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Opinion

Opinion

Cynical Obama budget expands debt

February 19, 2011

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— Five days before his inauguration, President-elect Obama told The Washington Post that entitlement reform could no longer be kicked down the road. He then spent the next two years kicking — racking up $3 trillion in new debt along the way — on the grounds that massive temporary deficit spending was necessary to prevent another Great Depression.

To prove his bona fides, he later appointed a deficit reduction commission. It made its report last December, when the economy was well past recession, solemnly declaring that “the era of debt denial is over.”

That lasted all of two months. The president’s first post-commission budget, submitted Monday, marks a return to obliviousness. Even Erskine Bowles, Obama’s Democratic debt commission co-chair, says it goes “nowhere near where they will have to go to resolve our fiscal nightmare.”

The budget touts a deficit reduction of $1.1 trillion over the next decade.

Where to begin? Even if you buy this number, Obama’s budget adds $7.2 trillion in new debt over that same decade.

But there’s a catch. The administration assumes economic growth levels higher than private economists and the Congressional Budget Office predict. Without this rosy scenario — using CBO growth estimates — $1.7 trillion of revenue disappears and U.S. debt increases $9 trillion over the next decade. This is almost $1 trillion every year.

Assume you buy the rosy scenario. Of what does this $1.1 trillion in deficit reduction consist? Painful cuts? Think again. It consists of $1.6 trillion in tax hikes, plus an odd $328 billion of some mysterious bipartisan funding for a transportation trust fund (gas taxes, one supposes) — for a grand total of nearly $2 trillion in new taxes.

Classic Obama debt reduction: Add $2 trillion in new taxes, then add another $1 trillion in new spending and, presto, you’ve got $1 trillion of debt reduction. It’s the same kind of mad deficit accounting in Obamacare: It reduces debt by adding $540 billion in new spending, then adding $770 billion in new taxes. Presto: $230 billion of “debt reduction.” Bialystock & Bloom accounting.

And what of those “painful cuts” Obama is making to programs he really cares about? The catch is that these “cuts” are from a hugely inflated new baseline created by the orgy of spending in Obama’s first two years. These were supposedly catastrophe-averting, anti-Depression emergency measures. But post-recession they remain in place. As a result, discretionary non-defense budget levels today are 24 percent higher than before Obama — 84 percent higher if you add in the stimulus money.

Which is why the supposedly painful cuts yield spending still at stratospheric levels. After all the cuts, Department of Education funding for 2012 remains 35 percent higher than in the last pre-emergency pre-Obama year, 2008. Environmental Protection Agency: 18 percent higher. Department of Energy: 22 percent higher. Consider even the biggest “painful cut” headline of all, the 50 percent cut in fuel subsidies for the poor. Barbaric, is it not? Except for the fact that the subsidies had been doubled from 2008 levels. The draconian cut is nothing but a return to normal pre-recession levels.

Yet all this is penny-ante stuff. The real money is in entitlements. And the real scandal of this budget is that Obama doesn’t touch them. Not Social Security. Not Medicaid. Not Medicare.

What about tax reform, the other major recommendation of the deficit commission? Nothing.

How about just a subset of that — corporate tax reform, on which Republicans have signaled they are eager to collaborate? The formula is simple: Eliminate the loopholes to broaden the tax base, then lower the rates for everyone, promoting both fairness and economic efficiency. What does the Obama budget do? Removes tax breaks — and then keeps the rate at 35 percent, among the highest in the industrialized world (more than twice Canada’s, for example).

Yet for all its gimmicks, this budget leaves the country at decade’s end saddled with publicly held debt triple what Obama inherited.

A more cynical budget is hard to imagine. This one ignores the looming debt crisis, shifts all responsibility for serious budget-cutting to the Republicans — for which Democrats are ready with a two-year, full-artillery demagogic assault — and sets Obama up perfectly for re-election in 2012.

Obama fancies his happy talk, debt-denial optimism to be Reaganesque. It’s more Louis XV. Reagan begat a quarter-century of prosperity; Louis, the deluge.

Moreover, unlike Obama, Louis had the decency to admit he was forfeiting the future. He never pretended to be winning it.

Charles Krauthammer is a columnist for Washington Post Writers Group.

Comments

just_another_bozo_on_this_bus 3 years, 10 months ago

Eliminating the deficit could be done in a few simple moves.

