President Obama’s $3.83 trillion Fiscal Budget

February 3, 2010

By Padmini Arhant

President Barack Obama unveiled his 10-year macro budget with various economic commitments.

2011 Fiscal Budget is projected with the total revenue $2.56 trillion and total spending @ $3.83 trillion leaving a deficit @$1.27trillion.

According to the impressive layout from the article:

Budget outlook: Budget deficits Published By Jackie Calmes – New York Times and,

Presented by San Jose Mercury News – February 2, 2010 – Thank you.

Targeted Revenues – $2.56 trillion

Individual Income Taxes – $1.12 trillion predominantly derived by ending the extravagant tax cuts allowed to wealthy individuals during the prior administration rule for e.g. the couples making over $250,000 and individuals earning above $200,000.

Corporate Income Taxes – Tax increase on wealthy corporations – Expected income – $270Billion

Social Security and Payroll taxes – $935 billion

Excise taxes – $74 billion

Custom duties – $27 billion

Estate and gift taxes – $25 billion

Other $87 billion
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Budget Spending – $3.83 trillion

Mandatory Spending:

Interest on debt $251 billion

Other – $ 648 billion

Medicaid – $297 billion

Medicare – $491 billion

Social Security – $730 billion

Discretionary Spending:

Defense – $895 billion

Other – $520 billion
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Views and Analysis: By Padmini Arhant

The budget’s focus on two most important factors unemployment and the lack luster consumer spending, responsible for slow economic recovery – is a major step in reviving the sluggish economy.

Unemployment addressed by providing $100 billion to boost the small businesses, medium corporations, middle class, social safety net programs, aid to state and local governments and expanding federal student loan program to enable the Pell grants for easy eligibility would remarkably tackle the national double-digit jobless figures.

Since President Obama pledged to reverse the trend by converting the U.S. market, presently a supersize importer to a profit-oriented exporter, the details on the manufacturing sector are missing.

Manufacturing being deeply hurt in the economy with jobs shipped to China, the blue-collar workers in this area require massive attention as the others in the construction industry. Unless there is a provision already made in the $100 billion fund.

The budget provides further economic stimulus through tax credits to average income families –
$400 for individuals and $800 on combined income including tax cuts for workers and other businesses through 2011 – An enormous supplement towards consumer spending and job creation.

Tax cuts to big businesses should be conditional upon preservation and creation of jobs in the national economy.

Federal aid to state and local governments should contribute to the national GDP considering the severe state budget crisis that has directly affected the public services such as education, health and environment suffering serious job losses from the state spending cuts.

Soaring annual deficit expected to be $1.6 trillion for 2010 due to burgeoning economic crisis dropping to $1.3 trillion in 2011 and, then onwards remaining high based on the rising health care costs and retirement programs for the baby-boom population.

The President’s effort in this regard should mitigate the deficit largely through proposed strategies
and they are –

Slashing funding for numerous redundant programs and freezing discretionary spending for three years.

Raising fees, taxes on banks and the wealthy.

According to the reports, the President approach towards a comprehensive deficit-reduction plan is to set up a bi-partisan commission represented by the lawmakers from both political parties and budget experts. Their task is to involve a package consisting tax increases and spending cuts to slash deficits as well as stabilize government borrowing by 2015.

Although, the Republican lawmakers had initially agreed to the measure, they later defeated the President’s bi-partisan commission plan and retracted from their position confirming the Republican members’ traditional partisanship towards the democrat President.

Despite the setback, the President’s decision to move forward in this regard is wise and the American electorate must remember the Republican members’ refusal to cooperate for the national interest, i.e. alleviating the national debt burden on their children, in the 2010 elections.

Criticisms against the President’s position on Medicare and Medicaid as the entitlement programs and tax revenues not adjusted against the annual deficit reduction by paying down an accumulated debt do not serve the economic viability, but only offer sound bites in the political discussion.

Again, deficit reduction is paramount and it should not happen at the cost of the vulnerable population – the senior citizens and the poorer families who are otherwise the consumer taxpayers.

