President Obama's Budget Plan

Wednesday 13 April 2011
by: Dean Baker, The Center for Economic and Policy Research

Washington, D.C.- Dean Baker, Co-Director of the Center for Economic and Policy Research (CEPR) released the following statement on the President's deficit-reduction plan:

President Obama’s statement was about as encouraging as could have been hoped for in the context of an agenda committed to deficit reduction. He rightly stressed that the wealthy, who have been the big winners in the economy over the last three decades, can afford to pay more in taxes. He also correctly pointed out that Social Security is an essential program for the nation’s retirees and workers, and that it does not contribute to the deficit. He also pointed out that the way to fix Medicare and Medicaid is to fix the private health care system, not to privatize Medicare as the Republicans in Congress have proposed.

On the negative side, it is unfortunate that President Obama accepted a formula that cuts three times as much from projected spending (including interest) as he proposes to increase taxes. It is also striking that he proposes to cut twice as much from domestic discretionary spending (the portion of the budget that includes most investment spending) as he does from defense spending, especially since defense spending is projected to be about 20 percent larger than domestic discretionary spending over the 10-year budget horizon.