Obama's budget proposal is shocking and insulting.

The highly anticipated proposal has finally been released and can be found in it's full glory here.  There is quite a bit to go through, but we can focus on the general overview in to retain some modicum of sanity.  There has been quite a bit of buzz about Obama's budget insofar that we will finally get a plan to tackle our debt crisis.  Instead we get a fantasy, pure and simple fantasy.  Obama's disjointed reality has produced a plan that offers a combination of spending reduction - can't call them cuts because they are just reductions of previous plans - tax hikes and the primary ingredient: fantasy.

Let us start with what the administration *thinks* will happen.

FY 2011 projected revenue: $2.174 Trillion (Arkady: 1.1 Trillion in income)
FY 2011 projected spending: $3.819 Trillion (Arkady:  1.682 Trillion on SS/Medicare/Medicaid)
FY 2011 projected deficit: $1.645 Trillion
Spending as a % of GDP: 25.3%
Deficit as a % of GDP: 10.9%

FY 2015 projected revenue: $3.583 Trillion (Arkady: 2.1 Trillion in income)
FY 2015 projected spending: $4.190 Trillion (Arkady:  2.07 Trillion on SS/Medicare/Medicaid)
FY 2015 projected deficit: $607 Billion
Spending as a % of GDP: 22.3%
Deficit as a % of GDP: 3.2%



Note:  I put some breakdowns in the parentheses because its critical to remember that the social security taxes are separate from income just because we cannot use that money for general spending, but it must go directly to the existing seniors whose money our Government has already spent before.

The fantasy is in bold.  In other words, Obama's entire plan of fixing our budget consists of saying:  Our economy will improve and taxes will double in four years.  There, done.  He shoots, he scoooores!  Yes that is right folks, our economy will improve to such a point in four years that 1.5 Trillion in additional revenue will save the day.  As you can also plainly see, there is no plan to reduce spending in the long run nor is there even an attempt to balance the budget.  Who cares about the existing debt, it's not hurting anyone.  Except that it is.

In 2010 we spent about 190 Billion on debt interest.
In 2015, our Government is projecting that we will be spending: 494 Billion.

Mind you this is an extremely conservative estimate because it guesstimates the interest rate and it does not account for additional borrowing that is not in line with previous borrowing.

This should be a red alert, because think about it this way, even with this conservative estimate and even with Obama's fantasy income number of 2.2 Trillion in income taxes - we will be spending a quarter of everything the Government takes from us via taxes on debt interest alone.  Now, if the bond market sells off because appetite for American debt drops and rates shoot up, then we could easily see 700-900 Billion in interest payments per annum!  This my friends, is Greece.  It is all over, because you can't spend half your income on interest payments.  That is the risk our current administration is actually willing to take where everything can fall apart within 4-5 years.  Forget 2020.

So with that in mind, what exactly does the Obama budget achieve in terms of debt?  A high level overview can be found at the Corner, but few items of concern.

$8.7 trillion — total new spending over the same period.

$26.3 trillion — Total new debt, including entitlement obligations, predicted by 2021.

That is 26.3 Trillion in new debt, NEW debt, on top of our existing 14 Trillion.

$2 trillion — Amount the budget will raise taxes on business and upper-income families over the next ten years, which includes letting the Bush-era tax rates expire in 2012 (for incomes $250,000 and up).  

Although the budget is hoping very much for an economic recovery to elevate revenue levels they are nonetheless planning to implement new taxes.  Of course their budget director (in the video below) proudly announces tax cuts in certain places, overall their combination of tax modifications are designed to increase additional revenue.  About 200 billion a year going forward.

The following is just a demonstration that Obama, who know prefers the term 'investing' over 'spending' is so out  of touch with reality that I recommend he "invests" in NASA to build a ship and bring him back home, because he is not on this planet.

$50 billion — Amount the administration plans to spend this year on infrastructure and transportation “investments”.
$30 billion — Amount dedicated to a “National Infrastructure Bank to invest in projects of regional or national significance to the economy,” including the much-touted high-speed rail initiative.
$77.4 billion — Funding allocated for the Department of Education, a 22 percent increase from 2010 levels, and a 35 percent increase from 2008 levels.
$29.5 billion — Total spending on the Department of Energy, a 22 percent increase from 2008 levels.
$9.9 billion — Funding allocated for the Environmental Protection Agency (EPA), a 30 percent increase from 2008 levels.
$150 billion — Total amount the White House plans to spend next year on research and development programs.

These additional billions on top of all the billions that were jammed into the 787 Billion stimulus package that was originally designed to save the economy and prevent unemployment (U-3) from exceeding 8%.  In other words, the first round of spending failed, so we are doubling down.

Now, the most important and pressing question of course that should be arising as you read this, what happens if these revenue projections fall short?   What happens if this recession/depression is a structural shift and something that will not resolve within a few short years.  With baby boomers permanently retiring, corporations permanently leaving, burdens in terms of taxation rising and more importantly monetary policy turning downright genocidal - where is the room for recovery?   What this comes down to, if Obama's cross my fingers and hope it happens plan fails we are going to be in a world of hurt.  Simply because we have continued to spend and will be forced borrow the difference!!

Below is a video capturing my frustration and angst, with Paul Ryan telling the budget director exactly what he feels.

Paul Ryan is asking the current administration of why they are ducking.  Because Paul Ryan despite all his faults also looked at the 2015 projections and noticed that in 4 years we will be spending 50% of ALL income on just two programs alone.  2.07 Trillion out of 4.1 Trillion.

Indeed, we have no leadership.  Our current "leader" is closing his eyes and strongly wishing for everything to just become better again, surrounded by pixie dust, unicorns and the Keebler elves.