With the release of his budget proposal for fiscal year 2012, we now know exactly what the president meant: We need to out-spend the world.
Sure, the United States government is already wracked with debt -- to the tune of about $9 trillion or 62 percent of gross domestic product -- and government spending is at or near post-World War II highs, about 25 percent of GDP using 2010 numbers. Obama's bold plan is to spend yet more without any ability to cover such new largess.
Far from winning the future, Obama has decided to punt on first down. Instead of dealing with federal spending that has ballooned by more than 60 percent in constant 2010 dollars over the past decade -- spending pushed by Republicans and Democrats alike -- the president has decided to stick with a status quo that is leading us to fiscal ruin.
In the broadest outlines, Obama proposes spending $3.7 trillion in 2012 (about the same as this year). Over the course of the coming decade, he claims that his spending plan would trim the deficit by about $1.1 trillion, with about two-thirds of theoretical savings coming from spending less than expected (such as a five-year freeze on non-security-related discretionary spending) and one-third from tax increases (on high-income earners).
The key reality here is that outlays keep growing from $3.5 trillion in FY 2010 to $5.7 trillion in FY 2021. If all goes according to plan, in 2021, debt held by the public will equal a whopping 77 percent of GDP. Of course, to that debt you have to add the money that the federal government has borrowed to various trust funds, like Social Security and Medicare, and also the trillions of dollars in unfunded promises made to the American people.
Obama's original estimates were way off for the same reason his current scenario can't be trusted: He grounds most deficit reduction in the fantasy world of increased revenues.
Indeed, the president decrees that revenue will increase by $1.6 trillion over the next decade. Theoretically, this will come from two basic sources: ending the Bush tax rates on high-income earners and from an economy that the president believes will increase in real terms by 3.6 percent in 2012 and 4.4 percent in 2013. Those estimates are far sunnier than most private and governmental projections.
While rosy scenarios are great to project higher revenue, they are also useful on the spending side. Higher growth rates allow the president to foresee a reduction in unemployment from its current 9.3 percent to 8.6 percent next year. That means less unemployment benefits to pay out and it explains half of the projected reduction in spending from 2011 to 2012.
Yet even if the president's growth and revenues do materialize, we're still in deep trouble. We are still left with a $1.1 trillion deficit in 2012 and with a cumulative $7.2 trillion deficit over 10 years. That's $7.2 trillion that the federal government will have to borrow in the best-case scenario. And that explains why the debt held by the public is set to double in the next 10 years from $9 trillion in 2010 to over $18 trillion in 2020.
Nothing in Obama's budget addresses the nation's short- and long-term budget problems. He simply isn't serious about addressing the spending overload that is piling up debt at greater and greater velocity, and he has shown no interest in even discussing serious entitlement reform.
Yet neither he nor his fellow Republicans have laid out any way of addressing the shortfall, either by seriously cutting spending or by raising taxes. Instead, House Republicans continue to dilly-dally whether to cut a measly $100 billion for the remainder of fiscal year 2011.
This is no way to fix a bipartisan budget mess that was many years in the making. Worse still, it looks as if it will get much worse before either Democrats or Republicans are moved to real action.
Veronique de Rugy is an economist at the Mercatus Center at George Mason University. Nick Gillespie is the editor-in-chief of Reason.com and Reason.tv.
Editor's note: The Outlays and Revenue chart in the original version of this story had incorrect spending figures. It has been corrected.