The next crisis deadline is already upon us.  Over the past 16 months the Obama Administration has borrowed and spent another $2 trillion (in addition to $3.4 trillion in tax revenue) and has once again reached it’s debt ceiling.  The Obama-friendly media continue to repeat the falsehood that the President and the Democrats have already implemented spending cuts.

At his recent press conference President Obama fired his opening salvo in the debt ceiling debate, a combination of gibberish and deception wrapped in words that seemed to be about government accounting.

The old I Love Lucy show used variations on the same gag over and over. Rickey discovers that Lucy bought an expensive new dress and complains that he can’t afford it.  “But,” Lucy protests, “the dress didn’t cost anything!  I paid for it with the money I saved when I bought a new coat on sale.”

Through six years of almost continuous campaigning President Obama has developed a rhetorical formula that wraps Lucy’s reasoning in political buzz words.  The most recent example, his press conference comments on the government’s exploding debt and the looming debt ceiling dispute began with:

We are poised for a good year if we make smart decisions and sound investments, and as long as Washington politics don’t get in the way of America’s progress.

Understanding Obama’s remarks starts with a brief vocabulary primer.

“Investment” is Obama’s word for what the rest of us call government spending.  His goal is more, not less spending.

“Washington politics” is any Congressional resistance to limitless annual deficits and record-shattering rates of growth in government debt.

“America’s progress” is more centralized power in the federal government, more spending and higher taxes.

Obama’s remarks continued:

As I said on the campaign, one component to growing our economy and broadening opportunity for the middle class is shrinking our deficits in a balanced and responsible way.

So far, so good.  Government can’t continue to run trillion dollar deficits forever without causing a financial crisis that will be disastrous to the middle class.  So shrinking government deficits is imperative to maintaining the standard of living of the American middle class.

And for nearly two years now, I’ve been fighting for such a plan — one that would reduce our deficits by $4 trillion over the next decade, which would…make [the debt] manageable so it doesn’t crowd out the investments we need to make in people and education and job training and science and medical research — all the things that help us grow.

The ladies and gentlemen of the White House Press play along and pretend this makes sense.  But In the real world it’s gibberish – nonsense.  He contradicts himself by promising “manageable” debt and more spending on his “investments.”  Obama always offsets words about reducing deficits with words about even more “investments.”  This rhetorical strategy is calibrated to be reassuring to listeners who are concerned about deficits and his progressive base that always wants government to spend and do more.  He then said:

Now, step by step we’ve made progress toward that goal.  Over the past two years, I’ve signed into law about $1.4 trillion in spending cuts.

Decoding this claim starts with understanding two key words in government budgeting:

• “baseline” and,

• “assumptions.”

The baseline is projected spending over the next ten years.  The baseline numbers result from a set of assumptions, starting with the assumption that almost every government department, agency and program will receive an automatic budget increase every year. 

As most people know, in Washington, the term “spending cut” rarely means government will spend less in the future than the present.  It means the 5 or 10 year prediction in the latest forecast from the White House shows a tiny bit smaller increase in spending than the previous forecast.

But Obama’s claim to have already “cut” over a trillion is more deceptive than even the usual Washington game of incremental reductions in the rate of spending growth.  The fine print behind his “cuts” are in his budget line item for “overseas contingency operations,” code for military operations in Iraq and Afghanistan.

The Iraq war ended and all US troops left in 2011. The Afghanistan operation was never as large or expensive as Iraq and reductions in troop strength are underway, with virtually all troops scheduled to pull out by next year. 

Yet, as the table to the right shows the Obama budget, under Overseas Contingency Operations, asserts more than a trillion in “spending cuts” for years 2012 – 2021 from not continuing the Iraq and Afghanistan wars.  This is most of the $1.4 trillion in cuts the President claimed in his press conference.

These fictitious “cuts” result from the White House budget office starting with a baseline assumption that the cost of Iraq and Afghanistan would increase every year through 2021, even though they knew there would be no cost at all after 2014.  Then, they tallied “savings” from recognizing reality that the Iraq operation ended nearly two years ago and Afghanistan will end in 2014.

Thus, the President now reports a “spending cut” of $136 billion in 2021, ten years after the last American soldier left Iraq and six years after the scheduled end of the Afghanistan operation.  If Not spending on a war that has ended qualifies as “cuts” then why not claim even more cuts from ending World War II, Korea and Vietnam wars?

The rest of his claimed $1.4 trillion in “cuts” is based on the assumption that not borrowing a trillion for Iraq and Afghanistan will save billions in interest.

