President Obama’s spending “freeze” is the center of a budget frenzy. The left is incensed by the assault on its “spend first, think later” tenets. The right is nervously looking for the trick — he can’t really mean it, can he? Meanwhile, the average person is wondering: “What exactly does this freeze do?”
The first thing to get straight is that that this does not save the advertised $250 billion over 10 years. It does not even matter for three years. Discretionary spending is set each year, so this is in effect a one-year freeze. Period.
The second important point is that this is a very narrow freeze. All entitlement spending is left out. All defense spending, veterans spending, and homeland security spending is also exempt. That means that the affected areas are a tiny fraction of the budget. The bottom line: this cuts spending by $15 billion when the deficit is projected to be $1.3 trillion.
It’s not that this is not important. This is a step — a really tiny baby step — in the right direction. The previous Obama budget planned (that’s what budgets are — planning documents) to run a deficit of $1 trillion in 2019. That is, long after the economy was assumed to have recovered, after the financial crisis was just a memory, and well past time it was fair to blame George W. Bush for everything, the plan was to run a deficit of $1 trillion, or 5.5 percent of GDP. Importantly, revenues were projected to have recovered to 19 percent of GDP — above the historic norm.
So, in a nutshell, the previous approach was to plan for out-of-control spending and the enormous debt accumulation that comes with it. Any evidence of changing direction is welcome.