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Goldman's Take On Obama's Latest Budgetary "Promises"

Tyler Durden's picture


BOTTOM LINE:  The president has released a budget proposal that goes beyond his budget proposal for fiscal year (FY) 2012.  The most important new items are a “debt trigger” that would result in across-the-board cuts in spending and tax credits/deductions if debt/GDP goals are not reached, additional reduction in defense and non-defense discretionary spending and an endorsement of additional entitlement reductions. In most cases, the proposal outlines savings only at a high level.   

Key points:

Process changes:  A new “debt trigger proposal”. The president proposes to reduce the deficit by a cumulative $4 trillion over twelve years (through 2023), though it is not entirely clear what baseline this savings number is relative to. The president also proposes to establish a debt trigger that would enforce across the board cuts in spending and “tax expenditures” if by 2014 “the projected ratio of debt-to-GDP is not stabilized and declining toward the end of the decade.”  For example, the current CBO baseline assumes an increase in the debt to GDP ratio from 2018 to 2020 of 75.3 to 76.2, so if this policy were to apply today (rather than 2014 as proposed), it would imply additional fiscal tightening as we understand the proposal.  

Discretionary spending:  More discretionary cuts reflect recent congressional debate. President Obama’s new proposal would reduce non-defense discretionary spending by an additional $200 billion over ten years compared with the freeze proposed in his FY2012 budget, released in February.  To some extent this probably reflects the fact that any freeze over future years would start at a lower level, and thus presumably generates additional cumulative savings. The president indicates that additional savings would also be found in defense discretionary spending; the White House fact sheet identifies $400bn in savings over twelve years (through 2023) beyond the savings from ramping down overseas military operations. Some of this reduction appears to be new, but it isn't clear how much it overlaps with existing proposals to reduce defense spending.

Taxes: Few specifics.  The president endorses the concepts behind the fiscal commission’s proposal, namely to reform the tax code and reduce tax expenditures. Note that the fiscal commission recommendations included multiple reform scenarios. He also indicates that increased revenue should make up only one quarter of total budgetary savings (including interest savings), in line with the fiscal commission’s approach.  Note that the president's budget in February already assumed expiration of upper-income tax cuts after 2012 as well as a limitation on itemized deduction by higher-income taxpayers; we assume the discussion of those issues in his speech relates to those proposals, as there were

Mandatory spending: Less deficit reduction than the House proposal.  President Obama proposes $340bn in savings from additional health reforms over the next ten years. This does not appear to involve the fiscal commission’s recommendations. Instead, it assumes savings from setting an even lower spending growth goal of GDP + 0.5% for the Independent Payment Advisory Board (IPAB) set up under last year’s health reform law, as well as $100bn in Medicaid savings and $200bn in Medicare savings.  This is a much lower aggregate defcit reduction amount from this segment of the budget than included in the House Republican budget resolution, which proposes $1.1 trillion in savings compared with the President’s FY2012 budget. The President proposes $360bn in savings through 2023 (i.e. over twelve years) in "other mandatory" spending, compared with the House proposal to reduce spending by $1.8 trillion through 2021 (i.e. over ten years).

Social Security: No near term changes.  Like congressional proposals, the president does not propose any near term savings from the Social Security program, though he endorses long-term reform.

The process from here:  A major debate over revenue vs. spending levels, with discretionary spending caps still the most likely near-term action.  It appears very unlikely that the House of Representatives will be willing to consider a meaningful increase in tax revenues, and although both parties have proposed mandatory spending reduction, the House budget proposal would generate much greater savings in this area. This takes the debate back to discretionary spending, where cuts are likely to be approved this week as part of the FY2011 process, and where it appears likely additional cuts or caps, as well as budget process reforms, will be proposed as part of the upcoming debt limit debate as well as the FY2012 budget process that is now getting underway.

From Goldman Sachs


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Wed, 04/13/2011 - 15:14 | 1166354 NOTW777
NOTW777's picture

key point - goldman funds the obama

Wed, 04/13/2011 - 16:11 | 1166385 Sudden Debt
Sudden Debt's picture


POINT 2: IN 12 YEARS, THERE WILL NOT BE ANOTHER CRISIS (or we're totally fucked)


POINT 4: why are you still reading this? Still not convinced?


somebody else can clean up his mess...


politicians... promising that somebody else of who they officially don't know who is going to be "elected" by than will fix it all...


