An Unserious Budget

It is hard to imagine any issue that threatens the future of the Republic more than the current and projected fiscal condition of the US economy. In his first two years in office, Obama has added $3 trillion to the national debt. His 2012 budget delivered on Monday – ironically Valentine’s Day – shows yet a third year of trillion dollar-plus deficits in his administration, and it projects trillion-plus spending deficits for another decade.

The federal government will have borrowed as much during Obama’s four-year term in office as it borrowed during the previous two-century-plus history since the Republic was founded in 1789. Best you reread that last sentence.

We are spending ourselves into an unmanageable crisis!

The budget deficit for Obama's third year in office is $1.645 trillion according to his own budget documents. This is the largest deficit in world history, let alone U.S. history. Federal spending will be 25¢ of every GDP dollar! Historically it’s been 20¢ or less. How much larger must the government share of GDP become before the US economy can be called socialism?

Yet Obama’s Valentine’s gift to Congress was a $3.7 trillion 2012 budget cleverly gimmicked to show a saving of $1.1 trillion over 10 years. The decade’s saving, however, is less than the projected deficit for fiscal 2011. And the “saving’ is only a slight reduction in spending on the programs that Obama spent the first two years of his administration fattening up. One morning talk show host likened it to increasing your child’s weekly allowance from $1 to $4 and then cutting it back to $3 while calling the 25% reduction “painful.” The kid still has two more bucks than he had at the start.

Federal spending is now 37% higher than four years ago, which represents a trillion dollar allowance increase from Uncle Sam – or should I say from you and me, since Uncle Sam doesn’t have any money. With a sleight-of-hand that would make David Copperfield envious, Obama claimed he will lower discretionary spending to the lowest percentage of GDP since the Eisenhower administration. But Obamanomics will push federal spending in 2020 to double that of 2007. Oh, and Obama’s Valentine XOXO? His 2012 spending will drive national debt to more than 102% of GDP, last seen in this country during World War II.

Speaking at the CPAC gathering in Washington last week, Indiana Governor Mitch Daniels (R) warned of a “new red menace” that threatened the nation – although this time it was red ink rather than communism. But somewhat surprisingly, voices that are ideologically aligned with Obama – normally – came out with criticism of the new budget. Obamaphile blogger Andrew Sullivan lamented that others must lead the fight to restrain spending because …

“… this president is too weak, too cautious, too beholden to politics over policy to lead. In this budget, in his refusal to do anything concrete to tackle the looming entitlement debt, in his failure to address the generational injustice, in his blithe indifference to the increasing danger of default, he has betrayed those of us who took him to be a serious president prepared to put the good of the country before his short term political interests.”

Sullivan concluded his Valentine’s Day blog, The Daily Dish, with these words:

“To all those under 30 who worked so hard to get this man elected, know this: he just screwed you over. He thinks you're fools. Either the US will go into default because of Obama's cowardice, or you will be paying far, far more for far, far less because this president has no courage when it counts. He let you down. On the critical issue of America's fiscal crisis, he represents no hope and no change. Just the same old Washington politics he once promised to end.”

Wow! And that’s from a friend and supporter!

Likewise, the Obama-friendly Washington Post characterized him as Punter-in-Chief.

“Having been given the chance, the cover, and the push by the fiscal commission he created to take bold steps to raise revenue and curb entitlement spending, President Obama, in his fiscal 2012 budget proposal, chose instead to duck. To duck, and to mask some of the ducking with the sort of budgetary gimmicks he once derided.”

The same Washington Post editorial included a graph of publicly-held debt as a percentage of GDP. It looked like a hockey stick. The editorial ended …

“If Oklahoma Republican Sen. Tom Coburn could sign on to a deficit-reduction plan that included raising tax revenue, is it too much to ask for such bravery from Mr. Obama? And if Illinois Democratic Sen. Richard Durbin could sign on to a plan that included raising the Social Security retirement age, is it too much to ask for more from Mr. Obama than an airy set of "principles for reform"? Sadly, the answer appears to be yes.”