Dismantle the War Department and all of its overseas bases of occupation, the 17 spy agencies and all their black budgets, nuclear weapons spending in the Energy Dept. and replace it with a real Defense Department, funded at about 20% of the current budget. Savings would be somewhere between $500 billion and $1 trillion a year.

Institute Medicare for all-- savings could easily be $400 billion a year.

Reinstitute a truly progressive income tax, streamline it, eliminate nearly all loopholes, and go after wealthy tax dodgers. This could easily generate several hundred billion a year.

All this would need to be to be phased in, but it could have the deficit completely paid off in less that a decade, and we'd have plenty of money left over to do the long list of must-dos if this country isn't just going slide into third-world status.

Not that folks like Chuck really care about that-- eliminating the deficit would mean he'd have one less thing to whine about, while offering no solutions except to blame it on the poor and the old.

Flap Doodle 3 years, 10 months ago

"Institute Medicare for all.." merrill's finally made a convert!

Liberty275 3 years, 10 months ago

"Institute Medicare for all"

Also, we should institute eating out of dumpsters. You can take your junk medicare/medicaid and place it where the sun doesn't shine.

JayhawksandHerd 3 years, 10 months ago

What's funny about it? Seems to make a lot of sense to me, and it's a heck of a lot more fiscally conservative than anything we're currently witnessing from either side.

cato_the_elder 3 years, 10 months ago

Then don't read past the byline. I read what Bozo had to say, and then yawned.

beaujackson 3 years, 10 months ago

The scariest thing about CK is that he tells the truth.

Orwell 3 years, 10 months ago

Interesting.

Krauthammer calls it "mad" to assert that 2 trillion (in new revenues) minus 1 trillion (in new investment) equals 1 trillion in deficit reduction. Similarly, he claims it's "mad" to assert that $770 billion in revenues minus $540 billion in spending equals $230 million in debt reduction.

I remember back in grade school we had a different term for such "madness." We called it "arithmetic."

Pay up, rich people. We can't balance anything by relieving you of more and more responsibility just to make you richer and richer. We were promised back in 2001 that course would lead to a pantload of economic growth – you can look around and see where it actually got us.

Richard Heckler 3 years, 10 months ago

Meet a white collar entitlement that helped kill the economy:

Why Isn't Wall Street in Jail?

Financial crooks brought down the world's economy — but the feds are doing more to protect them than to prosecute them.....

nobody went to jail. Nobody, that is, except Bernie Madoff, a flamboyant and pathological celebrity con artist, whose victims happened to be other rich and famous people.

The rest of them, all of them, got off.

Not a single executive who ran the companies that cooked up and cashed in on the phony financial boom — an industry wide scam that involved the mass sale of mismarked, fraudulent mortgage-backed securities — has ever been convicted.

Their names by now are familiar to even the most casual Middle American news consumer: companies like AIG, Goldman Sachs, Lehman Brothers, JP Morgan Chase, Bank of America and Morgan Stanley.

Most of these firms were directly involved in elaborate fraud and theft. Lehman Brothers hid billions in loans from its investors. Bank of America lied about billions in bonuses. Goldman Sachs failed to tell clients how it put together the born-to-lose toxic mortgage deals it was selling.

What's more, many of these companies had corporate chieftains whose actions cost investors billions — from AIG derivatives chief Joe Cassano, who assured investors they would not lose even "one dollar" just months before his unit imploded, to the $263 million in compensation that former Lehman chief Dick "The Gorilla" Fuld conveniently failed to disclose.

Yet not one of them has faced time behind bars.

http://www.rollingstone.com/politics/news/why-isnt-wall-street-in-jail-20110216

Richard Heckler 3 years, 10 months ago

Meet another white collar NOT GOOD idea entitlement that continues to kill the economy.

Still A Bad Idea –The ENTITLEMENT program for the wealthy at the expense of the middle class http://www.dollarsandsense.org/archives/2001/0301miller.html

Richard Heckler 3 years, 10 months ago

Two white collar entitlement programs that have become policy which have been wrecking the economy for more than 30 years:

The Reagan/Bush Savings and Loan Heist http://rationalrevolution0.tripod.com/war/bush_family_and_the_s.htm

The Bush/Cheney Wall Street Bank Fraud on Consumers http://www.dollarsandsense.org/archives/2009/0709macewan.html

Mixolydian 3 years, 10 months ago

Merrill's wrong, this all goes back not to the Savings and loan scandal, but to the Tea pot dome scandal....All those little fatcat teapots, short and stout.

meaningless.link.repeated.ad.nauseum.com

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