Wed, 04/13/2011 - 19:11 | 1167106 narapoiddyslexia
narapoiddyslexia's picture

So sorry. I'm sort of new here. I'm a somewhat recently-simple Midwestern American.

Who are you?

Almost all of your points I've seen have resonated with what I see.

And here? Yes, they will no doubt foment more wars. And Obama is a fraud.

But why do you care?

I've heard you're Dutch. Here, that means something else. My father used to call cheap people "Dutch."

"Oh, he's Dutch," he'd say, after an egregious example passed in front of my eyes.

What is the deal with that?

Surely, not all Dutch are cheap. Where did that come from? 

And, just so we know, Obama is fuk ed.

Thank you.



Wed, 04/13/2011 - 19:14 | 1167113 narapoiddyslexia
narapoiddyslexia's picture

Please, I am just curious. I've never been out of the Midwest, and do not understand why folks elsewhere care that much.

My father voted for GWB, btw. And he went to his grave regretting it. Too late.


Thu, 04/14/2011 - 03:21 | 1168024 Sudden Debt
Sudden Debt's picture

1. I'm not Dutch, I'm from Belgium.

2. We call the Dutch greedy to, and Americans Stupid.

3. Why do I care? This is a globalist world. America fucked it up and we get to stand in the heat to.

4. You sound really stupid. How did you pass the captcha test? Did your dog help you out?


Wed, 04/13/2011 - 16:52 | 1166756 mdwagner
mdwagner's picture

key point - goldman funds all of them

Wed, 04/13/2011 - 19:11 | 1167105 FoodTiger
FoodTiger's picture

If they need money, they ought to slap a 50% tax on political contributions.

Wed, 04/13/2011 - 15:14 | 1166358 LawsofPhysics
LawsofPhysics's picture


Wed, 04/13/2011 - 16:08 | 1166565 Cash_is_Trash
Cash_is_Trash's picture

Bullish indeed, Sir.

This melt-up is certainly the prelude for the most massive financial collapse that one day will happen: the Sovereign Debt bubble.

Rally on ol' chap!

Wed, 04/13/2011 - 16:42 | 1166715 SheepDog-One
SheepDog-One's picture

You left out 1 letter from your anagram sir 't'....see now its bullshit.

Wed, 04/13/2011 - 15:17 | 1166361 NOTW777
NOTW777's picture

remember obama "cuts" = slower increase in spending

Wed, 04/13/2011 - 15:19 | 1166368 NOTW777
NOTW777's picture


Wed, 04/13/2011 - 15:21 | 1166374 NOTW777
NOTW777's picture

now, back to bombing libya

and the US-Islamic World Forum featuring John the Kerry as Obama sidekick

Wed, 04/13/2011 - 15:17 | 1166369 AldousHuxley
AldousHuxley's picture

Now that Obama has spent your money on bankster rescue funds, you and your children will need to work harder for less.

Wed, 04/13/2011 - 17:38 | 1166879 Seymour Butt
Seymour Butt's picture

Having problems with your short term memory? Geez, do you even have a GED? Get your facts straight.

Bank bailout was approved in 2008. Remember Hank Paulson? Or you forgot that already?

Wed, 04/13/2011 - 15:22 | 1166376 Misean
Misean's picture

I could give a F**k what Goldman Sucks "thinks". They pay for this theater so it's kinda stupid to read their reviews anyway.

Wed, 04/13/2011 - 15:22 | 1166380 AldoHux_IV
AldoHux_IV's picture

Goldman should've gone under in the last financial crisis and will most certainly not survive the next one.  In other words: fuck Goldman and fuck Obama for the bullshit his administration help perpetuate-- the imbalances and inequities only grow more until the peasants wake up.

Wed, 04/13/2011 - 15:24 | 1166381 RobotTrader
RobotTrader's picture

Must be promising more food stamps.

WFMI on the verge of printing new highs.  That stock has had an insane run, no sign of it letting up.

