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Reason Foundation

Federal Deficit Reduction: Promises and Pipe-Dreams

Leonard Gilroy
January 6, 2010, 5:53pm

The understatement of the day award goes to The New York Times for this headline today: "Promise to Trim Deficit Is Growing Harder to Keep"

A deeper recession and slower recovery than the administration initially forecast have increased the tab for economic stimulus measures beyond the original $787 billion package, adding hundreds of billions of dollars for programs like unemployment relief and tax credits for homebuyers.

The savings Mr. Obama once projected from winding down the war in Iraq are being eroded by a bigger buildup in Afghanistan than he had initially contemplated. Congress has rejected or ignored his proposals to raise revenues by changing tax rules for multinational corporations and capping deductions by wealthy individuals; for Mr. Obama to reprise those proposals could raise questions about the credibility of the numbers in his budget.

Meanwhile, the biggest tool usually employed to chisel away at projected deficits — shaving Medicare payments to health care providers — is already being used to offset the costs of overhauling the health care system.

At the same time, the persistently high unemployment rate has intensified the pressure on the White House and Congress to not emphasize deficit reduction so much that they risk undercutting the already sluggish recovery or even tipping the economy back into recession. In February, Mr. Obama must submit his budget for the fiscal year that starts Oct. 1.

"The White House faces a tough challenge preparing a budget with very different goals: cutting the deficit while maintaining stimulative policies designed to keep the recovery going," said Thomas S. Kahn, staff director for the House Budget Committee. "There are unfortunately no politically painless ways to cut the deficit. Virtually all the low-hanging fruit has already been picked."

One thing's for sure—the administration's push to de-privatize outsourced federal functions and expand the federal bureaucracy by hundreds of thousands of new workers isn't a sensible or realistic way of tackling our massive federal deficit. Doing more with less in government should be the operative guiding premise these days, not the opposite.


Leonard Gilroy is Director of Government Reform


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