2010 U.S. FEDERAL BUDGET

A Critique of the 2010 United States Federal Budget

A Critique of the 2010 United States Federal Budget

Introduction

The United States Federal Budget for Fiscal Year 2010, titled A New Era of Responsibility: Renewing America's Promise,[1] is a spending request by President Barack Obama to fund government operations for October 2009-September 2010. Figures shown in the spending request do not reflect the actual appropriations for Fiscal Year 2010, which must be authorized by Congress.

A Critique of the 2010 United States Federal Budget

The total deficit for fiscal year 2009 was $1.42 trillion, a $960 billion increase from the 2008 deficit. The changes: account for the wars in Iraq and Afghanistan (”overseas military contingencies”) in the budget rather than through the use of “emergency” supplemental spending bills, assume the Alternative Minimum Tax will be indexed for inflation, account for the full costs of Medicare reimbursements, and anticipate the inevitable expenditures for natural disaster relief. The deficit is forecast to decline to $1.17 trillion in 2010 and $533 billion by 2013. The 2009 deficit includes the cost of the Troubled Asset Relief Program ($154 billion in 2009), the American Recovery and Reinvestment Act of 2009 ($202 billion in 2009, $353 billion in 2010, and $232 billion in 2011 forward), and the 2009 Omnibus spending bill ($410 billion)—and changes due to President Obama's policy proposals. The 2009 budget deficit would represent 12.3% of gross domestic product, the largest share since World War II.

The 2010 Budget proposed by President Barack Obama projects significant debt increases.[8][9] The debt is projected to nearly double to $20 trillion by 2015, but is expected to increase to nearly 100% of GDP by 2020 and remain at that level thereafter. These estimates assume real GDP growth (after inflation) ranging from 2.6% to 4.6% annually from 2010 through 2019, which exceeds Blue Chip consensus estimates.[10]

The high level of debt and continuing large trade deficits have raised concerns regarding inflation and the value of the dollar relative to other currencies, as well as its place as the primary reserve currency. The Economist wrote in May 2009: "Having spent a fortune bailing out their banks, Western governments will have to pay a price in terms of higher taxes to meet the interest on that debt. In the case of countries (like Britain and America) that have trade as well as budget deficits, those higher taxes will be needed to meet the claims of ...