Obama Did Not Inherit These Deficits
President Obama held a press event Tuesday to announce appointment of his new budget director. His remarks included:
When we walked through the doors of the White House we not only faced the worst economic crisis since the great depression, we also faced a $1.3 Trillion deficit…
Thus, Obama once again tried to blame the previous Administration for titanic deficits he has deliberately created, in part with the failed $800 Billion “stimulus.” He hopes we’ll all forget his stimulus hype back in the early days of his administration when he smugly mocked his adversaries for not understanding that massive government borrowing and spending would, somehow, “immediately jumpstart job creation.”
He hopes we’ll forget his famous speech to a meeting of Democratic Congressmen when he scorned those who warned against profligate borrowing and spending:
Then you get the argument that this is not a stimulus bill, this is a spending bill. What do you think a stimulus is? [laughter] That’s the whole point. [more laughter] no, seriously. THAT’S THE POINT!
At the beginning of 2009 Obama enthusiastically urged Congress to borrow and spend with abandon. When he was sworn in less than half of the $700 Billion TARP bailout fund had been loaned out to banks. in the end almost all of it was repaid. Obama could have used his authority to stop further TARP bailouts. Instead he broke the law by expanding the TARP program to seize control of GM and Chrysler and GMAC. He enacted the failed stimulus, Cash for Clunkers, expensive but failed foreclosure prevention programs, ridiculously extravagant subsidies for politically favored electric car, solar, wind and window companies.
But now Obama hopes to portray himself as the victim rather than the author of the deficit crisis. But if he had been serious about correcting the Bush deficits he campaigned against he certainly could have.
The charts above demonstrate one, easily implemented option: Obama could have cut the 2009 and 2010 deficits in half by simply putting Congress on an easily enforced budget. Instead of driving massive increases in spending, he could have insisted that Congress cap all spending on all programs except Social Security at the total that was spent in 2007.
Of course the politicians in Congress would have had to decide which of the scores of Unconstitutional, corrupt, wasteful programs to cut or eliminate in order to keep the total below the cap. Those decisions are considered phenomenally difficult in Washington, but a committee of Main Street small business owners, who have no choice but to invoke budget discipline every day, could have instructed them.
Here are some hard numbers:
- When Obama was sworn in, January, 2009 total federal debt was $10.6 Trillion.
- Today, 18 months later, the debt totaled $13.2 Trillion
- If Obama and Congress had adopted the easily implemented cap illustrated in the charts above the debt today would be $11.6 Trillion.
- The interest on the difference, $1.6 Trillion, at current rates will be about $55 Billion per year. To put that in perspective the entire annual cost of the Department of Homeland Security is $52 Billion.
The Silver Lining
We first published this paragraph here, a week before President Obama was inaugurated:
There is one bright spot in all this dreary news: before the 2010 election it should be obvious, to even the most naive voters, that politicians, including the magnificent Barack Obama, are simply not equipped to improve America by diverting a Trillion dollars from the private sector and hurling it at politically inspired projects and programs. With his grand plan Obama may demonstrate the value of liberty and the clumsy incompetence of political authority more effectively than any politician since Ronald Reagan.
Jeff,
A little Googling turned up this article from June 28th, a little over two weeks before your piece.
A few salient quotes:
“Together with the economic downturn, the Bush tax cuts and the wars in Afghanistan and Iraq explain virtually the entire deficit over the next ten years.”
“The events and policies that have pushed deficits to these high levels in the near term, however, were largely outside the new Administration’s control. If not for the tax cuts enacted during the presidency of George W. Bush that Congress did not pay for, the cost of the wars in Iraq and Afghanistan that were initiated during that period, and the effects of the worst economic slump since the Great Depression (including the cost of steps necessary to combat it), we would not be facing these huge deficits in the near term.”
The three largest pieces of the short term deficit: tax cuts, wars and the recession, are indisputably the inheritance the previous Administration bequeathed to us.
The tax cuts of the Bush era didn’t help with job growth: the 90s are an economic “lost decade” in terms of job growth, GDP growth and change in household net worth:
http://www.washingtonpost.com/wp-dyn/content/graphic/2010/01/01/GR2010010101478.html
All they’ve done is further the redistribution of wealth from everyone else to the top quintile.
You’ve claimed on a number of occasions that the stimulus bill “failed.” Not according to the CBO, and not according to the teachers, police and firefighters who still have their jobs, thanks to the transfer payments made to the states as part of the stimulus bill.
TARP is being repaid: repayments are surpassing loans and we’re even making a bit of a return on the investment, to the tune $23 billion as of May.
No one “seized control” of Chrysler and GM: they approached Washington in September of 2008 with a bailout request. In December, President Bush announced the emergency loan and handed things off to the next Administration. Chrysler subsequently went through Chapter 11, and the US came out as a 10% equity owner – that’s a very far cry from “seizing control” of anything.
It’s not semantics we’re arguing here – it’s a fundamental failure to see the facts for what they are. Your argument implies that deficits are the most serious economic problem we face: they’re not. Lack of jobs and a stagnant GDP are the real problems that have to be addressed. The economy has to grow first before we can fix the problem of a burgeoning deficit.
Its good to see that Victor still reads science fiction.
Now, it seems to me Victor went point by point and explained the facts. Explained them very well and backed them with sources. Then Drew comes along and just dismisses everything he’s said. Without facts, without sources and without reason. This is the problem in our society. It seems if you have the facts on your side, it means nothing as long as people WANT to hold on to fiction. Cognitive dissonance maybe?