Obama Budget Glass: Half-Empty or Half-Full?
WASHINGTON - President Obama's proposed $3.73 trillion budget for 2012 which was announced Monday makes several assumptions in its claim to reduce overall spending by about $1.1 trillion over the next decade, mostly from spending cuts.
Republicans immediately attacked the bill as insufficient in reining in spending.
Rep. Paul Ryan, R-Wis., said that for the sake of the economy, employment, and the future, "It would be better doing nothing than if we were to actually pass this budget."
One of the big question marks raised by the budget proposal relates to future growth of the U.S. economy. The plan shows the overall economy - as measured by the gross domestic product - growing at significantly higher rates than private forecasts.
Stronger economic growth means more people working - and making more tax payments to the government, increasing revenue and thus lowering the deficit.
For 2012, the administration is forecasting that GDP will increase 3.6 percent and then climb at rates of 4.4 percent in 2013, 4.3 percent in 2014 and 3.8 percent in 2015.
CBS News business and economics correspondent Rebecca Jarvis called those assumptions "pretty aggressive. They're very optimistic about the state of our future, and in fact they're more optimistic about our future growth than even the Congressional Budget Office, which is a nonpartisan office which looks at how fast the economy is going to grow. This budget actually assumes that the economy will grow faster."
For 2012 the CBO and others foresee GDP rates as much as a full percentage point below the administration's forecasts, and the White House continues to be more optimistic about stronger GDP for the rest of the decade.
Conversely, the administration's GDP forecast for 2011 is less optimistic than the projection of many economists. The administration sees GDP growing 2.7 percent this year, while many private forecasters have GDP growth a full percentage point higher - at 3.7 percent this year.
Part of the reason for the discrepancy in 2011 calculations owes to the fact that the administration's forecast was done last fall before Congress passed the deal that continued the Bush-era tax cuts and provided for Social Security payroll tax reductions in 2011 and tax incentives for businesses, boosting economists' projections for growth this year.
"Near-term, the administration is being very cautious, but as you move out, they get quite optimistic," Mark Zandi, chief economist at Moody's Analytics, told The Associated Press.
Jarvis also notes that the budget shows its optimism in other areas. "It assumes that unemployment will drop faster than many economists are expecting," she said. "And on top of that, it anticipates that inflation will stay constant below 2 percent.
"So those are aggressive projections for the future, and if those don't turn out to be the case, then we won't get the kind of savings that the plan anticipates," Jarvis said.
Private economists said they did not view the administration's economic forecast as totally unrealistic, like some used in previous administrations to mask a deteriorating deficit picture.
David Wyss, chief economist at Standard & Poor's in New York said that, while "not being ridiculously rosy," the administration is "certainly on the upbeat side."
Jarvis also noted that about half of the cuts - about $650 billion - are still unspecified. "They're mystery cuts right now," Jarvis said. "So when you think about what the future of this plan will hold, there's probably going to be a lot of gamesmanship, and in that whole negotiating process that $650 billion number is really probably going to turn into a moving target."
And while the budget proposal assumes cuts, it also allows for increases in spending in several key areas, such as improving teacher quality.
What will actually get cut? And will Congress have the will to tackle the elephant in the room - entitlement programs?
Making any cuts in popular programs will be difficult: According to a new CBS News poll, 41 percent of Americans said they do not believe cuts in funding to programs that benefit them personally should be necessary to balance the budget.
Optimistic about not needing cuts? CBS News senior White House correspondent Bill Plante said that the same CBS News poll also shows that Americans are pessimistic about the economic recovery. Fifty-seven percent say they don't feel the recession is over - or that recovery is underway.
On CBS' "The Early Show" this morning, Sen. Jeff Sessions, R-Ala., said the atmosphere in Washington was especially difficult for making bipartisan decisions about spending cuts.
"Mr. Daly, the new chief of staff at the White House, taunts the Republicans a week or so ago saying "Where is the beef? Where is your cuts?' Like, 'We don't want any cuts but as soon as you produce them, we're going to attack you,'" Session said on "The Early Show." "Harry Reid said even a $30 billion cut that the House was proposing at one point is unacceptable. So this is not a good situation. I'm really worried about it."
But Sessions was hopeful that progress could be made in the Senate. "Senator Conrad, chairman of the budget committee that I work with, I think he's open to some improvement in our situation, so maybe we can," Sessions told "Early Show" anchor Erica Hill. "We've got to try to work together."
But when asked he thinks Americans are prepared to lose benefits from entitlement programs and even retire later, Sessions said, "Well, they don't have to prepare to lose significant benefits. If we start now and we do the right thing today and work together, we can reform Social Security and Medicare - which is over half of our budget, correct - and make some real progress there to put them on a sustainable path.
"But I have to say we should not ignore the discretionary spending. That has surged 24% in the last two years under President Obama. It needs to come down. It can come down. Program after program have had unprecedented increases, and I'm not counting the stimulus that was on top of that.
"Just for an example, if you would take a one-time cut of a $100 billion on discretionary spending over ten years, that reduces the baseline - and it's a trillion dollar savings," Sessions said.
"There's much more that can be done than that, but this is the kind of trajectory we need to be on," he said.
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