President Obama has sent a $3.7 trillion 2012 budget to Congress. The size of the budget is being challenged by the Republican majority in the House of Representatives, especially the new Tea Party backed members.

This budget proposal would expand our debt. How can we do this, at a time like this? Well, the federal government budget differs from business budgets. The government budget is based on expected revenues and expenditures, mainly for a short term. It is prepared by the Office of Management and Budget and submitted to Congress, which can make changes. If income and expenses don’t balance, the federal government can incur a deficit on its budget, unlike private businesses.

In the business world, for a company to stay in business, its income must balance or exceed its costs. In other words, a business must be profitable, to remain functioning. When expenses are greater than revenues, businesses must cut back on spending, materials and personnel. That means stop spending; otherwise, the business can go bankrupt.  Unlike businesses, governments can increase income by raising taxes. Fortunately for all of us, this is very unlikely right now, even though many liberals still want more tax-and-spend policies, and the administration wants to increase the federal debt limit.

Many conservatives plan to vote against raising the debt limit. If an agreement is not reached, and a new budget is not approved, the government will run out of money to pay its bills. This happened in 1995, when Newt Gingrich was Speaker of the House of Representatives. Federal government spending was closed down, due to a deadlock that prevented passage of the government budget presented by President Bill Clinton. As a result, the government had to temporarily shut down all non-essential US government offices, until the budget crisis was resolved. A budget compromise was finally agreed upon between the legislature and the President’s office. But history has a strange way of repeating itself, and it could happen again.  There is a budget battle brewing now. Republicans say our country is going broke and needs to stop excessive spending. They say our government is spending too much, borrowing too much and taxing too much. The Democrats say we still need to spend more, to invest in infrastructure to pump up the economy. The House of Representatives, controlled by Republicans, refuses to accept the excessive spending.  The Senate is controlled by Democrats, but not all of them support increased spending right now.

The President’s 2012 budget has substantial spending increases in public works, education, law enforcement and environmental programs, to mention but a few. Under pressure from Tea Party and Independent voters who helped elect many Republican candidates last November, a promise was made to cut spending by $100 billion. The President’s budget did cut programs, installed wage freezes and long-term cost reductions, but not enough to satisfy fiscal conservatives. Democrats and Republicans should reconsider the recent fiscal commission’s analysis. It had a lot of tough, but good, recommendations. Many should be adopted during this budget session, and again next year, even in the face of the elections coming up in 2012.  There is no silver bullet to reduce overall spending by the government. But we have to do some things quickly. We need to reduce spending and cut our long-term debt. We need to make government smaller. And we ought to end our pointless war, bring our military forces back home, and reduce the Pentagon budget. The government also should get out of the housing market, by turning over Freddie Mac and Fannie Mae to private sector companies, eliminating about $150 billion in deficits.

The big decisions to be faced, in addition to military cuts, are reductions in Social Security benefits, extension of retirement age, and targeted cuts in Medicaid, Medicare, pension plans and entitlement programs, whether popular or not. We must act on these problems, without delay, or face unpleasant future consequences.

If we continue to borrow from overseas countries and our debt continues to soar, loans from those countries will stop and be called for repayment. Rejection of future loans by China, India and other foreign nations will affect our lower and middle class families even worse, by being taxed more to cover our debts. Jobs will suffer. Businesses will retrench or fail. With uncertainty on paying back future debts, foreign countries will loan their monies elsewhere, rather than in the US.

Both sides of the spending debate have to come together with a reduced but reasonable budget, that can lay the groundwork for a better future.

— Bernard Featherman is past president of the Biddeford-Saco Chamber of Commerce. He can be reached by e-mail: bernard@featherman.com.