Through repetition in the zombie media Obama plants in the mind of the public the perception that he has already “cut” spending.   But, as the chart above shows, Obama’s most recent budget document shows record-breaking annual increases in total government spending at the same time actual war spending winds down.

The spending increase during Obama’s first term was greater than any previous period since mobilization for the Korean War in the early 1950s.  His own budget calls for an even greater spending increase in his second term.

One more quote from Obama’s press conference:

Two weeks ago, I signed into law more than $600 billion in new revenue, by making sure the wealthiest Americans begin to pay their fair share. 

The revenue estimate is a grand total for ten years.  The number that counts, the amount of additional revenue to be produced this year, probably won’t be more than $50 billion, even if the President’s ten year forecast turns out to be accurate.  But in the same Fiscal Cliff bill that enacted this tax increase is new spending and tax credits for politically connected corporations that will will more than offset the additional revenue.  As a result of the fiscal cliff bill total deficits will go up, not down.

The President does not speak in coherent accounting terms.  His words are not meant to inform.  They are meant to deceive.

In a Wall Street Journal interview about fiscal cliff negotiations House Speaker John Boehner quotes President Obama:

“We don’t have a spending problem.”

While the President often says the word “cuts” at his campaign style media events, his next words usually are “so we can make investments in…”  It’s hard to avoid the conclusion that he is still committed to his spending (investment) agenda, that he is not alarmed by huge annual deficits and exploding debt and that he simply is not interested in spending reductions except at the Department of Defense.  In short he really doesn’t believe there is a spending problem.

Liberty Works humbly offers four charts to help the President and his media cheering section realize that there is indeed a spending problem that will soon become a spending crisis. 

The first chart is a history of spending over the past six decades.  After adjusting for inflation spending is up 394% with an alarming spike in the most recent four years. [Continued below the chart]

The second chart shows spending as a percentage of the economy or GDP.  This is a way to quantify the cost born by the private economy.  This comparison tends to flatten the increases over previous decades but the spike in last four years appears even more alarming because the economy has weakened under the burden of increased regulation, health care mandates and government borrowing. 

When asked what’s to blame for spending and deficits being so high President Obama and the Democrats most often cite defense and “wars not paid for.”  As the next chart  shows, defense is responsible for very little of the total increase.  The real spending problem is is the explosion in the cost of entitlements.  [Continued below the chart.]

The last chart puts the growth in the cost of entitlements in context.  Entitlements are payments to individuals of cash, food stamps, medical services, rent subsidies, etc.  The cost of entitlements should then have some relationship to the size of  the population. But as the chart shows, since 1980 the population has grown 39% while the cost of entitlements, adjusted for inflation, has grown 263%.

The corrupt, profligate spenders won. The media cheered, The People lost.

The President and his media allies didn’t talk much about why America faced the so-called fiscal cliff.  This chart shows why there is such acrimony in Congress. It took 22 years, from 1986 to 2008 for government debt owed to the public to rise 88%, after adjustment for inflation.  Then, in the most recent four years it rose by 88% again.President Obama and Congressional Democrats’ only reaction to the alarming data in this chart has been to enact legislation that will require government to borrow even more.

Republicans gained a majority in the House of Representatives in 2010 by promising voters they would stop the massive growth in government borrowing, spending and debt that President Obama began to implement in 2009.  Almost all of them were reelected on the same promises.  But the Democratic Senate has blocked their efforts for the past two years, forcing their leaders to try, desperately, to negotiate a “grand bargain” directly with the President who presumably would prevail upon the Senate.

They were unable to reach any sort of compromise with the President except to kick the can down the road until the end of 2012.  Thus, the fiscal cliff, a confluence of several can-kicking measures that all came due at the same time.

So, considering that spending driven debt were the reason for the fiscal cliff it would appear that the voters who elected Republicans to Congress have been treated with contempt.  Obama’s so-called balanced approach turns out to be tax increases balanced with spending increases balanced with debt increases. The media are cheering of course because their celebrity President “won,” and Republicans who were trying to hold down spending and debt “lost.”  Party on!Scary as it is, the chart at the top actually understates the debt crisis.  It shows only one of the two categories of federal debt, that which is owed to “the pubic: American and foreign individuals, foreign and domestic financial institutions, foreign governments and the Federal Reserve.  The other category is debt that is owed to “government accounts.”

The largest government accounts are the deceptively named Social Security and Medicare “Trust Funds.”  For decades government has logged Social Security and Medicare Payroll tax revenue that was diverted to other programs as a “debt” owed to the Trust Funds.  These fictitious debts the government supposedly owes to itself now total about $4.8 Trillion.  The headline debt number usually reported by the media includes both the debt government owes to the public and to itself. 

