Geithner Hails Obama's 'Remarkably Fiscally Responsible' Budget That Deepens Debt by Trillions of Dollars
According to the budget released by the administration last Thursday, the federal deficit will total more than $1 trillion in 2009 and 2010, before dropping to $912 billion in 2011, and then reaching a plateau at approximately $500 billion from 2012 until 2019.
As it stands, Obama’s maiden budget contemplates adding $6.9 trillion to the national debt over the next decade--$3.7 trillion of which will be added during Obama’s first term. Currently, the total national debt is $10.9 trillion.
Geithner, however, did characterize the budget as being “the most fiscally responsible” spending blueprint to have been offered in decades, highlighting the administration’s commitment to better accounting practices--and deficit reduction.
“The president’s budget begins by offering an honest assessment of the dimensions of the problems facing the country,” Geithner said in his opening statement at a Tuesday hearing of the House Ways and Means Committee, chaired by Rep. Charles Rangel (D-N.Y.)
The Treasury chief praised the administration’s efforts as “remarkable.”
“This is a remarkably fiscally responsible budget,” Geithner said. “I don’t think we’ve been this fiscally responsible in a very long time.”
Geithner explained the gargantuan deficits incurred over the next two years as being necessary for economic recovery, saying that the administration had no other alternative.
“There’s no choice but to do this,” Geithner said. “There is no alternative.”
Geithner said the administration’s goal was just to keep the deficit to within approximately 3 percent of the nation’s gross domestic product (GDP), rather than actually balancing the budget.
“The president is determined to cut this $1.3 trillion deficit by at least half in four years,” Geithner said. “This would bring the deficit down to $533 billion by fiscal year 2013. More importantly, it would reduce the deficit to about 3 percent of GDP.”
Keeping the deficit in this range, Geithner said, would keep the national debt from outgrowing the economy and hindering economic growth.
“By bringing the deficit down to the range of 3 percent of GDP, we can keep our national debt from growing faster than the economy itself. Failure to reduce deficits to the level would result in higher interest rates as government borrowing crowds out private investment, leading to slower growth and lower living standards.”
Despite the Treasury Secretary’s assertions about the detrimental effects of government borrowing on the economy, Obama’s budget paradoxically proposes deficits in 2010 and 2011 that would be 8 percent and 5.9 percent of GDP respectively.
In fact, the deficit incurred through 2014 would total 4.7 percent of GDP. The 2009 deficit, which has been compounded by Obama administration’s stimulus and mortgage-rescue plans, is projected to be 12.3 percent of GDP--unless the administration proposes more spending.
The GDP, by the way, is the sum of all goods and services produced within U.S. borders, as calculated quarterly by the U.S. Department of Commerce.