A New Record of Folly

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A new report that hasn’t gotten much play in the afterglow of President Obama’s state of the union address was the Congressional Budget Office estimate for the budget deficit this year. The CBO estimates that the deficit will hit a new record of $1.5 trillion. And it projects that the 2012 deficit will be $1.1 trillion. Even though this will be the third year of trillion-buck-plus deficits, and it will top last year’s record-setting deficit of $1.4 trillion, no doubt Obama will continue to blame Bush (whose largest deficit was a little over $400 billion in 2008). But that rhetorical trope is working less and less well for Obama.

Obama seems now to be aware that the populace is becoming increasingly alarmed at these unprecedented budget deficits. His speech proposed a meager deficit reduction — about $400 billion over ten years.

The big question is how much stomach the Republicans have to push for steeper cuts. The public is now aware of the problem but is still fiscally incontinent: it favors cutting the budget generally but opposes cutting specific popular programs. Even Tea Party members typically support the major entitlement programs (Medicare, Medicaid, and Social Security) that are metastasizing most rapidly.

There are slight signs that the Republicans may strap on some stones and step up to the plate. Orrin Hatch (R-UT) has once again proposed a balanced budget amendment, stronger than the amendment that failed by one vote in the Senate 14 years ago. Hatch’s version would require a two-thirds majority for Congress to raise taxes. But while a dozen Republican senators have signed on, no Democrats have, indicating that this has little chance of passing.

Sen. David Vitter (R-LA) has raised the deficit issue in a different way. He has asked the administration to provide actual figures on the drop in offshore drilling revenue collected by the federal government. That information would show us just how much the Obama slowdown of offshore drilling has and will cost the government in revenues, and hence added to the deficit. One calculation puts the amount of lost revenue due to lower production in the Gulf at about $3.7 million a day.

But most interesting is the legislation introduced by Rep. Jim Jordan (R-OH) and Sen. Jim DeMint (R-SC) that would cut the deficit by $2.5 trillion over ten years. Some of the savings would come from the elimination of a number of programs and agencies, such as the US Agency for International Development (savings: $1.39 billion a year) and from cutting the subsidies of the Corporation for Public Broadcasting ($445 million a year), Amtrak ($1.5 billion a year), and high-speed rail ($2.5 billion a year). But most of the savings would come from rolling back all non-defense discretionary spending to 2006 levels across the board, and keeping it there until 2021.

It is unlikely that this proposal will even come to a vote in the Senate, much less be signed into law by Obama. Even if it did, as exemplary as it is, it would not address the real threat, which is the “Entitlement Explosion” — the ballooning costs of Medicare, Medicaid, and Social Security, costs that are going to drive the country’s economy to the wall as the Baby Boomers quite predictably age, retire, and sicken. In fact, the CBO just reported that this year Social Security will run a deficit of $45 billion (or $130 billion, if the cut in payroll taxes is included), and will continue to run deficits until the bogus “trust fund” is exhausted in 2037. As late as last year, please note, Social Security was projected to run surpluses until 2016.

The entitlement programs are what really endanger the country (and I haven’t even mentioned the state employee pension fund liabilities). The American people haven’t yet reached what I call the public-choice tipping point, the point at which a problem becomes so large that it is no longer rational for the average citizen to be ignorant of it. So the Republicans may do a little by way of deficit reduction, but I wouldn’t hold out hope that they will do a lot — the public isn’t there quite yet.

Give it a few more years, and a bout of high inflation . . . and that may finally do the trick. By then, of course, the economy will be in ruins. Rational ignorance is such a bitch, isn’t it?




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Comments

Gary Jason

Harrison's unrequited love for Obama is at this point either touching or touched, depending upon you perspective.

Yes, the first year of deficit under Obama was partially (though hardly entirely) a carryover from the Evil Bush tenure. But we should note that during the last two years of Bush's presidency, the two years of highest deficit, were when the Democrats controlled both houses of Congress.

And in any case, the following two years of trillion-and-a-half dollar deficits were entirely the making of Obama and his comrades controlling Congress with major majorities. In fact, it was just announced that the deficit of this year will hit $1.65 trillion. Also his making will be the projected $1.1 trillion deficit next year.

The fact Harrison refuses to acknowledge is that in his first four years in office, Obama will have added more to the national debt than all the prior presidents put together, INCLUDING ALL EIGHT YEARS OF EVIL BUSH. Period, flat.

That includes the passage of the largest exercise in Keynesian economics in history, the stimulus bill, which spent in one fell swoop roughly what the Iraq war cost us. The stimulus bill failed to improve the employment rate, but Obama is still pushing for more stimulus spending. Oh, and let us remember that all during this while, Obama has kept us in Iraq and Afghanistan, even expanding the war in Afghanistan--one that he hismself stressed was legitimate and necessary.

As to inheriting "the Great Recession," oh, please. Many presidents have inherited recessions--including Reagan and Evil Bush. It is how a president responds to the challenges that arise in his presidency that we judge him.

And here Obama has failed miserably. Both Reagan and Evil Bush cut taxes, and managed thereby to usher in rapid recoveries. But Obama's approach was to halt progress on free trade (indeed, to actually start trade wars with Mexico and Canada), to jack up regulations (including a massive new financial regulation package), to fight to jack up taxes on "the rich," to bash business every chance he got, and to pass a grotesque new health care entitlement that saddles business with even more costs. All this is what caused the increase in and persistence of the high unemployment we have seen under Obama.

Only now is the clueless Obama taking a few tentative pro-growth baby steps. These are too little, in my view, and rather late, but still welcome.

And the new health care entitlement by Obama is only going to make matters much worse. Yes, Evil Bush gave us a senior drug plan (one, please note, far more constrained than the one promised by his opponent Gore). But you can't seriously compare that program with a cost in the tens of billions, with Obama's plan to give free health care to 30 to 40 million uninsured people with a cost in the many hundreds of billions.

Blaming Wall Street, Bush, and Lyndon Johnson for the deficit, and absolving Obama, is beyond disingenuous. It is rank intellectual dishonesty, as I daresay Harrison well knows.

Jon Harrison

The first trillion-plus deficit was in fiscal year '09, was it not? That was Bush's budget, not Obama's.

The president has shown far too little interest (almost none, really) in cutting spending and getting the budget into balance. But the multi-trillion dollar deficits we are now experiencing are the result of 1) the Great Recession, which was brought about by mistakes not just in Washington, D.C., but on Wall Street, in Detroit, and elsewhere; 2) bad fiscal policy dating back at least to the administration of Lyndon Johnson; 3) George W. Bush's decision to borrow the money needed to fight the Iraq war and fund Medicare Part D and No Child Left Behind. These last three things have added trillions to the national debt, as I daresay Jason well knows.

The hacks on MSNBC and FOX are notorious for sacrificing truth on the altar of political partisanship. Libertarians must do better.

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