President Obama decided that New Years Eve, as the Senate was considering the fiscal cliff bill, would be a good time to mock Republican voters and the Representatives they elected.  So he organized a campaign style rally complete with a cheering audience of White House staffers.  He claimed the purpose of this media event was to:

emphasize to Congress, and that members of both parties understand that all across America this is a pressing concern on people’s minds.

Really Mr. President?  Senators and Congressmen didn’t know The People were concerned about massive tax hikes.  He went on to remind Congress of one of the deceptive slogans from his recent campaign:

Last year, in 2011, we started reducing the deficit through $1 trillion in spending cuts.

Of course the Congressmen and Senators he claimed to be speaking to know this is an even more deceptive form of the usual Washington double talk.  The “cuts” were tiny, incremental reductions in previously scheduled spending growth, spread over ten years.  In other words, we politicians of 2013 promise that the politicians of 2015  or 2019 will spend a tiny bit less than we said they would spend yesterday.

But even that gives the President more credit than he deserves because 80% of his “cuts” were completely fictitious “savings” from not continuing military operations in Iraq (already over) and Afghanistan (scheduled to end next year) for another eight years.  And, not only did Obama have the chutzpa to claim to have “cut” war spending that was never budgeted or even contemplated, during the second presidential debate he actually proposed:

let’s take the money that we’ve been spending on war over the last decade to rebuild America, roads, bridges schools.

The chart shows Obama’s own budget plans for the next four years after deducting his $1 trillion in “cuts”.  The increases in his first term were the largest since the Korean War in the early 1950s.  His budget calls for even larger increases in his second term.

Obama’s media event went on with a sneering comment calculated to humiliate Republicans for having compromised their principles to vote for “The Deal” that he demanded:

Keep in mind that just last month Republicans in Congress said they would never agree to raise tax rates on the wealthiest Americans. Obviously, the agreement that’s currently discussed would raise those rates, and raise them permanently.

But most arrogant and astounding of all, Obama went on to raise the stakes before the fiscal cliff bill was even written:

Now, if Republicans think that I will finish the job of deficit reduction through spending cuts alone — and you hear that sometimes coming from them…If they think that’s going to be the formula for how we solve this thing, then they’ve another thing coming… At least as long as I’m president. And I’m going to be president for the next four years, I hope.

So, as far as Barack Obama is concerned, the tax increases just enacted are only the beginning.  He will demand more.  His previous claim that he was only keeping a campaign promise, to extract a limited tax increase from a limited number of to bracket taxpayers turned out to be empty words quickly forgotten.

A casual consumer of “news” might perceive the so-called fiscal cliff as nothing more than a debate about whether or not “millionaires and billionaires” (defined as annual income of $250,000 or more) will be “asked to pay a little more.”

The “news” rarely provides background to to answer the question, why are we on the cliff edge, facing increases in virtually every federal tax rate unless Congress and the President can agree on legislation that would prevent it. The answer is in this chart.  [continued below chart]Since 2009, under President Obama’s leadership, government spending and debt have expanded dramatically. Polls show huge majorities see the debt as a crisis, and exploding debt was a major reason for the emergence of Tea Party activism and the historic election sweep of 2010 that shifted control of the House of Representatives from Democrat to Republican.

Today’s so-called fiscal cliff is the result of inconclusive “show-downs” between Obama and House Republicans  over spending and the looming debt cliff.  Failing to resolve their differences they enacted short term measures that “kicked the can down the road,” until January 1, 2013.  Can kicking has been forcefully criticized by all sides and we don’t feel the need to add our 2 cents worth now, except to point out that putting a stop to soaring debt is the action that can kicking postponed, and thus the real reason America faces the fiscal cliff.

Since the beginning of 2011 the Republican led House of Representatives has passed several bills that would have enacted at least token spending reductions.  But the Democrat controlled Senate has refused to bring them to the floor for a vote. 

The next chart shows the same debt as a percentage of GDP. [continued below the chart]Government debt can be made less threatening by a growing economy as measured by GDP.  But recent GDP growth has been slower than in any post-recession period since the government began reporting quarterly GDP data in 1946.  It would take a substantially greater growth rate for many years plus a freeze on new borrowing for the current level of debt to be sustainable over the long run.

While President Obama talks on TV of a “balanced approach”  his “compromise offers” to House Republicans were “deals” that would increase spending.  He has changed his tax increase “offer” several times since fiscal cliff negotiations began right after the election.  But in every case the only taxpayers to take a hit would be higher income individuals, two thirds of whom are business owners.  He has not proposed any increase in the corporate income tax on big business.