A new Rasmussen Reports piled on with a national telephone survey this week that found 55% of “Likely US Voters” said the president’s budget proposal doesn’t cut government spending enough. Rasmussen further found that 70% of “Likely US Voters” think they are more willing to make the hard choices needed to reduce federal spending than elected politicians are.

So there you have it. The mood of the country is moving to the fiscal right while Obama’s budget is right out of the land where the unicorns live. After seeing an outline of it, I thought if this budget represented Obama’s roadmap to “Winning the Future,” the theme of his State of the Union address, our country’s best years are behind it.

I had planned to write this week’s blog on how out of touch this president is with fiscal reality, but Obama’s media cheerleaders beat me to it. "I don't need to tell you what I think of the budget: It's disastrous," wrote Atlantic Magazine economics writer and Obama voter, Megan McArdle. "I'm starting to think it's time to panic."

When the budget arrived at the Capitol, Sen. McConnell (R-KY) called it “an unserious budget” and Rep. Paul Ryan (R-WI) called it a “political document which is ‘dead on arrival’ – or should I say,” Ryan added, “‘debt on arrival.’”

Congressional Democrats were delighted that Obama offered no plan for dealing with entitlements. That saved them from fighting another hard reelection campaign in 2012. However, the Tea Party Republicans remembered that they were elected – at least they believe so – on the promise that they would bring down spending. Spending cuts cannot avoid entitlements because entitlement spending, in combination with interest on the national debt, represent two-thirds of all federal spending.

And since the cowardly 111th Congress refused to pass a 2011 budget before the voters kicked them out, the Republicans of the 112th Congress have to create that budget on the fly and fulfill their campaign promise to cut $100 billion in spending. Thankfully the Tea Party House members haven’t been in Washington long enough yet to become jaded, so when their cautious leaders in the Republican caucus came up with $37 billion in spending reductions and thought it was close enough, the Tea Party freshman forced their elders to find more cuts or else forfeit the Tea Party votes. So far they are close to $100 billion.

Later this year, Republicans will turn their attention to a 2012 budget that reduces spending and deficits well beyond Obama’s budget. Since they are opposed to confronting out-of-control spending with large tax increases, which Obama did in his budget, entitlement spending will have to be reduced by Republicans, knowing they will be demagogued for doing so by Democrats in the 2012 election.

Entitlement spending – largely Social Security, Medicare, and Medicaid – are on autopilot, running up the national debt (and therefore its interest payment) every year. Because there aren’t enough taxpayers or available taxable income, the US must therefore borrow 40¢ of every dollar it spends. Even the most reckless spendthrift knows you can’t do that for long.

“They are suckers,” said one senior Democratic congressional aide of the House GOP plans to release detailed proposals to reduce entitlement spending. “They have painted themselves into a corner.” Obama’s reticence to address entitlements is a political trap, Democrats believe, for a Republican Party divided between Tea Party conservatives pushing for major changes to Medicare, Medicaid, and Social Security and a GOP leadership wary of the political peril of tinkering with Americans’ retirement security.

As polls show, the country is deeply frustrated with the $1.6 trillion deficit this year, and voters want spending cut back. But that's not the same as wanting spending cut back in the areas that are important to their interests.

Unless politicians are convinced that voters support cuts in the Medicare benefits that Granny receives, or in the Social Security benefits they pay into and expect to receive, there is little incentive to commit political hara-kiri, as Obama obviously concluded. Washington is many things, but an arena for political courage, it ain’t.

When the Pew Research Center recently surveyed Americans about government spending, they found only 12% wanted to see cuts in Medicare or Social Security spending, and only 6% wanted veterans benefit spending reduced. Those stats are reflected in Obama’s budget, which cuts discretionary spending but not mandatory spending. And since the big bucks are spent in the latter, not the former, his proposed cuts are anemic by default.

