Obama’s 2011 budget – playing the deficit game

The US budget wouldn't be looked upon with such interest around the world if it wasn't for its sheer size and importance. Though China, India and Brazil may hog all the headlines, the fact remains it is the American consumer's spending power that will determine whether or not the world pulls out of a recession.

Monday's $3.8 trillion budget for fiscal 2011 may raise eyebrows for its sheer size but attracts enormous global interest in what it portends for the future.

President Obama's budget announcement on Monday has received predictable, knee-jerk responses from both sides of the American political aisle, but qualified support from experts who are trying to gauge how the White House has gone about performing a juggling act.

The budget calls for increased spending on education and clean energy technology, tries to pare defence spending, and, critically, calls for increased spending on job creation. In a move that will receive wide spread approval around the country it also allows the Bush-era tax cuts for high-income Americans lapse as scheduled at the end of 2010.

While it receives predictable boos from the Republican side of the aisle for increasing budget deficit it is being argued that an increase of $120 billion in this figure, after accounting for all the new spending, cuts, tax increases and subsidies, under the current circumstances is still a reasonable deficit. Particularly, as the country battles recession and deficit spending is required to boost growth and create jobs.

It is pointed out that nearly $2.4 trillion, of the overall budget, is intended for mandatory spending, on programmes like Medicare, Medicaid, Social Security and for payment of interest on the national debt. Medicare and Medicaid bills alone total up to $788 billion.