As scary as they look the charts above actually understate the debt crisis.  For the sake of clarity, they show only one of the two categories of federal debt, that which is owed to “the pubic.” The Pubic is defined as foreign and American individuals, foreign and domestic financial institutions, foreign governments and the Federal Reserve.  The other category is debt that is owed to “government accounts.”

The largest government accounts are the deceptively named Social Security and Medicare “Trust Funds.”  For decades government has logged Social Security and Medicare Payroll tax revenue that was diverted to other programs as a “debt” owed to the Trust Funds.  These fictitious debts the government supposedly owes to itself now total about $4.8 Trillion.  The headline debt number usually reported by the media includes both the debt government owes to the public and to itself. 

For at least the next 30 years Social Security and Medicare benefits will exceed payroll tax revenue so the government will have to “pay back” debt owed to its own trust funds by borrowing even more from the public.

From “The Message” Bible, a translation from the original Greek and Hebrew Manuscripts to contemporary American English.

Luke 1:

26-28 God sent the angel Gabriel to the Galilean village of Nazareth to a virgin engaged to be married to a man descended from David. His name was Joseph, and the virgin’s name, Mary. Upon entering, Gabriel greeted her:

“Good morning!
You’re beautiful with God’s beauty,
Beautiful inside and out!
God be with you.”

^29-33She was thoroughly shaken, wondering what was behind a greeting like that. But the angel assured her, Read more »

Much of the political-media establishment’s “information” about massive government deficits and fiscal cliff negotiations is deception made possible by the arcane budgeting process in Congress.  President Obama didn’t invent the process.  But he’s an enthusiastic practitioner of the deception. [continued below the chart]While most of the “news” bout fiscal cliff negotiations has been about tax increases, the real problem is uncontrolled spending.

Decoding political-media “information” about spending and deficits starts with understanding two key words in government budgeting: Read more »

The Obama Administration and its media friends proclaim good news without disclosing that it masks bad news.

“The Employment Emergency is Over,” announced Reuters News Service when the December Jobs report was published.  The White House bragged:

…the unemployment rate declined from 7.9 percent in October to 7.7 percent in November, the lowest since December 2008.

But it turns out that the drop in the Unemployment Rate statistic is misleading. [continued below the chart] Barely mentioned in media reports was the reclassification of 350,000 people  from “unemployed” to “not in the labor force” in one month, November.

• The Labor Force is the sum of all persons who have jobs plus all who are officially classified as “unemployed” because they are actively seeking jobs.
• The labor force participation rate is the percentage of all working age adults who are officially counted as “in the labor force.”

Today, there are millions of people who want jobs but don’t qualify as “unemployed” by meeting government criteria and are thus counted as “not in the labor force.”  We know this to be true because the participation rate has steadily declined for four years.  Counting unemployed people as “not in the labor force” artificially lowers the unemployment rate.

The chart above shows tracks both the official unemployment rate and what the “actual” unemployment rate would have been each month if labor force participation had not declined from 65.7% to 63.6%, by reclassifying more than five million people.

It is important to note that this continuous, four year decline in the labor force participation rate is unprecedented.  The rate has never declined this much since the Labor Department began reporting it in 1946. [Continued below the chart]

The second chart places the labor force participation rate into context by tracking it over three decades. 

• During the boom years of the Reagan Administration exploding employment opportunities drew millions of new people into the labor force. 
• For most of the next twenty years the participation rate tracked within a narrow range between 66% and 67%. 
• After the end of 2008 labor force participation dropped precipitously as employment opportunities disappeared and more than five million people became discouraged and quit seeking jobs often enough to be classified as “unemployed.”
  

The media have all but ignored this dramatic deterioration in employment statistics, portraying very gradual, incremental drops in the unemployment rate as good news, without explaining that in reality it masks bad news.

During weeks of post-election campaigning and economic debate in Washington the political-media establishment has simply ignored the the real cause of the government’s monstrous deficits and rapidly growing debt.

After years of refusing to deal with relentless growth in federal spending Congress and the President have dragged us to the Fiscal Cliff, a nickname for a series of laws that, preposterously, designate the Bush income tax rates that have been in effect since 2003 as “temporary,” with an expiration date of January 1, 2013, after which they all go up.

To avoid increases in every federal tax rate on January 1 Congress must pass and the President must sign new legislation by December 31.

So far President Obama has dominated the fiscal cliff story by holding campaign style events to present his position to the adoring media who have blessed it as smart, reasonable and popular.  He wants to allow the top two income tax brackets for single and married tax payers to go up as scheduled.  He wants new legislation enacted to keep the lower four brackets at their current “Bush” rates.  Apparently he would adjust the income thresholds for the 33% rate up to $250,000 for married taxpayers and $200,000 for single taxpayers.

