Obama’s Louis XV Budget
WASHINGTON – 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.”
WASHINGTON – 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.
© 2011, The Washington Post Writers Group
