[Guest post by DRJ]
In his State of the Union address, President Obama laid out his plan to pay off America’s financial debt:
“But families across the country are tightening their belts and making tough decisions. The federal government should do the same. (Applause.) So tonight, I’m proposing specific steps to pay for the trillion dollars that it took to rescue the economy last year.
Starting in 2011, we are prepared to freeze government spending for three years. (Applause.) Spending related to our national security, Medicare, Medicaid, and Social Security will not be affected. But all other discretionary government programs will. Like any cash-strapped family, we will work within a budget to invest in what we need and sacrifice what we don’t. And if I have to enforce this discipline by veto, I will. (Applause.)
We will continue to go through the budget, line by line, page by page, to eliminate programs that we can’t afford and don’t work. We’ve already identified $20 billion in savings for next year. To help working families, we’ll extend our middle-class tax cuts. But at a time of record deficits, we will not continue tax cuts for oil companies, for investment fund managers, and for those making over $250,000 a year. We just can’t afford it. (Applause.)”
Now the New York Times clarifies what President Obama meant when he said he would repay America’s trillion dollar debt:
“President Obama will send a $3.8 trillion budget to Congress on Monday for the coming fiscal year that would increase financing for education and for civilian research programs by more than 6 percent and provide $25 billion for cash-starved states, even as he seeks to freeze much domestic spending for the rest of his term.”
Total savings? At best, three percent of the projected deficit:
“The three-year freeze would save $250 billion over the coming decade, assuming the overall spending on the domestic programs is permitted to rise no more than the inflation rate for the remainder of the decade — an austerity that neither party has ever achieved in Washington. Even so, the $250 billion in savings would be less than 3 percent of the total deficits projected through 2020.”
Oh, and that recent 4th Quarter 2009 GDP of 5.7%? It may be due to inventory changes, and analysts expect continued sluggish growth and high unemployment.
PS — At the GOP retreat attended by President Obama, Republican Rep. Jeb Hensarling:
“… cited Congressional Budget Office statistics putting the average deficit during 12 years of GOP House control at $104 billion and the average deficit under three years of Democratic control at $1.1 trillion.”
Obama disputed Hensarling’s statistics as “factually just not true” and said: “With all due respect, I’ve got take this last question as an example of how it’s very hard to have the kind of bipartisan work that we’re going to do. The whole question was structured as a talking point for running a campaign.”
UPDATE 1/31/2010: The budget for FY2010 reportedly forecasts a $1.6T deficit.