“None of the options polls well,” lamented one Republican insider this week.

Still, Republicans predict Obama’s dodging the real cause of budget deficits will come back to haunt him. Since becoming President, he has positioned himself as Washington’s only grown-up – a man who is willing to tackle tough problems and propose unpopular solutions. “Every Republican candidate in 2012 is going to bring this up,” one Republican aide believes, especially since the Republicans must show their hand first and bear the risk of doing so.

Spending reductions are difficult because there is probably no program funded by federal spending which is universally hated by members of Congress. Every program has an advocacy that must be reckoned with when spending is budgeted.

For example, Rep. Jim Clyburn (D-SC), the third ranking leader in the Democrat caucus and the leader of the Congressional black caucus, gave an emotional news conference this week, decrying education cuts proposed by Republicans in their quest to find $100 billion in spending cuts. Districts like the one he represents in Congress have a large number of poor and seven black colleges targeted by the GOP. Clyburn said of the cuts:

“You explain to me how that will provide us the wherewithal to compete. They’ve just gone in with a meat ax chopping stuff out in order to get to some magic number without regard to what this means to the people that we are trying to prepare for the future and what it means to this country if we are going to compete.”

The seven black colleges Clyburn is trying to protect were scheduled to get grants from the Department of Education. Since it was created by Jimmy Carter in 1979, the Department cannot show that it has had any positive impact on the nation’s schools, which are under the supervision of local and state officials. Yet in the 2012 Obama budget, the Education Department received the highest year-over-year percentage increase in budget, 21%, and is set to receive over $77 billion in spending. Republicans have been trying to shut down the department for 30 years.

Then there are Obama’s pet projects in his 2012 budget. He wants to rebuild the nation's roads and spend $53 billion on a high speed rail network in Florida and other states. The newly elected Republican governor of Florida, Rick Scott, says he will reject funds for the project. Scott is the third newly elected Republican governor to turn down money for Obama’s national rail system, joining John Kasich of Ohio and Scott Walker of Wisconsin. Each of the three replaced governors who had lobbied for the funds.

Obama also wants to spend $556 billion on highway and mass transit projects, $46 million to increase EPA spending "to reduce greenhouse gas pollution," and $584 million on research and innovation in “new and emerging environmental sciences.” Of course, Obama refers to this spending euphemistically as “investments,” but neither he nor Congress has ever bothered with a cost/benefit analysis to prove these projects aren’t just more government boondoggles.

However, Obama did issue this threat through a spokesman to Republic deficit hawks this week:

“If the president is presented with a bill that undermines critical priorities or national security through funding levels or restrictions, contains earmarks or curtails the drivers of long-term economic growth and job creation while continuing to burden future generations with deficits, the president will veto the bill.”

Translated: he will force Republicans to shut down the government and hopefully suffer the same consequences when they last did that in 1995, virtually assuring Clinton’s reelection for a second term.

There is something peculiarly reprehensible about a president or member of Congress who puts his or her political future ahead of the good of the country, regardless of party affiliation. The future of the Republic is poorly protected when our elected representatives lack the courage to confront their constituents with the facts that this country is headed for a fiscal train wreck and sacrifices akin to a wartime footing are called for if we are to avoid calamity. Obama’s quiescence in fiscal leadership contradicts the image he beholds in the mirror – a tough-minded chief executive who confronts challenges others avoid. Instead he has taken a political path, persuaded that he is more clever, more persuasive in out-maneuvering his opponents in the political chess game.

“I’m confident we can get Social Security done in the same way that Ronald Reagan and [late Speaker] Tip O’Neill were able to get it done, by parties coming together, making some modest adjustments. I think we can avoid slashing benefits, and I think we can make it stable and stronger for not only this generation but for the next generation.”

Those are the words of a community organizer, not a political leader.