Dems’ Blueprint for Five More Years in the Red

February 14, 2012

Obama’s Budget Request Shows Democrats Have No Intention of Curbing Their Spending Addiction, Now or Ever

President Obama debuted his election-year budget to the fanfare of his fellow Democrats, but serious observers were struck by the president’s apparent complete lack of concern for America’s escalating debt burden.
President Obama’s failure to take America’s debt crisis seriously is all the more jarring given his own vow to “halve the deficit” by the end of his term.
By again avoiding any effort to reduce the deficit in a serious way, the Democrats who run Washington are choosing to ignore the threat their spending addiction and job-destroying tax hikes pose to economic growth not just this year, but for the next four.

President Obama debuted his election-year budget to the fanfare of his fellow Democrats, but serious observers were struck by the president’s apparent complete lack of concern for America’s escalating debt burden:

USA TODAY: “OBAMA BUDGET LEAVES DEBT BOMB TICKING”: (Editorial, “Obama Budget Leaves Debt Bomb Ticking,” USA Today, 2/14/2012)

OBAMA BUDGET LEAVES PUBLIC DEBT AT 74% OF GDP, THE HIGHEST SINCE 1950 AND END OF WORLD WAR II: “The best test of a budget proposal these days is whether it reins in the national debt, which is projected to equal a troubling 74% of gross domestic product this year. The last time the publicly held debt was that high as a percentage of the economy was in 1950, when the nation was still paying off the stupendous amount of money it had to borrow to fight and win World War II.” (Editorial, “Obama Budget Leaves Debt Bomb Ticking,” USA Today, 2/14/2012)

BLOOMBERG: “OBAMA’S BUDGET MISSES OPPORTUNITY TO TACKLE TAX REFORM”: (Editorial, “Obama’s Budget Misses Opportunity to Tackle Tax Reform,”Bloomberg, 2/13/2012)

DEMOCRATS “WOULD ADD NEW LAYERS OF TAX COMPLEXITY”: “Do as I say, not as I do. That was the unwelcome message in President Barack Obama’s federal budget for 2013. The president calls on Congress to begin work on corporate tax reform, including simplifying and lowering the overall corporate rate. Yet his fiscal blueprint doesn’t even hint at how he would achieve that. Instead, he would add new layers of tax complexity.” (Editorial, “Obama’s Budget Misses Opportunity to Tackle Tax Reform,” Bloomberg, 2/13/2012)

LOS ANGELES TIMES: “NO REAL SOLUTION TO THE UNITED STATES’ LONG-TERM FISCAL PROBLEMS”: (Editorial, “What About The U.S. Debt?,” Los Angeles Times,2/14/2012)

THE CHICAGO TRIBUNE: “A CAMPAIGN PLAYBOOK,” “ACTUALLY WOULD AGRAVATE” HIS OWN DEBT PROJECTIONS: “Monday’s document, in truth, is a campaign playbook — the vision of government that Obama hopes voters will reward with a second presidential term. Its central theme:

“Obama didn’t use the S-word — stimulus — but he wants to raise taxes on the wealthy and borrow more money in order to spend more on economic … stimulus. Yes, the president’s plan does continue to give lip service to debt reduction in future years. But the proposal he floated Monday actually would aggravate the somewhat rosier debt projections he provided to Congress as recently as September.” (Editorial, “Athens on the Potomac,” The Chicago Tribune, 2/14/2012)

WSJ: “THE FOUR HIGHEST SPENDING YEARS SINCE 1946,” AN “UNPRECEDENTED FOUR-YEAR BLOWOUT”: “Four years of spending of more than 24% of GDP, the four highest spending years since 1946. In the current fiscal year of 2012, despite talk of austerity, Mr. Obama predicts spending will increase by $193 billion to $3.8 trillion, or 24.3% of GDP. The top chart shows the unprecedented four-year blowout.” (Editorial, “The Amazing Obama Budget,” The Wall Street Journal, 2/14/2012)

MORE WSJ: OBAMA’S “FISCAL RECORD IS THE WORST IN MODERN AMERICAN HISTORY”: “Promises of future spending cuts are a mirage. Mr. Obama needs to point to the mirage because his fiscal record is the worst in modern American history.” (Editorial, “The Amazing Obama Budget,” The Wall Street Journal, 2/14/2012)

President Obama’s failure to take America’s debt crisis seriously is all the more jarring given his own vow to “halve the deficit” by the end of his term:

