Saturday, January 30, 2010

Obama's 2011 Budget: $3.8 Trillion (Where's the Saving?)

Reuters reports that President Obama will unveil his 2011 Budget on Monday, and the price tag is going to be $3.8 trillion.

$300 billion increase from his 2010 budget of $3.5 trillion. So what if he finds $20 billion savings?

If the receipts projected for 2011 haven't changed (last updated in May 2009), they will be about $2.7 trillion. The deficit (receipts minus outlays) will be $1.1 trillion in 2011, making it the second consecutive year of over $1 trillion deficit.

If you look at the budget projection summary by the White House, you'll find that it is made of very optimistic (if not irrational) assumptions. It reminds me of the budget of the State of California, which was based on ever-increasing housing price.

For example, receipts (personal and corporate taxes) in 2010 is supposed to grow by a robust 8.2% from 2009, on a 3.4% growth in GDP. Receipts in 2011 is supposed to grow by a phenomenal 15.1%, while GDP grows by 5.2%. Receipts in 2012 is supposed to grow by another 14.5%, and GDP by 6.2%.

And all the while, government spending (outlays) is supposed to stay flat.

Well, flat no more. Instead of 2010 projection of 0.7% growth for 2011, outlays will grow by 5.8% if Obama's budget is indeed $3.8 trillion.

Even before the 2011 budget announcement, the projection by the White House assumes average 5.5% annual increase of receipts from 2009 to 2019, GDP increase of 4.4%, and outlays increase of 5.6%. The White House clearly does not see any "double-dip" or any dip in the next 10 years.

So, tax receipts are to increase at a higher pace than the GDP increase, and the government spending is to outpace both tax receipts and GDP. The budget deficit incurred from 2009 to 2019 will be $9 trillion under the current White House projection, and over $11 trillion with new 2011 budget and apply the average annual increase of outlays of 5.6%.

So what's this talk of reducing the deficit? An empty talk, nothing more.

Current budget deficit, as Timmy Geithner's Treasury Department (Debt to the Penny) tells us, is about $12.3 trillion.

(By the way, Treasury has the site where you can make donations to reduce the public debt, at

I have a feeling that Obama may not want to be elected for the second term, and may be wishing that the presidential election is every two years.


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