Why Obama's Budget Doesn't Matter

There must be at least a few White House budget writers wondering, why bother?

The president's annual presentation of his budget to Congress is one of those storied traditions that sets Washington into a tizzy and signals that a "Serious News Story" must be reported. In the usual fashion, President Obama has presented an exhaustive budget for fiscal 2013, with a 256 page outline that details his spending plans for 15 cabinet-level departments and dozens of other agencies. The budget is typically a big deal not just because it's a spending blueprint for the world's biggest purchaser, but because it illuminates the president's vision for the future of government.

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The press has been dutifully reporting the heady numbers in Obama's latest budget: $3.8 trillion in government spending, a $1.3 trillion deficit for the current fiscal year, a $901 deficit for 2013, and $4 trillion worth of proposed cuts in the national debt over a decade.

There's also one small footnote: There's very little chance Obama's budget will ever go into effect.

Even when the politicians in Washington get along, the president's budget is a mere guideline to spending, with Congress passing specific appropriations bills that provide funding for each department. Sometimes those bills reflect the president's priorities, sometimes they don't. But since 2010, the federal budgeting process has been a fractious, ad hoc process that basically keeps the government going for a few months at a time—with virtually none of the strategic planning that's typically reflected in an actual budget.

Ordinarily, Congress passes an annual "budget resolution," which is supposed to outline an overall spending plan for the next five years. But Congress didn't do that for the 2011 or 2012 budgets, partly because Republicans and Democrats couldn't agree on a plan, and partly because neither party wanted to be associated with Washington's huge deficits. The same is likely to happen this year, with -- you guessed it -- deep divisions over spending, taxes and the future of entitlement programs such as Medicare.

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Instead of a proper budget thoughtfully executed, Congress has been funding the government like a spoiled rich kid who whips out a credit card for every impulse purchase, without ever checking the balance. Most spending these days is funded by short-term resolutions that tend to get passed at the last minute with little public scrutiny. The government still functions, but with little prioritization and an unsustainable mismatch between the money that comes in and the money that goes out. "We're budgeting with blunt tools right now, instead of a more detailed assessment of what's best for the nation," says Maya MacGuineas, president of the nonprofit Committee for a Responsible Federal Budget. "If you look at our fiscal situation, it's leading to suboptimal outcomes."

Expect more of the same this year. In his 2013 budget, Obama calls for billions of dollars in new spending on roads, schools and other types of infrastructure investments, which is very similar to what he requested in his "American Jobs Act" last fall. Congressional Republicans blocked such measures then, and everybody in Washington knows they'll do so again. The same goes for Obama's call for higher taxes on households earning $250,000 or more--there's almost no chance Republicans will agree to tax hikes before the elections.

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Meanwhile, the biggest portion of federal spending doesn't require any budget or short-term resolutions. Spending on entitlement programs such as Medicare, Medicaid and Social Security accounts for roughly two-thirds of all government spending, and it happens automatically. Those programs, especially Medicare, are the biggest budget-busters, yet Obama's budget calls for only minor reforms when much more is needed.

Obama's aides insist that even if Congress completely ignores the president's budget, it's an important document because it details the types of programs Obama will pursue if re-elected in November: An aggressive effort to reinvigorate manufacturing, more job retraining, more help for homeowners, an "all of the above" energy policy and, of course, higher taxes on the wealthy. But anybody planning to read the president's budget can get the gist of his ideas by watching his most recent State of the Union address or listening to any stump speech Obama gives this year. Or simply Google "economy built to last."

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The real suspense in Washington is going to come after the November elections, when the president and Congress have to make huge decisions about a wide range of tax cuts set to expire, across-the-board spending cuts set to go into effect in 2013 and another boost in the government's borrowing limit that will be required shortly after the next president is sworn in. Unlike the 2013 budget, that may be a drama worth watching.

Rick Newman is the author of Rebounders: How Winners Pivot From Setback To Success, to be published in May. Follow him on Twitter: @rickjnewman

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