Coming in at 2,000 pages, the 2016 federal budget is a fiscal road map for President Barack Obama’s remaining two years and beyond. Its aim: to bolster the U.S. recovery, keep America safe and invest in the middle class.
But at nearly $4 trillion, it carries a hefty price tag. It includes $561 billion in military spending, $478 billion for public works projects, $526 billion in nonmilitary spending, plus assorted tax cuts for the middle class and free community college for students.
Economist Diane Lim at the Committee for Economic Development in Washington said that although the plan is commendable, it's also unrealistic.
“I have no problem with the investment, and I think, in fact, our nation does not invest enough in things that will promote longer term economic growth," she said. "It’s just that we have to come up with realistic ways to pay for it. Otherwise, those investments are never going to happen.”
The budget proposes more than $2 trillion in tax hikes over the next 10 years, mostly on corporations and the wealthy to help pay for these initiatives. But Republican majorities in both houses of Congress are unlikely to accept them.
As it stands, the budget would also add another $6 trillion to the national debt by 2026.
"So if you go out a decade later or two decades later, after the end of the 10-year budget window, we still haven’t done anything to figure out how are we going to keep health care costs down so that Medicare spending as a share of GDP doesn’t keep rising so dramatically,” Lim said.
That should worry investors, Lim said, because the world's largest economy is only as good as its financial health.
But in testimony before Congress on Tuesday, Treasury Secretary Jack Lew said that not only is the U.S. economy growing at a sustainable level, it's also doing better than those of most other countries.
"The fact is our businesses created nearly 3 million jobs last year, the most jobs since the late '90s," he said. "From a global perspective, we continue to outperform our trading partners, many of whom are still trying to climb out of the vast hole created by the global economic crisis."
Congress and the president must still agree on the budget before it can become law, and unless the two sides have the political will to deal with the nation’s expensive health care and retirement programs and its unsustainable high debt, Lim said, the spending plan isn't going anywhere.
"Very, very little of it will pass," she said. "I can guarantee you that.”