Obama's first budget

The White House will be presenting a budget summary for the fiscal year which begins in October. The summary will be given to Congress this Thursday with the completed document to be ready in April. Complicating the issue and swelling the $1.2 trillion deficit Obama inherited from Bush are the $787 billion recovery bill as well as various bailouts issued in the hope of stemming the falling economy.

The budget, according to the Washington Post, will be a combination of spending cuts and eliminating tax cuts to the wealthy. A major component will be preparing the way for extensive health reform as promised by Obama in the election campaign. In his weekly address to the nation, Obama said he intends to “get exploding deficits under control“.   Furthermore, he said his budget summary will be “sober in its assessments, honest in its accounting, and lays out in detail my strategy for investing in what we need, cutting what we don’t, and restoring fiscal discipline.”

The Washington Post reports,

“Even before Congress approved the stimulus package this month, congressional budget analysts forecast that this year’s deficit would approach $1.2 trillion — 8.3 percent of the overall economy, the highest since World War II. With the stimulus and other expenses, some analysts say, the annual gap between federal spending and income could reach $2 trillion when the fiscal year ends in September.”

“Obama proposes to dramatically reduce those numbers, said White House budget director Peter Orszag: “We will cut the deficit in half by the end of the president’s first term.” The plan would keep the deficit hovering near $1 trillion in 2010 and 2011, but shows it dropping to $533 billion by 2013, he said — still high but a more manageable 3 percent of the economy.”

The New York Times also ran an interesting piece on the upcoming budget in which they write of the Obama administration’s intent on eliminating shady accounting practices used by the previous administration. The Times writes,

“For his first annual budget next week, President Obama has banned four accounting gimmicks that President George W. Bush used to make deficit projections look smaller. The price of more honest bookkeeping: A budget that is $2.7 trillion deeper in the red over the next decade than it would otherwise appear, according to administration officials.”

“Mr. Obama’s banishment of the gimmicks, which have been widely criticized, is in keeping with his promise to run a more transparent government. Fiscal sleight of hand has long been a staple of federal budgets, giving rise to phrases like “rosy scenario” and “magic asterisks.”

It’s going to take some special kind of magic for Obama to keep the population patient as he tackles both the massive deficit and the overall economic crisis he inherited.   Good luck.