Wed, 04/13/2011 - 15:23 | 1166383 DonnieD
DonnieD's picture

This is the economic equivalent of Stalin analyzing the methods of Hitler.

Wed, 04/13/2011 - 15:28 | 1166398 jmac2013
jmac2013's picture

Trillions for Wall Street bailouts, but Main Street government services get cut, go figure.  The first cuts should go to the military (but won't).  Over ten years ago the Pentagon announced that they couldn't account for two and a half trillion dollars, money down a hole.  The other ridiculous expenditure that should get cut is foreign aid $$$.  The ignorant masses hoped for change, but got suckered yet again.


Wed, 04/13/2011 - 15:27 | 1166402 digalert
digalert's picture

While loading the teleprompter, this statement was fed to GS.

Wed, 04/13/2011 - 15:49 | 1166495 Urban Redneck
Urban Redneck's picture

Did GS write its analysis before or after they delivered Barry's speech to the teleprompter guy?

Wed, 04/13/2011 - 15:28 | 1166411 Bicycle Repairman
Bicycle Repairman's picture

If the FED isn't getting any help from the fiscal side of the house, I guess they'll have to do it alone.  Wonder what that means?

Wed, 04/13/2011 - 15:34 | 1166427 Commander Cody
Commander Cody's picture

Screw GS.  And as far as the fascists in DC: They will continue to kick the can down the road until they can't.

Wed, 04/13/2011 - 15:33 | 1166435 chet
chet's picture

It's completely meaningless to listen to what any politician or party proposes for the next ten years.

They're always campaigning, so the "right time" never comes to actually vote on any of it.

Wed, 04/13/2011 - 15:43 | 1166475 Cognitive Dissonance
Cognitive Dissonance's picture

Since the 'official' numbers are manipulated anyway, they will never 'trigger' Armageddon in 2014. And the $4 Trillion will magically arrive early. And Santa Claus.............

Wed, 04/13/2011 - 15:47 | 1166483 XitSam
XitSam's picture

"The most important new items are a “debt trigger” that would result in across-the-board cuts in spending and tax credits/deductions if debt/GDP goals are not reached"

Ha ha, oh this is rich.  They will simply redefine the goals. Just like the debt ceiling isn't fixed but keeps going up.

Wed, 04/13/2011 - 22:26 | 1167685 FreedomGuy
FreedomGuy's picture

My thoughts, exactly! Every plan to attack budget deficits and national debt always has automatic triggers and disciplines. Anyone remember Gramm-Rudman? It's all crap because it all happens in the future with someone else. The "tomorrow" disciplines never ever ever never happen. It's smoke and mirrors. What you need is one of those old chainsaw finance types that started in corporate America back in the 80's. You cut now, deep and fairly ruthlessly. Of course you have to agree on what the core missions of government are before you do that. Democrats think the core mission is income stuff. Republicans tend to think it's security, FBI, defense, etc. That's why no one wins and government grows.

The Republicans will lose the budget fights, the Dems will win in the near term by preserving the ever growing government. All America and actually the world will lose when it crashes...and it will.

Wed, 04/13/2011 - 15:55 | 1166526 Hedgetard55
Hedgetard55's picture

So the national debt will only increase by $12 trillion rather than $16 trillion in the next 12 years under Barry's plan?


Winning the future.

Wed, 04/13/2011 - 15:57 | 1166534 Dr. No
Dr. No's picture

Graham-Rudman.   snoooze.

Wed, 04/13/2011 - 16:03 | 1166551 newworldorder
newworldorder's picture

I am not an accountant, but we really do need to simplify the debt discussion for the masses.

"Perpetual debt" should be added to the US Treasury and FED lexicons and be identified as a separatebudgetary line item. Lot's of things can go into this definition, including debt that will never be repaid as well as future interest debt that can be added to the balance outstanding by future administrations.

Wed, 04/13/2011 - 16:04 | 1166555 stoverny
stoverny's picture

"debt trigger" - is that as iron-clad as the "debt ceiling"?

Wed, 04/13/2011 - 16:15 | 1166598 bigdumbnugly
bigdumbnugly's picture

obama's got to be very careful while reading the teleprompter and talking about this or he might just earn himself yet another derogatory nickname.



