President Barack Obama has unveiled a hugely disappointing budget, cutting only a few percentage points from the $100,000bn in projected US federal deficits over the remainder of this century. Why was it such a dud? Because Social Security, Medicare and Medicaid – the entitlement programmes that will comprise more than 60 per cent of all spending just a decade from now – were left untouched.
Deck chairs are being rearranged on the Titanic. American politicians promise their constituents an ever-expanding social safety net, but with no intention of paying for it. Most experts know entitlement reform is essential, but few political leaders dare to lead – because doing so would be self-immolating.
Mr Obama’s budget should have proposed much more significant cuts, but ultimately it is the US Congress that is responsible for tax and spending legislation. Mr Obama’s budget is therefore aspirational, but unbinding. In the vernacular – he proposes, Congress disposes.
To put this failure right America’s leaders must begin to make a strong moral case for entitlement reform. And to develop this argument they should turn first to an unlikely source of policy advice: The Vatican.
The logic behind president Obama’s budget has one extremely sensible feature: it distinguishes between spending that simply adds to consumption, and spending that really does mean investment. His analogy over the weekend – that a family cutting a budget would rather not cut money for the kids’ education – is a sound one. We do need more infrastructure, roads and broadband, non-carbon energy and basic science research, and some of that is something only government can do. In that sense, discretionary spending could be among the most important things government could do to help Americans create wealth themselves. And yet this is the only spending Obama wants to cut.
But the core challenge of this time is not the cost of discretionary spending. Obama knows this; everyone knows this. The crisis is the cost of future entitlements and defense, about which Obama proposes nothing. Yes, there’s some blather. But Obama will not risk in any way any vulnerability on taxes to his right or entitlement spending to his left. He convened a deficit commission in order to throw it in the trash. If I were Alan Simpson or Erskine Bowles, I’d feel duped. And they were duped. All of us who took Obama’s pitch as fiscally responsible were duped.