Obama's 2012 Budget: Why Federal Spending Needs to Be Raised, Not Cut

The battle cry in Washington today is to cut federal spending now and ask questions later. So, President Obama's proposed $3.7 trillion spending plan for 2012 seeks to slash $1.1 trillion from the deficit over the next decade. But cutting too fast, too deeply may undermine the fragile U.S. economic recovery.

Among the cuts being eyed are $100 billion over 10 years from Pell Grants, which help 9 million students get an education, along with funding for airports and waste-water treatment plants and a five-year freeze on non-security domestic spending. Some taxes would increase for couples earning $250,000 or more. The plan would also ax $78 billion from the Defense budget over the next five years. But it includes increased investments in infrastructure programs such as high-speed rail and education.

"These cuts include many programs whose mission I care deeply about, but meeting our fiscal targets while investing in our future demands no less," Obama says in his budget message. "All told, we have put forward more than 200 terminations and reductions for over $30 billion in savings."

As expected, Republican House Speaker John Boehner argued that the cuts did not go far enough. "The president's budget will destroy jobs by spending too much, taxing too much, and borrowing too much," he said in a statement. "By continuing the spending binge and imposing massive tax hikes on families and small businesses, it will fuel more economic uncertainty and make it harder to create new jobs."

You Can't Cut Your Way to Prosperity

In this case, both Obama and Boehner are wrong. The U.S. doesn't need to spend less. It needs to spend more -- a lot more -- though, of course, not recklessly. Dean Baker, co-director of the Center for Economic and Policy Research, figures $300 billion to $400 billion in additional money could be spent between 2011 and 2012. His view is echoed by another liberal, former Clinton administration Labor Secretary Robert Reich, who writes:

The Republican bromide -- cut federal spending -- is precisely the wrong response to this ongoing crisis, which is more analogous to the Great Depression than to any recent recession. Herbert Hoover responded the same way between 1929 and 1932. Insufficient spending only deepened the Great Depression.

The best way to revive the economy is not to cut the federal deficit right now. It's to put more money into the pockets of average working families. Not until they start spending again big time will companies begin to hire again big time.

Don't cut the government services they rely on -- college loans, home heating oil, community services, and the rest. State and local budget cuts are already causing enough pain.

Though I believe that government should live within its means, the idea that America can cut its way to prosperity is ludicrous. Every dollar of government spending that gets cut during the slow recovery means less money flowing into the economy. Fewer goods and services are ordered, giving businesses less incentive to hire additional workers. And for those who argue that what should be cut is so-called "wasteful spending," Baker points out that finding government waste isn't as easy as it seems.

Sponsored Links

"None of the waste stands up there and identifies itself," he says, adding that large amounts of time and energy are expended to uncover relatively small amounts of waste. "Everywhere in the budget you are going to find some amount of waste. It's not really clear that we can reduce more from the current levels."

Indeed, there is remarkably little enthusiasm for tackling the budget deficit. A poll released last week by the Pew Research Center showed that most Americans had little desire to see either cuts in spending or higher taxes. Support for increased defense and environmental protection spending fell, though, as did support for foreign aid.

Mostly, Americans interested in cutting the federal deficit only in the abstract. What they can't do is find much to cut when they are asked for specifics. And with good reason: The government is, for the most part, in the business of doing things that genuinely benefit society -- and in hard times, those are the last things we should cut.