Wed, 04/13/2011 - 16:09 | 1166568 monopoly
monopoly's picture

What a joke that man has become. We sure know who wears the shoe in his house. Not him!

Wed, 04/13/2011 - 16:22 | 1166618 SparkyvonBellagio
SparkyvonBellagio's picture

I hope the 'Gimp' gets a big piece of him.



Wed, 04/13/2011 - 16:27 | 1166653 JustPrintMoreDuh
JustPrintMoreDuh's picture

Nobel prize for economics in store for Barry?

Wed, 04/13/2011 - 16:31 | 1166667 PulauHantu29
PulauHantu29's picture

How about triming the Mega-Trillion Sacred Military expenses? That seems to be the "elephant in the room."

Wed, 04/13/2011 - 17:31 | 1166854 Seymour Butt
Seymour Butt's picture

Military Industrial Complex. Sacred cow.

Wed, 04/13/2011 - 16:56 | 1166769 Mach1513
Mach1513's picture

What the fuck is a "tax expenditure?"

Wed, 04/13/2011 - 17:00 | 1166782 centerline
centerline's picture

I would sincerely hope that it becomes painfully clear soon enough that the gas-pedal is stapled (nailed) to the floorboards.  Spending can't stop.  It can only accelerate from here.  Else the system drops dead on the spot.  Maybe some event serves as a "stop-strip" and sends us screaming off into the ditch.  Or maybe the wheels just fall off soon enough.  Maybe we achieve warp speed (and find out just what happens when mass is converted into pure energy).  Who knows.  But the message ought to be loud and clear here soon enough.

Wed, 04/13/2011 - 17:54 | 1166918 Moe Howard
Moe Howard's picture

Which came first - did they write the analysis first, or the teleprompter-in-chief script first? Or simultaneously?


Meanwhile, back on the ranch, Ron Paul said:

Of course, an actual government collapse would create serious problems for many people who have come to depend on government payments for healthcare, retirement income, their children’s education, and even food and housing. However, these so-called entitlement programs are unconstitutional to begin with and have engendered a culture of dependence on wealth transfer payments that is out of control. It concerns me greatly that instead of dealing seriously with our situation, so many in Washington would rather allow the chaos that will ensue when all of the dependent people are suddenly cut off. Better to look reality squarely in the face and tell people the difficult truth that government is simply not capable of managing people’s lives from cradle to grave as was foolishly promised. We face trillions in deficits with any of the budgets under consideration. Keeping those promises is, sadly, just not one of our options in the long run. Better to admit the nanny state is coming to an end and we are no longer working on “compromises” but a transition – to a sustainable way of life, one that respects the constitution, the rule of law and property rights.


And that is why the media hates him, the banksters hate him, after all, that is some straight shooting there by Dr. Paul. Compare that with Obama's [or whatever his real name is] speech as written by the Squid. See what I mean? By the way, last Friday the stupid 'deal' proved out to be what I heard it was - an increase in defense spending to cover Libya without a vote, hiding the money in the Afghanistan and Iraq appropriations. They cannot have a vote to be held against them in 2012.

Wed, 04/13/2011 - 18:06 | 1166936 buzzsaw99
buzzsaw99's picture

Lie about GDP = Problem solved.

Wed, 04/13/2011 - 18:11 | 1166945 redpill
redpill's picture

It's worked for China so far

Wed, 04/13/2011 - 18:35 | 1166993 honestann
honestann's picture

LIES ... LIES ... LIES ... LIES ... LIES

If there is a $4-trillion "cut", that is relative to some fictitious assumed $444-trillion increase in debt... "reducing" added debt to $440-trillion.

In fact, neither party will cut SQUAT.  Not in reality.  They might create a bunch of new off-budget, never discussed, totally bogus and unconsitutional scams to print and spend without revealing it... but that's the best case scenario for the predators-that-be in both parties.

Amazing how brazenly disingenuous they're getting.  They must realize the total collapse draws near.

Wed, 04/13/2011 - 21:21 | 1167497 max2205
max2205's picture

Hope the trigger is aimed at his mouth

Wed, 04/13/2011 - 22:56 | 1167776 Myzery
Myzery's picture

Executive Summary:


The United States will continue to meet it's obligations by devaluing the dollar.



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