There will be much more to say about the president’s budget proposal for FY 2012 as the week unfolds. While the Bowles-Simpson deficit commission proposed $4 trillion in deficit reduction measures over the next decade, the president calls for $1.1 trillion. The goal appears to be reducing the federal budget deficit to 3% of GDP by 2015, and to remain at that level through 2021. The plan outlined in the budget would add $7.2 trillion to the federal debt over this period. As the White House acknowledges, the federal budget deficit will explode after 2021.
As you’ve probably heard, the president’s budget does nothing to curb entitlements or tax expenditures, as far as I can tell. It gets harder to insulate people who are soon-to-retire from deep cuts to existing entitlement programs as we delay phasing in structural reforms. House Speaker John Boehner has said that Rep. Paul Ryan’s budget proposal in April will make the Republican approach to reforming entitlements clear, and one can hope that both parties will make significant progress beyond what looks like a strangely uninspired opening bid from the White House.
Politically, however, the budget looks shrewd. Modest cuts to Pell Grants for summer school students and a slight reduction of subsidies for currently enrolled graduate students will attract criticism from the higher education industry, thus giving the budget proposal a centrist gloss.
The reliably sane Committee for a Responsible Federal Budget released a sobering preliminary analysis of the proposal. Though CRFB will go into greater detail on the economic assumption underlying the document in its full analysis, the release briefly notes that OMB is offering a considerably more optimistic current law projection than the CBO, thus suggesting that an independent analysis of the White House proposal might look considerably worse than the numbers we’re hearing today.