Followup to the budget terminations/reductions in the Obama plan

I'm not done looking at different reactions to FY2012. This one came from the National Taxpayers Union. It makes you stop and think how many times over the years this style of termination/reduction has been put in place by all other Presidents. 

Despite some worthy attempts at spending restraint, President Obama’s latest budget plan relies more heavily on new revenues, rosy economic assumptions, and accounting shifts than many taxpayers would expect, according to a special National Taxpayers Union Foundation (NTUF) analysis. The nonpartisan research group prepared its evaluation for CNBC’s C-Suite Insider.

“Taxpayers now have more details about the fiscal plans President Obama first outlined during his State of the Union speech in January,” said NTUF Senior Policy Analyst Demian Brady. “Yet, even the thousands of pages in new budget documents the Administration released can’t seem to map out a strategy that will address the trillions of dollars in unfunded liabilities that current and future generations will face from entitlement programs.”

Highlights of the analysis, providing little-known facts about the President’s Fiscal Year 2012 budget, include:

• Revenues Would Zoom. Receipts are expected to jump by almost 21 percent in Fiscal Year 2011, then by 14 percent and nearly 11 percent in the two years following. The White House also assumes an astonishing spike in corporate income tax receipts of 100 percent in two years (FY 2011-2013). The last time this occurred was between 2003 and 2005 – ironically, when the Bush Administration was reducing tax rates, largely for individual but also on items like dividends.

• Spending Slows, then Grows. The White House is commendably claiming $1.1 trillion in savings over 10 years, but even this would not slow the overall pace of total federal expenditures for long. In Fiscal Year 2011, outlays are expected to climb by 10.5 percent, to $3.819 trillion. They would then fall by 2.4 percent in Fiscal Year 2012, and rise just 1.1 percent in Fiscal Year 2013. In future years, however, outlays would increase by an average of 5.3 percent, fueled by entitlements.

• Looking Forward, the Budget Problem Is Worse. Federal outlays are projected to consume more than 22 percent of Gross Domestic Product for as far as the eye can see, more than 10 years. Since 1930, the longest period in which federal expenditures reached this mark was between 1981 and 1986; the second-longest period was World War II (1942-1946).

• The Overall Picture: Little Different from the One Painted in 2009. Two years ago the President’s tax and spending outline predicted that by Fiscal Year 2019, federal expenditures would total $5.158 trillion. Despite new proposals for savings, in his latest budget, the figure for 2019 is $5.154 trillion – a relatively tiny difference of $4 billion. Revenues would be slightly higher than initially assumed; in the 2009 document, total collections were supposed to reach $4.446 trillion by 2019. Now, the 2019 estimate has ticked upward to $4.473 trillion.

• Spending by Any Other Name Is Still Spending. The words “investment” and “invest” appear 196 times in the first volume of the President’s budget, on whose 216 pages he sketches his spending and revenue priorities.

• Budget Reductions: Old, New, and Borrowed. The Fiscal Year 2012 “Terminations, Reductions, and Savings” section in the President’s Budget includes 153 programs that would either be terminated or see reduced funding; 50 of these programs were also listed in the FY 2011 “Terminations, Reductions, and Savings.” These 50 cuts, if implemented would save $5.7 billion. Nearly half of this amount is from terminating the production of C-17 transport aircraft ($2.5 billion). A total of 20 Fiscal Year 2012 savings proposals also appeared in at least one budget submitted by Obama’s predecessor, George W. Bush.

• Hidden Taxes. The Administration proposes to cut grants-in-aid to airports by $1.1 billion, but larger airports would be allowed to increase “non-federal Passenger Facility Charges.” This would simply raise the cost of an airline ticket, which can already carry government tax and fee loads of over 20 percent. More than 40 percent of the $43.6 billion the White House wants to raise from ending “oil and gas preferences” would come from repealing the Section 199 domestic manufacturing deduction, which is available to all kinds of companies, not just those in oil and gas development. Boosting these firms’ tax liabilities will show up in higher energy prices and even lower tax receipts of other types, because fewer workers will be employed in those industries.

• Hidden Spending. Many of the Administration’s tax credit proposals are “refundable,” meaning that an individual or company can get more money back than they originally paid in tax. According to NTUF, in addition to foregone revenues, the “refundable” credits would trigger higher spending of $115.3 billion over ten years.

• Shifting Finances. Some savings get plowed into other programs rather than reducing the deficit; examples include the President’s plan to maintain expanded Pell Grant amounts in part by ending their availability for summer programs and accelerating interest payments. The budget also proposes to eliminate special rules modifying the amount of estimated tax payments by corporations. This will shift $53.6 billion in receipts from Fiscal Years 2015 and 2016 to 2014.

• Federal Payrolls Will Swell, Not Shrink. The White House estimates that Executive Branch civilian employment will nudge slightly downward, by 0.6 percent, between Fiscal Years 2010 and 2012. However, after adjusting for Commerce Department jobs, which would have included temporary Census workers, employment will jump by 4.96 percent over that period.

• Government Benefit Rolls Will Swell Too. The budget predicts that between 2010 and 2021, the number of Americans receiving payments from one or more federal programs (ranging from farm subsidies to student loans to Social Security) will increase by 27 percent.

• Even the Budget Itself Costs More. The purchase price of the budget documents, whether in paper or electronic format, seems to have defied most attempts at economization. This year the four volumes comprising the budget presentation cost $214 total, up $3 from last year. Compared to 10 budgets ago – FY 2002 – the price of the printed volumes has risen 29 percent, versus a 23 percent rise in Consumer Price Index averages from 2001 to 2010. The budget on CD-ROM – offered at $19 for the FY 2002 presentation, is now $27, a 42 percent increase.

“The President’s budget is only the opening bid in a process whose stakes have never been higher for taxpayers,” Brady concluded. “Now it will be up to Congress to provide competing visions for the nation’s finances, and only time will tell if that plan foresees additional savings.”