The Right Opinion

When Big Deficits Became Good

By Victor Davis Hanson · Jan. 10, 2013

As a senator and presidential candidate, Barack Obama said that he detested budget deficits. In 2006, when the aggregate national debt was almost $8 trillion less than today, he blasted George W. Bush's chronic borrowing and refused to vote for upping the debt ceiling: “Increasing America's debt weakens us domestically and internationally. Leadership means that 'the buck stops here.'”

In 2008, Obama further blasted Bush's continued Keynesian borrowing: “The problem is, is that the way Bush has done it over the last eight years is to take out a credit card from the Bank of China in the name of our children … so that we now have over $9 trillion of debt that we are going to have to pay back – $30,000 for every man, woman and child. That's irresponsible. It's unpatriotic.”

Strong words. But so worried was Obama about the debt that just two weeks after he took office, he promised still more: “And that's why today I'm pledging to cut the deficit we inherited by half by the end of my first term in office. … I refuse to leave our children with a debt that they cannot repay.”

In his first term, Obama has added more than $5 trillion to the national debt, borrowing more in four years than the “irresponsible” and “unpatriotic” Bush did in eight. In fact, Obama is on schedule to add more total debt by the end of his two terms than all prior presidents combined. What happened to worries about leaving our children with a “debt they cannot repay”? And where did all borrowed money go, given that the war in Iraq has been over for more than a year, and we are winding down in Afghanistan?

The recession that ended in 2009 cut revenues, and the population continues to get older and draw more on federal entitlements. But all that said, we have spent record trillions of dollars during the last four years expanding the size of government. A vast 2009 stimulus plan; new Obamacare; new federal employees; vast new expansions in food stamps, disability and unemployment insurance; and spiraling Medicare, Medicaid and Social Security payments all increased government spending in each year of the Obama presidency to a higher percentage of the gross domestic product than at any time since 1946.

Obama, for all his overblown rhetoric in 2006, was once right about the deficits. But the antidote for the profligacy of the Bush administration was not to increase the borrowing even more.

What, then, explains the vast gulf between the prior Obama rhetoric and his current record on deficits?

Either one of two things occurred.

The first possibility is that Obama and his advisors really believed that record deficit spending, near-zero interest rates and expansions in federal entitlements would jump-start the economy into prosperity. In fact, the opposite occurred. Economic growth continued to hover around or below 2 percent of GDP. Unemployment has never dipped below 7.8 percent during Obama's entire presidency. The massive borrowing made things worse, not better.

A second explanation for Obama's “irresponsible” and “unpatriotic” behavior is that, at some point, he began to see political advantages to massive borrowing when combined with near-zero interest rates. The growth of entitlements is popular with many voters, especially given that 47 percent pay no federal income taxes. Politically, it proved wiser to provide free birth control pills than to be demagogued as wanting to throw granny over a cliff. Who wants to run on giving fewer things to voters and making everyone pay more for what they receive?

Perhaps the Reagan-era notion of lower taxation could only be ended through a sense of impending calamity. As former White House Chief of Staff Rahm Emanuel once put it, “You never let a serious crisis go to waste. And what I mean by that it's an opportunity to do things you think you could not do before.”

Reagan once advocated a “starve the beast” philosophy – lower taxes resulted in less money for out-of-control government. Obama flipped that sequence to a “gorge the beast” paradigm of an out-of-control government demanding far more in taxes.

Higher taxes, weighted heavily toward the affluent, spread the wealth and correct the inequities of market-based compensation. They punish the culpable 1 percent. And they remind some that they did not build their businesses on their own. Deficits force income redistribution through changes in the tax code that in any other political climate would have proven impossible.

But beware of what you wish for. Obama has already gotten his dream of a vastly increased government, federalized health care, near-zero interest rates and record debt to force higher taxes. The problem now is that there are not enough millionaires and billionaires to make up for the shortfall. And if interest rates rise just a bit, the debt will bury us all – fat cats and thin cats alike.

© 2013 TRIBUNE MEDIA SERVICES, INC.

5 Comments

Robinius in Broomfield, Colorado said:

Victor, this is the most well written column I have read in quite some time. Too bad liberals, progressives, environmentalists, union members and young people will never read nor understand it. Thanks for the effort. Perhaps posterity will record that you were correct about these things. It is unfortunate that the education industry can teach our young people whatever they want to, regardless of the facts.

Thursday, January 10, 2013 at 12:47 AM

Tod the tool guy in brooklyn ny said:

As long as government grows,out of control, progressives are satisfied.. Libs don't seem to care about results. Capitalists are always concerned about the end results-the fruit of the labor. We can share ideas all day, but NOT PROFITS! God said to His people-Thou shall not steal---That's why SOCIALISM is contrary to God's Laws and Ways! LOL VDH.

Thursday, January 10, 2013 at 5:55 AM

wjm in Colorado said:

The third possibilty, and the most likely given the facts, is that Obamao and his handlers purposely expand government and spending in a Cloward Piven strategy to collapse the economy. After all, they must have a crisis to use to take over and transform. Chairman Obamao wants to be a dictator, and rule over the United Socialist States of America. Biden promised executive orders on guns, that will not surprise me, but it may be the smoking gun we need to impeach as he exceeds his Constitutional authority.

Thursday, January 10, 2013 at 10:33 AM

Tapdaddy in Indiana said:

"A second explanation for Obama's "irresponsible" and "unpatriotic" behavior is that, at some point, he began to see political advantages to massive borrowing when combined with near-zero interest rates."
It is sad the people don't realize that their votes are being bought and are non-refundable.

Thursday, January 10, 2013 at 2:36 PM

Thin Cat in Montgomery, AL said:

Mr. Hanson-

I respect your work and appreciate your willingness to afford the Bush administration a share of the responsibility for "Keynesian borrowing". I think it was proven in the recent election that being the lesser of two evils is no longer a viable position for the Republican party. Many, especially in the younger generations, cannot see the differences in the two parties, especially regarding this matter. This is partly because many conservative authors and media sources refuse to admit that the Republicans, for whatever motives and at whatever proportions, have also contributed on the spending side of the equation toward the indebted state in which we find our Republic. While I recognize that national defense is ultra-constitutional while social income redistribution is ultra-not, does our Liberty truly require that we give massive amounts of money to foreign nations or that we pledge our amed forces and young peoples lives to "police the world"? Even those politicians opposed to "nation building" find themselves doing the same when they come to power. Is bringing down the Soviet Union a "better" reason for national debt than social welfare? I think so (nuclear proliferation excepted), but I understand why many others do not. When Reagan "starved the beast" at home he was also growing it militarily in order to starve the red beast of the USSR, no? And I know it is neither reasonable to bring home all troops at once nor to snatch up the entire social welfare at once. I think it is time the Republican party joins with their deflated independent and libertarian minded bretheren to look the Republican platform square in its collective eye to share responsibility for our past fiscal and monetary mismanagement. The status quo is a losing prospect for fiscal conservatives. The old paths need to be renounced and new paths need to be both bold and simple. I suppose I'd like to say one thing and to request another: The social conservatives and libertarians need to call a truce, and I'd ask if you might elighten us with a little more history on the path to our current deficit. Is fiscal relativism more justifiable than moral relativism? Honesty, Freedom, and Hope are themes that apparently worked well for President Reagan when I was a small child, and they would resonate today, as well. But did the Nixons and Reagans of the world not also get us into this unsustainable financial mess? I defer to your keen insight. Thank you.

Thursday, January 10, 2013 at 9:08 PM