The Obama budget: One lie after another

by Rossputin | 4:35 am, February 2, 2010 | 1 Comment

Yesterday, the Obama Administration presented its proposed 2011 budget to Congress.  Along with the budget, White House Office of Management and Budget Director Peter Orszag penned a blog note introducing the fiscal monstrosity.  It’s filled with one distortion after another.  Below is the entirety of Orszag’s note (indented) with my comments interspersed.

After a year in which we took immediate and unprecedented action to rescue the economy from the brink of a second Great Depression, the FY 2011 Budget takes steps to jumpstart job creation, strengthen the economic security of middle-class families, and make the tough choices to put our Nation back on the path to fiscal sustainability.

In fact, the budget proposes a “jobs” program which will be no more successful than the “stimulus” bill.  While I have no objection to tax credits for job creation, the majority of “jobs” spending will be wasted in investments in “clean energy” and slush funds for recruiting teachers…one of the key groups of government employees which Democrats constantly attempt to grow.  The economic security of middle-class families could be best strengthened by reducing the economic insecurity caused by deficit spending which, as Rep. Jeb Hensarling points out, is about as much per month under Obama as it was per year while Republicans controlled Congress.  And, as far as tough choices, Obama makes none.

When the President took office, the economy was on the brink of a depression. The economic crisis required that we take immediate and extraordinary steps to prevent a complete economic collapse that would have caused millions more to lose their jobs. Not all of the efforts we undertook to avoid a deeper recession were popular.   Nonetheless the President did what was right for our country’s future: signing into law the Recovery Act to jumpstart economic growth and taking steps to prevent the collapse of the financial system.

Honest people can disagree about whether the “Recovery Act” was a good idea, but it’s clear now that it’s been mismanaged and ineffective.  The recent report from the Special Inpsector General for the TARP program is as damning as a government report on government could be.

A year later, the economy is back from the brink – and is growing again.  This “statistical recovery,” however, is cold comfort for the millions of Americans who have lost their job. The President has therefore called for a package to spur job creation now – including small business tax cuts and investments in clean energy and infrastructure.

The recent GDP growth number is almost certain to be revised downward dramatically and was to a large extent a statistical figment, based on reductions in exports and on build-up of inventories.  As I said, while tax incentives to create jobs are reasonable, almost none of Obama’s jobs package does anything but increase the size and cost of government, waste money on make-work weatherizing projects, and increase transfer payments.

To sustain job creation and economic growth into the years ahead and provide room for the private sector to expand, we are also making tough choices in the Budget: cutting what doesn’t work or isn’t necessary and investing in what will help to expand the economy and employment in the coming years.

Bullshit.  No “tough choices” are made, and when Democrats say “investing” you should hold on to your wallet.

The Budget thus institutes a three-year non-security discretionary freeze that will save $250 billion over the next decade.  We’re not putting forward an across-the-board freeze, but rather an overall cap on non-security discretionary funding in which key investments are expanded but we cut back on programs that are ineffective, duplicative, or just wasteful.  As part of that overall effort, we identified more than 120 programs across the government that should be terminated or reduced – generating $20 billion in savings.

This is possibly the Administration’s biggest current lie.  The so-called “freeze” is on a tiny percentage of the overall budget and simply locks in massive spending increases over the past two years.  Any responsible budget would have cut back the increases.  As I’ve said in a prior note, this freeze is like saying we should be thankful that government has gone from buying $10 bottles of wine to buying $50 bottles of wine because they’re promising they won’t start buying $100 bottles.

At the same time, we are making critical investments in the areas critical to building a strong economy in the 21^st century. That is why we increase funding at the Department of Education by $2.9 billion or 6.2 percent, make the largest proposed request for Elementary and Secondary Education Act programs while reforming it to be more effective, and provide more money for Pell grants and Race to the Top.

What part of “spending more money on education has not worked for decades?” does the Administration not understand?  OK, that’s not fair.  They do understand.  But they need to buy the ongoing loyalty of the teachers’ unions as they lose support all across the political landscape.  The Department of Education should be abolished and the government should get out of the student loan business.

