Tuesday, February 15, 2011

Of Obama's Budget and the "Green Weenie" Test

Today is the day President Barack Obama unveils his $3.73 trillion budget, and the punditocracy has been going nuts from early this morning. That was when the early edition of MSNBC's 'Morning Joe' came on, and assorted talking nitwits (starting with Joe Scarborough) began bleating about 'Why Obama lacks the courage to go after entitlements?'. Well, uh, because he has the natural preservation instinct: he has no wish to be a one-term wonder.

At the same time, thanks to Alan B. Simpson, Deficit Commission co-Chair, the "green weenie' test has been getting more and more play. According to Simpson, this is the basis of the test:

"Unless the budget plans dig into the big ticket items of health, Social Security and Defense, you want to walk out the door, stick your finger down your throat, and give them the green weenie".

Well, this conjures up images of the proverbial "bird" - but who knows? Maybe Simpson intends it to mean something else entirely.

What we are assured by Obama, is that his new budget will cut off $1.1 trillion over ten years, with the deficit peaking this year at 10.9% of output, then receding to 7 percent in 2012 and 4.6% by 2013. By 2014 the budget ought to be broadly back in balance with "debt stable at about 7% of GDP" (The Financial TIMES, Feb. 15, p. 6)

In one sense the budget prognostications are reasonable, with the assumption (realistic, I believe) of 2.7% growth in GDP in 2011, vs. 3-4% advanced by most finance gurus and bond traders. On the other hand, some rather dicey assumptions are made for which the benefits may not come to fruition at all, including:

- The 2012 budget depends on a series of tax rises, including NO further extension of the Bush tax cuts.

- spending cuts (as in domestic benefits - such as home heating for seniors) that will be hard to sustain, and

- future savings (e.g. from the Medical Modernization plan) that are envisaged but hard to precict.

The top issue is one that we all need to watch! In truth, given an election year next year, I simply can't see the Bush tax cuts not being passed again (possibly for two more years) which will dig us even deeper into perdition. What ought to have happened is that NO Bush tax cuts extensions (middle class or other) should have been passed last December, then we'd at least be half way OUT of the hole. Now, having passed them, we are over ten feet deep in the hole, with the likelihood they will pass again next year-- pushing us another 10 feet deeper. I mean, think about it! If Obama couldn't stop the tax cuts extension for the rich THIS year, with all the ammo he had, how's he going to do it next year in the heat of a Presidential re-election campaign? Nine will get you ten he punts, and lets them go through.

Meanwhile, all the bleating whiners are yelping for calls in "entitlements" cuts when it is the repeal of the tax cuts they ought to be examining, since that represents the loss of a revenue stream. Obama didn't exactly make things better by chopping off FICA collections (which fund Social Security and Medicare) the next two years. I know he's playing the pragmatist to win "independent voters", but personally I think it's more critical to get the base on board first. They aren't a "given" - given what happened in the mid-terms!

If Obama weakens, and loses the pluck to ensure no further tax cut extensions (and no further FICA cuts extension) then all bets are off and the deficit will explode. Anything else done will be too little, and too late as the debt approaches 90% of GDP.

According to The Financial Times also:

"The Pentagon got ahead of the game by agreeing with the White House last month to a $78 billion cut over five years."

But this is an absolute, outrageous joke! $78 billion over FIVE years, given the Pentagon is now blowing $700 BILLION a year (plus $100 billion in Afghan supplementals), is a damned disgrace. The Pentagon budget ought to be cut at least by 50% a YEAR, given the Afghan operations are winding down. Even then, at $400 billion a year, the budget will be 25% higher than during the end of Clinton's tenure when he had to deal not only with conflicts in Bosnia-Croatia, but other places as well.

Here is the skinny amidst all the bullshit you will hear the next few days from the hyperbolic pundits: nearly ALL the deficit problems we're looking at have been engendered by:

a) extended tax cuts (over $3.7 TRILLION, plus interest, since 2001)


b) Military spending (over $3 trillion, including for the Iraqi and Afghanistan invasions, occupations, plus $200 bn to pull all wares out of Iraq).

A country that spends like this can't hope to survive, it's digging itself into permanent decline and the dustbin of history. Ask the Russkies, and the British.

Meanwhile, Social Security has been the one golden light, which up to 2005 had been projected to deliver $3.2 trillion into the government's coffers for that program. Except the congress and government used that money to disguise the size of the deficit, mainly for the purpose of more tax cuts and wars-occupations.

A damned disgrace....

And the "Green weenie"....it goes to ALL the politicos, their hangers-on and the meathead, know -nothing pundits. Oh, and the originator of the "green weenie" test, Alan B. ("300 million teats") Simpson!

Take that "weenie", and rotate on it!

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