Skip to main content

Podcast: Examining the President’s Budget Proposal for Fiscal Year 2012

I’m Michelle Bazie and I’m here with Jim Horney, the Center’s Vice President for federal fiscal policy.  We’re going to discuss the President’s budget proposal.

  1. Jim, the President recently released his budget plan for fiscal year 2012.  You’ve had a bit of time to examine the proposal. What are your initial findings?

    The initial finding is that I think the President actually produced a budget that’s a very sensible and thoughtful approach to the real fiscal challenges we face right now. It accomplishes, if it’s enacted, a very important goal of stabilizing the debt-to-GDP ratio.  That means we will have debt that’s not increasing relative to the size of the economy by the end of this decade, but he does that in a way that doesn’t undercut the need to make sure that the current economic recovery keeps going and doesn’t lead to draconian cuts in important programs like the cuts that are currently being proposed by House Republicans.
  2. What are some key aspects of his proposal?  What are some items that we should start wrapping our heads around?

    One of the things the President does is recognize that we can’t continue all of the tax cuts that have been enacted in recent years.  For instance, he lets the tax cuts that were enacted in 2001, 2003 for people with incomes over $250,000 expire as scheduled at the end of 2012. That’s a good step in the right direction.

    The President also proposes a number of loophole closers, for instance cracking down on companies that have tried to shelter income overseas and avoid paying corporate income tax here.

    The President also made some really hard choices in carrying out a freeze for 5 years in non-security discretionary, and I think the President did a good job of prioritizing within those programs so that the freeze really doesn’t have a big negative impact on the most important programs.
  3. So you mentioned the President made some really tough choices in this budget.  Were there some proposals in the budget that you find particularly troubling?

    Not surprisingly, not everything in the budget is exactly the way I would want to do it, but there is one area where we think the President went too far in the cuts, and that’s in the Low Income Energy Assistance Program, which is known as LIHEAP.  The President proposed a cut in there that the Administration said wouldn’t do great harm because they were taking into account reductions in energy costs.

    Unfortunately, we think they didn’t really adequately reflect the real cost of energy right now and they didn’t take account of the fact that we have a lot more people with big needs now as a result of the economic downturn, people have lost jobs, assistance that states had been providing to low-income seniors and others has gone down and so the real needs in the LIHEAP program have increased in the last few years and we think that’s one area where there should really be a reconsideration and the cuts shouldn’t be that deep.
  4. We talked about the tough choices; we talked about some concerns, but what about these charges from some critics that the President’s budget just didn’t do enough to address the nation’s longer-term fiscal problems?

    I think the President actually took a reasonable approach to this. He completely recognizes that in coming decades, because of rising health care costs, the aging of the population and inadequate revenues, that if we don’t make further changes we will have deficits that start to increase and debt will start to rise again relative to the size of the economy.

    But the President, I think wisely did not lay out a specific program to try and deal with that problem because if he had it would have been shot down from every which-way and it would have made it actually harder when we eventually get to the bipartisan negotiations that are needed to deal with this problem to reach agreement.

Thanks so much for joining me today Jim.

For detailed information on the President’s proposed budget and future budget battles see the federal budget section of our website at