To build a more modern infrastructure, the Budget establishes a new $4 billion dollar National Infrastructure Innovation & Finance Fund to focus on infrastructure investments of national and regional significance.

Why don’t you do that out of the unspent “stimulus” money?

To help put the nation at the top of the pack when it comes to the new clean energy economy, the Budget includes more than $6 billion in funding for clean energy technologies while also eliminating existing fossil fuel subsidies. And to continue our country’s proud, innovative history, the Budget invests $61.6 billion for civilian research and development – an increase of $3.7 billion, or 6.4 percent, over 2010 levels.

Fine, get rid of subsidies for fossil fuels.  But subsidies for “clean energy” jobs will destroy jobs in the private sector while piling taxes on to taxpayers during a time when we can least afford these financial boondoggles.  If there’s any part of the budget which screams for cutting rather than increases, this is it.

As we focus our efforts on spurring job creation and jumpstarting economic growth, we also have to change business as usual in Washington and restore fiscal responsibility. Because of the irresponsibility of the past decade, we’ve seen a projected 10-year surplus of over $5 trillion at the end of the Clinton administration turn into a projected 10-year deficit of over $8 trillion the day President Obama took office.

Does the Administration really believe that they can get away with blaming Bush for all this? Obama’s 5-year deficit projection is now more than $2 trillion in excess of their projection a year ago. (See this good short note by Phil Klein at Spectator.org which is the source of the graphic below showing the change in OMB’s deficit estimates in the past year.) “Blame Bush” is wearing extremely thin…and I hope they keep doing it because it will lead to Obama’s defeat in 2012.

 

The Budget lays out a plan to put the country back on a sustainable fiscal path.

In what sense is utterly undisciplined massive government spending a “sustainable fiscal path?”

First, we have already taken action to avoid making the hole any deeper. The Administration proposed, and the Senate just joined the House in passing, statutory pay-as-you-go (PAYGO) legislation. PAYGO forces us to live by a simple but important principle:  Congress can only spend a dollar on an entitlement increase or tax cut if it saves a dollar elsewhere.  In the 1990s, statutory PAYGO encouraged the tough choices that helped move the Government from large deficits to surpluses, and it can do the same today.

PAYGO is a leftist tactic to block tax cuts because Congress uses static modeling, making it impossible for tax cuts to even partially “pay for themselves.”  In other words, Congress uses economic models which intentionally ignore the fact that tax cuts will increase economic activity, causing tax payments which will offset some, much, or all of a particular tax cut.  Furthermore, Congress has a history of respecting PAYGO rules when it comes to proposed tax cuts but getting around the rules when it comes to spending hikes. When you see Democrats proposing something that appears to be fiscal discipline, you have to look behind the curtain for their real motive.

Second, economic recovery – on its own – would take our deficits from 10 percent of GDP to 5 percent of GDP. To take them down further, the Budget proposes a series of policies including: the three-year non-security freeze mentioned above; restoring some balance to the tax code by allowing the 2001 and 2003 tax cuts to expire only for those making more than $250,000 a year and reducing the rate at which these same households write-off itemized deductions; ending subsidies for oil, gas, and coal companies and closing other loopholes; and putting in place a responsibility fee on the largest banks to compensate taxpayers for the extraordinary direct and indirect help they provided while also discouraging excessive leverage.

Economic recovery would only reduce deficits if there were some reason to believe that total government spending won’t be increased as fast or faster than GDP growth.  But there’s no reason to believe that, especially with this government.  The “three-year non-security freeze” is somewhere between a joke and an insult to voters’ intelligence. By the way, it wouldn’t start until 2011, locking in even more spending increases between now and then.  Allowing the tax cuts to expire for those making $250,000 is nothing more than class warfare and will not generate the revenue the Administration claims.  Furthermore, why should upper income earners be penalized in their ability to deduct mortgage interest, charitable deductions, etc?  (In fact, I would expect the non-profit world to fight against this particular change.)  I’m glad to see “loopholes” closed and subsidies reduced or eliminated, but it needs to be done across the board, not just with the industries that liberals dislike.  Let’s get rid of subsidies and loopholes for agricultural products and not add subsidies for white elephant “clean energy” projects.  Finally, there have been few more potentially destructive ideas from this White House than the bank “responsibility fee”. Banks have paid back TARP money with interest, and many of those banks didn’t want the money to begin with.

