SBE Council Chief Economist on Bottom Line of Obama Budget

Raymond J. Keating, chief economist for the Small Business & Entrepreneurship Council (SBE Council), issued the following statement on President Barack Obama's proposed budget:

"Small business owners tend to be bottom-line people. So, what's the bottom line on the President's proposed budget? The Obama White House offers no serious effort to rein in the unprecedented expansion in government spending that we've experienced over the past three-plus years.

"To the contrary, the President presents a budget agenda that calls for a small one-year reduction in spending for 2012 - after outlays will have increased by 40 percent over four years - and then federal spending resumes its growth. As a share of the economy, spending would remain at unprecedented levels over an extended period of time. That's a big negative looming over the economy.

"Meanwhile, the growth in federal government revenues under the President's budget is projected to be robust over the coming five years. And while the budget deficit is expected to start shrinking after this year, it would still remain huge under this plan.

"Key problems with this entire scenario are the underlying economic assumptions. The budget assumes robust economic growth starting in 2012 and for several years thereafter, along with very low inflation. Given the negatives in this budget for the economy and the many questions swirling around monetary policy, these assumptions can in no way be counted on as realistic. If growth turns out to be slower than projected and inflation runs hotter, then this already dismal budget picture will only grow grimmer."

Democrats Worried About Obama Economic Policies

So, it's not just Republicans, conservatives and free market types who are worried about many of the policies being pushed by the Obama administration.

The March 20 Los Angeles Times reported the following:

In the three weeks since the budget was unveiled, fiscally conservative Democrats have raised concerns about proposed spending increases. Leaders of the House and Senate tax-writing committees have criticized some of Obama's proposed tax increases on wealthier Americans. And influential Democrats are backing away from using a legislative shortcut that may be Obama's best hope for passing his far-reaching health and energy policies.

An additional multibillion-dollar bailout for banks and other financial institutions, which the administration will soon propose, is expected to add more pressure to the federal government's finances.

Into that tinderbox, a lit match has come from new deficit estimates.

Where Obama's budget foresees rolling up $7 trillion in cumulative deficits over the next 10 years, Sen. Kent Conrad (D-N.D.) on Thursday pegged the deficits at $1.6 trillion higher over that period.

Conrad, chairman of the Senate Budget Committee, said the figure was calculated by his panel's Democratic staff members.

The Congressional Budget Office report today is expected to reflect a worsening deficit outlook in part because economic conditions have deteriorated in the two months since the administration set its budget assumptions. The office is expected to project lower revenue and higher spending than what Obama's budget assumed.

Indeed, everyone should be concerned -- no matter on which side of the political aisle they happen to be seated.

Raymond J. Keating

Chief Economist

Small Business & Entrepreneurship Council