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The President Introduces His FY 2014 Budget

In a video at CNBC today, John Harwood "parses" President Obama's Fiscal Year 2014 budget proposal. The video is accompanied by an article by Harwood in which he says the President is pursuing "two separate goals." Harwood writes:

"One is, as always, expressing the president's priorities. Instead of giving tax breaks for the "carried interest" of hedge fund managers, for instance, Obama would use some of the same money to provide tax credits for low-income workers, parents needing child care or small businesses. As a result, much of the budget would reshuffle existing spending and devote it to other purposes.

"The second is to lure congressional Republicans, again, into negotiations for a budget "grand bargain." That's why the White House document includes plan for reducing Medicare and Social Security spending by in ways the administration wouldn't otherwise favor.

"Since Republicans have called for large savings to those entitlement programs for the elderly, Obama aims to persuade that he's willing to compromise on that priority. His budget includes $270 billion in Medicare cuts, and $230 billion in reduced inflation adjustments for Social Security and other federal programs."

Harwood continues with his political take on the budget.

Thankfully, James Pethokoukis takes a more serious look of the budget proposal at the American Enterprise Institute's blog, AEIdeas (HT Mark Levin Show), where he points out the President's budget won't balance the federal budget until 2055. According to Pethokoukis:

"Republicans have mocked the Obama White House for talking about a “balanced approach” to debt reduction that doesn’t actually ever balance the budget. But in its 2014 budget report, Team Obama tries to create the impression that its plan does balance the budget … in the year 2055!

"From the White House Office of Management and Budget:

"The Budget reaches balance in 2055, when revenues and outlays are 21.5 percent of GDP, slightly higher than their levels during the budget surpluses of 1998-2001. The Federal Government is then projected to run surpluses over the remainder of the projection window, with publicly-held debt falling rapidly until it reaches zero in 2074 (see Chart 4–1). The 75-year fiscal gap disappears in the base case, becoming a fiscal surplus of 1.6 percent of GDP.

"Now, the White House does add the bureaucratic caveat that these projections “are not intended to be a prediction of future legislative action, nor are they intended to reflect explicit policy proposals for the years beyond 2023; rather, they are a mechanical extrapolation of the Budget policies.”

Finally, we have the "reaction" of the Committee for a Responsible Federal Budget (CRFB). Their press release today begins:

"Today, President Obama released his FY 2014 budget proposal, which combines a version of his final deficit-reduction offer from the fiscal cliff negotiations with a number of new tax and spending initiatives.

"The President’s budget proposes roughly $1.8 trillion of savings in its deficit reduction package designed to replace the sequester and put the debt on a downward path relative to the economy. When combined with the President’s new policy initiatives, the repeal of the sequester, and the President’s proposed war drawdown, this plan adds up to $1.4 trillion in deficit reduction.

"Encouragingly, the budget is projected to put the debt on a downward path relative to the economy. Public debt would fall from 77 percent of GDP in 2013 to 73 percent of GDP by 2023. Deficits in the budget would fall to below 2 percent of GDP by 2023. To achieve this, the President’s budget includes about $400 billion of health savings, $400 billion of discretionary and mandatory spending cuts, $230 billion of savings from more accurately measuring inflation, and $580 billion of additional revenues. At the same time, the budget also repeals the $1.1 trillion sequester and includes a number of new spending initiatives paid for in part with new revenue."

Separately, the CFRB looks at "The President's Budget, In One Table." In a separate "overview of the President's budget," CFRB says:

"The budget starts by filling in the policies necessary to reach the savings targets in the last fiscal cliff offer. It then adds in other initiatives, such as increased infrastructure spending and universal pre-school, and other revenue increases and spending cuts. The budget contains ten-year deficits of $5.3 trillion.

"Overall, the budget puts debt on a downward path as a percent of GDP by the end of the ten-year window although at a higher level than we have recommended. Debt does rise initially from 72.6 percent in 2012 to 78.2 percent by 2015 before falling steadily to 73 percent by 2023. As you can see below, debt is slightly higher than OMB's adjusted baseline in the near term due to upfront infrastructure and jobs measures plus the cancellation of the sequester, but it falls below the baseline by the end of the projection window."

As CFRB notes, they will have "further analysis of what is behind the numbers" in the coming days. We'll comment on that when it becomes available. However, we first wanted to provide you a brief flavor in this Growls.

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