The Islamic Post Blog

Federal Budget Spurs Debate by Khalida
March 25, 2009, 5:53 am
Filed under: Business/Economy, Front Page News, March Volume 2009, National, Politics

(IP)– Many Republicans are ready for war over President Barack Obama’s proposed federal budget, interpreting it as a plan to interject the government into corporate affairs. Republican Congressman Paul Ryan of Wisconsin says enactment of the Obama budget plan would lead to the largest expansion of government since Franklin Roosevelt’s New Deal. At the same time Republican statesmen are expressing their concern over the projected record-high deficit of $1.75 trillion for the next fiscal year, more than 12 percent of U.S. gross domestic product. “It is terrifying in the policy implications as well as mind-boggling in the numbers,” Senate Finance Committee member Jon Kyl (R-Arizona) told Fox News.
But political analysts have found ways to explain away both of the main arguments regarding an escalated deficit and government intervention. Lyndon LaRouche, chief economist of Executive Intelligence Review says the deficit argument is overplayed. A “diversion,” Mr LaRouche said, adding that the deficit before the new budget already has “no solution.” Matt Dallek, political historian at the University of California’s Washington Center takes a milder stance on government intervention: “Now on some level, we accept that the federal government for the most part, not everyone does, obviously, but we accept that the federal government has a role to play in a time of economic crisis.”
Mr Dallek’s logic is not acceptable to everyone, however. Many Republicans resent the scope of the new budget, even after a weeks long struggle of the Obama administration to pass the stimulus bill, the other part of the package to deal with the economic crisis.
However, White House officials point out that President Obama inherited the crisis, along with the federal deficit, from the previous administration. Director Office of Management and Budget, Peter Orszag, reiterated: “The economic crisis we’ve inherited raises the deficit by roughly $2 trillion (for this year and next year combined).” According to Mr Orszag, the crisis has raised the deficit, and the Obama administration has been left to deal with that in a way which is “fiscally responsible and not ‘big spending.’” “Irresponsible budgets and inexcusable practices are now in the past,” President Obama said during his weekly address March 7. The President also emphasized that, while the deficit will increase in the short run, reduction of the same amount is calculated for the next years.
In Peter Orszag’s notes to the public, he states the deficit reduction will partially come from “responsibly redeploying our military forces engaged in overseas contingency operations, as well as reforms that would allow us to get more for the money spent on defending the nation.” “The President is committed to responsibly winding the war,” wrote Orszag, “I don’t do foreign policy, but I can tell you this: ending wars saves money – and so the Administration’s budget includes savings from ramping down overseas military operations over time.” President Obama also signed a presidential memorandum earlier this month “to end unnecessary no-bid contracts and dramatically reform the way contracts are awarded — reforms that will save the American people up to $40 billion each year.” While defending massive short-term deficits as necessary during a severe economic recession, President Obama says his budget will shrink the revenue gap in subsequent years by eliminating unnecessary spending and raising income taxes on the wealthy.
Other methods of deficit reduction, according to Mr Orszag, include “returning fairness to the tax system by closing tax loopholes, eliminating subsidies for special interests, and returning to the pre-2001 tax rates for high-income families making more than $250,000 per year (over the next ten years, these revenue enhancements would reduce deficits by roughly $1 trillion).” The budget includes a tax cut for all but the wealthiest of workers and as White House Chief of Staff, Rahm Emanuel, told CBS’ Face the Nation program: “Ninety-five percent of Americans will have a tax cut. Nobody will see a tax increase for two years.”
Orszag also states the budget will make government “more efficient – for example, by eliminating unwarranted subsidies to middlemen on educational loans and reducing erroneous payments (these two steps would reduce deficits by almost $100 billion over the next ten years).” On ABC’s This Week program, the budget director enjoined: “Let us also count the benefits that families get through Pell [education] grants, the benefits that they will receive through constraining health care costs, the benefits they get from weatherizing their homes, and so on. This budget makes the vast majority of American families much better off.”
But still, “a weak economy reduces revenue and increases spending on automatic stabilizers like unemployment insurance,” Orszag stated. This also requires billions to stabilize financial markets, including the need for the $787 billion Recovery Act to “jumpstart” the economy.
But not everyone agrees that the economy can be jumpstarted. Mr LaRouche contends that what is needed is a restart: “What’s running the world today [is] a usury-ridden financier system, which is now breaking down. Putting the entire world system through bankruptcy reorganization will, in effect, eliminate the present Anglo-Dutch-Saudi empire, that is, the banker, the financier empire.”
“The fact of the matter is, that the United States is [already] bankrupt. The U.S. system is bankrupt. The U.S. government is bankrupt. And every part of the world is also bankrupt,” LaRouche writes. The solution to what he calls an impending New Dark Age is “to create [a] system of cooperation among nation-states, of the type envisaged by Franklin Roosevelt in 1944, end all traces of imperialism, end all globalization, and go back to the sovereign nation-state and its people.” Locally, LaRouche proposes that, after declaring bankruptcy and cancelling claims against the economy, “A new flow of credit [be created], under our Constitution, to ensure that the local chartered and local national banks are able to perform their traditional function, in cooperation with government, for creating a system of long-term credit, to generate the rebuilding of our economy: agriculture, industry, infrastructure.”
LaRouche emphasizes that, like the President’s high speed rail program, infrastructure is of the greatest importance to reviving jobs and the economy. The economist also points out: “We need to go back to more distribution of production away from a few large centers of mass industry, into regional development; smaller industries, more emphasis on closely-held corporations. We need to rebuild the idea of a community, where you can walk to work in a quarter-hour or half an hour each way, at most.”
While, the ideas of the EIR director suggest a restructuring of society, the President’s budget, as it stands, is a definite far leap for those who prefer the status quo of the last eight years. Because the US dollar is linked to, and financially supported by, so many of the world’s economies, “Whether this president succeeds or fails, he’s going to do it in historic proportions.” says Larry Sabato, who directs the Center for Politics at the University of Virginia. “It seems to me that in a sense, it is another New Deal or Great Society. You may support it. You may oppose it. But it is big.”  -Sources: Treasury Dept. VOA,, EIR


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