Third, these policies will take deficits down to 4 percent of GDP – amounting to $1.2 trillion in deficit reduction excluding war savings. But that is still not enough, and the only way to solve this is to change Washington, and bring Republicans and Democrats together to work on this problem. That is why the President wants to establish a bipartisan, fiscal commission to look at a range of proposals and put forward a bipartisan recommendation to balance the budget excluding interest payments on the debt by 2015. This type of process has worked in the past, and if everyone in Washington puts the national interest first, we are confident it will again.

The deficits will not drop to 4% of GDP, and 4% of GDP is still on the path toward bankrupting the nation. The “fiscal commission” is simply a way to give Democrats cover to raise taxes.  Obama does not want to cut spending and, to be fair to him, he probably couldn’t even if he wanted to.  After all, most of the Senators who voted for a fiscal commission last week then voted against every move to curb spending.  As the WSJ notes, “If Americans want deficit reduction, they’ll have to elect legislators who want to cut spending.”

 

Finally, as I have said many times before and will again (since it’s still true!), the key to our long-term fiscal future is fiscally-responsible health insurance reform. All our steps to rein in the deficit will be for naught if we do not reduce the rate of health care cost growth over time.  The legislation passed by both the House and Senate will reduce the deficit over the next decade and put in place the key pieces that will help to bring down health care costs over time. Congress must now deliver on this promise of fiscally responsible health reform – the stakes are high, both for the millions of Americans who lack a stable source of health insurance coverage and for the fiscal well-being of the Nation itself.

This simply shows how clueless this Administration is.  The key to our long-term fiscal future is cutting back entitlement spending.  Government already spends half of all our nation’s health-care dollars.  Let’s see them clean up their current mess before even allowing them to suggest taking over even more of that industry.  It is simply a lie that the proposed “reform” legislation will reduce the deficit over the next decade.  And it will explode the budget in years following that while destroying the private health insurance industry.  That’s why the legislation is probably (but not certainly) dead.  Someone needs to explain to Obama and Orszag that we the people are not as stupid as they seem to think.

 

 

If we take follow the plans laid out in the Budget, I am confident that we will be able to spur job creation now and in years to come and put our Nation back on a fiscally sustainable path, which is critically important to the future growth and prosperity of the United States.

If there job creation over the next couple of years, it will be in spite of, not because of, this Administration.  Everything they do violates not simply economic common sense but the evidence before their very eyes.  It’s too bad that things had to become this ugly, this expensive, for Americans to wake up to the true nature of Obama/Reid/Pelosi.  But sometimes lessons have to be expensive to be learned.  I just hope our children don’t end up paying too much for the stupidity of those who elected The One based on his empty promises of hope and change.

 

Comments

Featured Posts

• Open Thread: Should Dan Maes Withdraw? (26)

  Do you think Dan Maes should step aside as the Republican nominee for governor? Why or why not? If he did step aside, who do you think the vacancy committee should consider in his stead and why?

• Speak Now, or Forever Hold Your Peace… Governor’s Office seeks public comment on Colorado Supreme Court nominees
• R Block Party Second Annual Picnic (1)
• Happy 2nd Birthday to People’s Press Collective! (3)
• Statewide Survey Results Show Overwhelming Discontent With Incumbent Colorado Supreme Court Justices (8)
• “The GOP Made Me Do It” (9)
• Clear The Bench Colorado wins judgement against “frivolous, groundless, vexatious” complaint by “Colorado Ethics Watch” (CEW, pronounced “sue” – it’s what they do), awarded “tens of thousands” in legal fees (3)