What is Sustainable about Obama’s budget in these Foreclosure times?

“A New Era of Responsibility”—President Barack Obama’s budget for 2011 has been announced. “Let’s invest in our people without leaving them a mountain of debt,” the president stated in his State of Union Address. “Let’s meet our responsibility to the citizens who sent us here.” It may be tempting to assume that a balanced budget is the natural benchmark. Certainly, the Obama budget can not meet that goal.

But there are reasons to think that this standard is far too strict. Budget deficit can be caused by war or recession. The government has to borrow money in these tough situations. For this reason, foreclosure adversely affects the economic status of the people.

President Barack Obama, like his predecessor George W bush, the former president, is dealing with both war and recession. A transitory surge in the government’s budget deficit is natural under these circumstances and need not be a cause for alarm. Moreover, even in the future, a balanced budget is too strict to maintain a standard.

As new technologies are being invented, the path of progress has vastly changed, population growth and inflation, the nation’s income and tax base grows over time. If the government’s debts increases or decreases in that pace, paying the debt will not become too hazardous.

The main problem of President’s budget is that it fails to return the federal government to manageable budget deficits, even as the wars end and the economy recovers from the recession. According to the administration’s own numbers, the budget deficit under the president’s proposed policies will never fall below 3.6 percent of G.D.P. By 2020, the end of the planning horizon, it will be 4.2 percent and rising.

As a result, the government’s debts will grow faster than the economy. The administration projects that the debt to G.D.P. ratio will rise in each of the next 10 years. By 2020, the government’s debts will equal 77.2 percent of G.D.P. President understands that the fiscal plan of his budget is not sustainable and is not really a plan at all. So the budget needs a fiscal commission for “identifying policies to improve the fiscal situation.” The goal is “to stabilize the debt-to-G.D.P. ratio at an acceptable level once the economy recovers.”

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