His position on the marriage penalty, the child tax credit, capital gains and dividends isn’t clear.

Republicans oppose upper bracket tax increases, citing the faltering economy and high unemployment, and the fact that most upper bracket tax payers are the small businesses who have always created most of the new jobs in America.

The President speaks about Fiscal Cliff issues in catchy phrases designed not to inform, but to manipulate the perceptions of people who don’t have the time or inclination to research political and economic issues.  For example, on camera he chants his poll tested slogan, “balanced approach,” which he says would reduce deficits with a combination of tax hikes on upper income taxpayers and “responsible” spending cuts.  But at the same time he submits a “compromise offer” to House Republicans that calls for increased spending, which he calls “investments.”

A serious review of the deficit problem would begin by asking what taxpayers have gotten in exchange for a dramatically expanded federal government.  Are we Americans more prosperous now, with a much larger government that costs 156% more than it did a quarter century ago?

The political-media establishment functions as a cheering section for the President and seemingly has no interest in such fundamental questions.  But the answers can be found in some readily available economic indicators in the table to the left.

Every economic statistic is worse today than it was when government cost 156% less.   Yet the President and his supporters never look back, never question the wisdom of a relentlessly growing federal government.

Obama spent two years enacting a new government run health care regime.  It’s clear that a major reason unemployment remains so high is business reluctance to expand in the face of the higher costs and yet to be written new regulations associated with ObamaCare.

While the President claims current deficits were caused by the Iraq and Afghanistan wars, the truth is those operations never cost more than 5% of annual spending, and cost less in 2012 than anytime since 2003.

As the table shows, Defense, or military spending has gone down as a percentage of GDP and of total government spending. 

Most of the increase in the cost of government has been due to expanding entitlements which now consume two thirds of the federal budget.

When Obama’s aids are asked what spending he would be willing to reduce they answer that his ideas are incorporated into his annual budget proposal, sent to Congress last Spring.  But his budget plan calls for a 71% spending increase over the next eight years from $3.3 trillion in 2012 to $5.6 trillion in 2021.

Even some in the media are beginning to acknowledge the reality that there aren’t enough rich people and they don’t earn enough income for Obama’s top bracket tax hikes to matter.  For context, consider that the government ran a deficit of $120 billion in one month, October.  The Congressional Budget Office estimates Obama’s increase in top bracket rates would yield $82 billion in a whole year.

Back in 1992 James Carville, who was Bill Clinton’s campaign manager, made himself famous by hanging a banner in his office proclaiming “It’s the economy, stupid.”  We can only hope someone in Washington will defy the establishment with a new, common sense banner:

It’s the spending, stupid.

A week after the election the Congressional Budget Office (CBO) and the Washington Post published key economic data that all voters should have seen – that Liberty Works readers did see – before the election.

This chart, copied from a November 14 Congressional Budget Office report, appeared November 15 on the Washington Post’s WonkBlog under the title “This graph should scare you.” 

It should indeed scare voters, especially since it’s too late for them to do anything about it. 

The CBO chart compares the current post- recession recovery with the average of previous, post- recession recoveries since World War II.  

Before the election we were told countless times by the media and the Obama campaign that the President deserved our gratitude, our reverence and a second term because the recession he inherited ended and the economy transitioned to a recovery.  Of course they neglected to mention that every previous recession ended and resolved into a new period of economic growth, no matter who was President, which party was in power, or what economic strategies the government pursued.  

Twelve days before the election and 21 days before CBO published its report, Liberty Works readers saw the chart below tracking each post recession economic recovery since the end of World War II.  [continued below the chart]

The Liberty Works comparison is is more informative, and thus even more “scary” than the CBO-Washington Post chart because it makes clear that the Obama economy isn’t just below average, it is THE weakest recovery of all, tenth out of ten.

While the current recovery is extraordinarily weak, one of the strongest, the Reagan recovery of 1982 followed a recession that was by most measures worse the what Obama inherited.  Reagan’s strategy, exactly opposite Obama’s, was to reduce rather than expand the government’s power and intervention in the economy.   Investors and entrepreneurs had the freedom to start new enterprises and create jobs without complex and costly new health care mandates or regulatory interference. 

While Obama has added new taxes to fund his health care law and has constantly threatened tax rate hikes that would directly target small business, Reagan persuaded Congress to enact sweeping reductions in every tax bracket rate, from top to bottom.

The very close election might have been turned out differently if CBO and the media had been as timely as Liberty Works in reporting critical data to voters.