In terms of paying down the national debt, it could be adjusted from the inevitable economic growth through vast investment in job creation and consumer spending.

Bi-partisan consensus on the economic revival as the immediate priority is oxymoron, if the administration is not allowed to expedite the process through aggressive policies combined with direct interjection of funds into the revenue sectors.

War spending in the amount of additional $33 billion and a total budget $160 billion for the two simultaneous wars in Iraq and Afghanistan is an area that could be drastically modified with a concrete exit strategy from both territories in the near future.

Iraq troop withdrawal this summer has been committed by the President and the savings from it could be utilized in paying back the national debt as it would result in the return savings via interest payment contraction on the borrowings.

Passing the health care legislation with a government insurance program should unequivocally cut the health care costs and decrease the deficit because of the widely acknowledged health care expenditure draining the present economy. Even more reason to introduce the public option in the legislation to minimize the projected escalation in health care spending cited above.

Other areas aimed at reducing national deficit are the cutting and eliminating minor domestic programs and major military equipments.

Raising taxes on big banks and oil companies is an effective means to earn income and a long overdue transformation from the Bush-Cheney era.

The White House being optimistic in cutting the inherited deficit in half by 2013to slightly over 4 percent of the GDP juxtaposed to the projected $1.3 trillion deficit exceeding 9 percent of the GDP at the dawn of Obama Presidency highlights the stark contrast in economic policies between the two administrations.

Overhauling finance and energy sector in addition to the health industry would yield the desirable outcome in the national debt decline.

Allocating necessary funds towards education, science and research, food and drug safety, NASA space programs innovation and climate change legislation reflect short and long-term aspirations.

Concerns over sustainable deficits in the long run are justified. At the same time, the confidence in the guaranteed economic boom is disappointingly low especially after successful intervention to avert the financial collapse in the year 2009 that stabilized the stock market up until now, apart from dealing with other economic woes.

“Limited long-term solutions in the budget expressed by the skeptics” – They fail to view the entire picture in detail that ensures the economic security throughout the decade and beyond primarily owing to the robust fiscal policy adopted in the budget.

In fact, it’s possible to balance the 2011 budget with a shortfall exacted at $1.27 trillion.

Defense spending $895 billion is blown out of proportions and require trimming.

Discretionary ‘other’ spending $520 billion upon careful review could lead to huge savings.

The combined total for these two expenses are $1.4 trillion that could be easily restrained to below trillion dollars for the prolonged deficit sustainability.

On the revenue side – Corporate Income Taxes estimated @$270 billion is relatively low for the world’s leading industrialized nation with U.S corporations playing a prominent role as the multinationals offshore. Therefore, the Obama administration could close loopholes in the tax evasion through tax haven and extract more income to reduce the deficit.

Foreign Corporations in the United States should be evaluated for their operation in promoting local employment against enhancing economic prospects to their country of origin.

Likewise, in excise taxes and custom duties – the tariff and import duty revision on overseas items could produce additional revenue.

Similarly, updating the estate and gift taxes including the ‘other,’ is an opportunity to extract more income.

President Barack Obama and the administration have prepared the budget diligently. It deserves praise and credit for the broader vision. The economic recommendations are solid while remaining essential.

However, a daunting task is the legislation on national issues such as health care, finance and energy crucial to contain the agonizing deficit. The grueling legislative process is dominant in opposition and weak in positive action.

Therefore, the opposition from both sides of the aisle must work together with the majority in resolving the economic crisis to benefit the people across the political spectrum.

People should coalesce nationally in this respect and help President Obama and Congress in seeking legislation approval on the listed national issues from across the political aisle, particularly free of filibuster threats.

Perhaps, bust the filibuster movement is imminent.

The legislations are urgently needed for instant economic relief.

Finally, the fiscal budget has –

Remedy for the past problems, Solutions to the present challenges and Investment in future goals.

Thank you.

Padmini Arhant

Written by Padmini Arhant · Filed Under Business, Economy 

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