OBAMA PROMISED TO HALVE THE DEFICIT BY THE END OF HIS FIRST TERM:“[T]oday I’m pledging to cut the deficit we inherited in half by the end of my first term in office. This will not be easy. It will require us to make difficult decisions and face challenges we’ve long neglected. But I refuse to leave our children with a debt that they cannot repay — and that means taking responsibility right now, in this administration, for getting our spending under control.” (“Remarks by the President and Vice President at Opening of Fiscal Responsibility Summit,” The White House, 2/23/2009)

BUT NOW OBAMA HAS “BROKEN [HIS] DEFICIT PROMISE”: “The 2013 budget the president submitted today does not come close to meeting this promise of being reduced to $650 billion for fiscal year 2013.” (Jake Tapper, “Obama’s Broken Deficit Promise,” ABC News, 2/13/2012)

By again avoiding any effort to reduce the deficit in a serious way, the Democrats who run Washington are choosing to ignore the threat their spending addiction and job-destroying tax hikes pose to economic growth not just this year, but for the next four:

NYT: “OBAMA BUDGET BETS OTHER CONCERNS WILL TRUMP THE DEFICIT”:“President Obama will lay out a budget blueprint on Monday that amounts to an election-year bet that a plan for higher taxes on the rich and more spending on popular programs like infrastructure and manufacturing will trump concerns over the deficit.” (Jonathan Weisman, “Obama Budget Bets Other Concerns Will Trump the Deficit,” The New York Times, 2/10/2012)

PUBLIC DEBT WILL SOON HIT 90% OF GDP, A POINT AT WHICH “ECONOMIC DAMAGE BEGINS TO RISE”: “Economists believe that when debt to GDP reaches 90% or so, the economic damage begins to rise. And this doesn’t include the debt that future taxpayers owe current and future retirees through the IOUs in the Social Security ‘trust fund.'” (Editorial, “The Amazing Obama Budget,”The Wall Street Journal, 2/14/2012)

STUDY SHOWS DEFICTS PUT A DRAG ON OUR ECONOMY: “The eventual effect of sustained fiscal imbalance is slower growth and greater risk of a fiscal crisis. Our estimates suggest that a 10-point increase in the debt/GDP ratio lowers growth four years later by 0.2 percentage point, and increases the probability of a debt crisis by 2.5% in the aftermath of a financial crisis like the recent one. (See No Rush for the Exit,” Global Economics Paper, No. 200, June 30, 2010 and “When One Crisis Leads to Another,” US Economics Analyst, 11/04, Jan. 28, 2011.) To avoid this, lawmakers must begin to identify deficit reduction strategies.

“Ultimately, what goes up must come down. In the case of the federal budget, this means that a deficit-financed boost to growth will eventually lead to a drag. While policymakers can try to smooth the transition by phasing in cuts and incorporating multi-year fiscal commitments, achieving a sustainable fiscal policy will inevitably be a painful but necessary process.” (Jan Hatzius and Alec Phillips, “Fiscal Restraint: A Question of When, Not If,” Goldman Sachs Global ECS U.S. Research, 3/2/2011)

MAJOR ECONOMIC STUDY LINKED GOVERNMENT DEBT TO SLOWER ECONOMIC GROWTH: “The sharp run-up in public sector debt will likely prove one of the most enduring legacies of the 2007-2009 financial crises in the United States and elsewhere… Our main finding is that across both advanced countries and emerging markets, high debt/GDP levels (90 percent and above) are associated with notably lower growth outcomes… Seldom do countries simply ‘grow’ their way out of deep debt.” (Carmen M. Reinhart and Kenneth S. Rogoff, “Growth in a Time of Debt,” American Economic Review Papers and Proceedings, 12/31/2009)

DEMS ARE PUSHING TAX HIKES, BUT FORMER WHITE HOUSE CHIEF ECONOMIST WARNED TAX INCREASES HAVE A “LARGE, SUSTAINED AND HIGHLY SIGNIFICANT NEGATIVE IMPACT” ON GROWTH: “In short, tax increases appear to have a very large, sustained, and highly significant negative impact on output. Since most of our exogenous tax changes are in fact reductions, the more intuitive way to express this result is that tax cuts have very large and persistent positive output effects. … Our baseline specification implies that an exogenous tax increase of one percent of GDP lowers real GDP by almost three percent.” (Christina D. Romer and David H. Romer, “The Macroeconomic Effects of Tax Changes: Estimates Based on a New Measure of Fiscal Shocks,” American Economic Review, June 2010)