Deficits in Obama Budget Raise Questions of Global Influence
Policy + Politics

Deficits in Obama Budget Raise Questions of Global Influence

Projected deficits over the next decade could compromise U.S. strength globally

Two items in President Obama’s $3.8 trillion budget proposal could lead to deteriorating U.S. power globally, New York Times writer David E. Sanger concludes.  First, the budget deficit this year is expected to be 11 percent of GDP.  Even more worrying, the deficit will not come back down to workable levels over the next ten years. Though the plan, which was sent to Congress yesterday, calls for substantial  deficit reductions over time, the immediate impact could be damaging.  By running unsustainable deficits over the next decade, the U.S. may become vulnerable to the same problem that has plagued Japan: Debt grew faster than income, leading to the country’s waning world influence. Though giving credit to Obama for  a frank assessment of the U.S. economy, Sanger cautions,, “His budget draws a picture of a nation that like many American homeowners simply cannot get above water.”

The need to continue borrowing from foreign countries may put U.S. national security at risk, according to Wall Street Journal columnist Gerald F. Seib. Ramping up defense spending to $708 billion – and financing it with foreign debt -- is unsustainable and potentially hurtful in the long run, since rising deficits fuel growth in nations like China, and diminish U.S. ability to defend itself. 

Obama’s budget will likely be met with resistance by both Democrats and Republicans, who are concerned about the 2010 midterm elections, Bloomberg reports.  Among other grievances, Republicans are frustrated about the increased spending proposals, while many left-wing Democrats are perturbed by the three-year discretionary spending freeze.  To actually discover significant savings from the spending freeze would require adhering strictly to cuts until 2021, a leap of faith for a legislature that likes to spend money.  

Also today in budget news:

Budget Winners and Losers

Record $708 Billion Sought for Defense

Interactive: The Federal Budget Process | Obama's Fiscal 2011 Budget Proposal: How It's Spent

 


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