spending over a decade and was responsible for this year’s budget sequester – which will save more than $50 billion this year.
If we see any normal acceleration in economic growth from the anemic 1.4% rate so far this year, the deficit is on a path to drop at a steady pace through 2015. Already the deficit has fallen from 10.2% of gross domestic product in 2009 to about 4% this year.
Sequester cuts in annual budgets for the military, education, transportation and other discretionary programs have been an underappreciated success, with none of the anticipated negative consequences.
Discretionary spending soared to $1.347 billion in fiscal 2011, according to the CBO, but was then cut by $62 billion in 2012 and another $72 billion this year. That’s an impressive 10% shrinkage. And these are real cuts, not pixie-dust reductions off some sham baseline. Discretionary spending as a share of the economy hit 9.4% of GDP in fiscal 2010 but fell to 7.6% this year and is scheduled to slide to 6.4% in Mr. Obama’s last year in office.
Sequester is squeezing the very programs liberals care most about – the Nat’l Endowment for the Arts, green subsidies, the Environmental Protect Agency and NPR. Outside the gates of Washington, the sequester is forcing a fiscal retrenchment for liberal special interest groups like Planned Parenthood (Murder, Inc.) and the National Council of La Raza (You Stole Our Land and Owe Us Bigtime, Inc) which had grown accustomed to taxpayer handouts.
But, not everything is rosy. Entitlement spending remains on autopilot and is fast heading toward insolvency, thanks in part to Obama’s aversion to practical fixes. The CBO calculates that through July 2013, spending for Social Security, Medicare and Medicaid is up $73 billion from last year. If ObamaCare isn’t repealed, 2014 will see an estimated $1 trillion plus of new costs over the next decade. And I shutter to think what will happen to entitlement spending if amnesty is passed.
Entitlement reforms will happen only when liberals realize that the unhappy alternative is to allow every welfare program they cherish to keep shrinking.
Source: Stephen Moore, Wall Street Journal
