Obama’s budget proposes cuts

President Obama’s new budget proposal is an interesting moment as Obama is now admitting that the time for fiscal stimulus has passed and that cuts needs to be made. As one administration official tells The New York Times, “The debate in Washington is not whether to cut or to spend… The question is how we cut and what we cut.”

Interestingly, Obama has proposed a ratio of two third spending cuts and one third tax rises. By contrast, the bi-partisan Simpson Bowles commission on the deficit proposed something very similar to the 80 percent spending cuts, twenty percent tax rises model that Osborne is using.

But the most interesting contribution to the US budget debate in recent days was the speech of Mitch Daniels, the Republican governor of Indiana who is considering running for the Republic nomination for 2012, at the Conservative Political Action Conference. Daniels in a dose of straight talk that we haven’t seen from any presidential candidate in recent memory proposed, “An affectionate thank you to the major social welfare programs of the last century, but their sunsetting when those currently or soon to be enrolled have passed off the scene.”