Obama the Fiscal Conservative?
The “next big thing” has arrived in the political arena this week, though how “big” it will really turn out to be remains to be seen. President Obama, proving once and for all that he actually is capable of reading poll numbers, is proposing a three year spending freeze on domestic discretionary spending. Before you deficit hawks get too excited, we’re talking about roughly 20% of the budget here, and it is projected to save approximately $250B over ten years at a time when we’re running roughly $200B deficits every month. (Hat tip for that one to Allahpundit, who snarkily refers to Obama as a “noted deficit hawk.”) But the one thing I would rather not see is fiscal conservatives rushing to throw cold water on this idea.
Granted, the numbers don’t mount up to much right away, and Obama should have expected that his proposal would receive scorn from both sides of the aisle. And he didn’t have long to wait for that to happen. John Boehner came out quickly with a statement comparing the move to “going on a diet after winning a pie eating contest.” From the left, the suggestion of not spending money as quickly immediately sent MSNBC talking head Rachel Maddow into apoplectic fits, referring to the move as “Stupid Hooverism.”
But I don’t want to jump on the bandwagon here and dump all over the President’s efforts. Small steps are better than no steps, and this can be viewed in much the same way that many of us view pork barrel spending through the earmark system. True, earmarks don’t add up to a very significant portion of the budget, but it’s the symbolism of the spending and the problems which arise from money changing hands in questionable deals which we oppose. So even if this doesn’t amount to a lot of real savings, it is at least a step in the right direction. I’ve been waiting quite a while for this president to demonstrate some leadership in his own party, and this is a good starting point.
The more cynical among us will note that the Republicans weren’t very good at fiscal restraint during the Bush years, and that is absolutely correct. We ran up more than $5T in debt during the GOP salad days early in this decade, including a disastrous expansion of Medicare pushed through with largely fantastic ideas of paying for it. (“Fantastic” i.e. “comprised largely of fantasy.”) You may also claim that Obama is simply doing this because he sees his approval numbers tanking and he is in a panic over his party facing a slaughter in the 2010 mid-terms. Fine. Feel free. Personally, I don’t care if he’s doing it because somebody is blackmailing him with a picture of him smoking cigars with Fidel Castro. The point is, we’ve finally got the President acknowledging that spending is out of control and the mounting national debt is threatening to crush us.
This spending freeze may not be much, but I’ll take it for a start. Now let’s see if he can get some of the Democrats in Congress to follow suit.
UPDATE: Here’s another part of the problem (for those of you who think I’m being “too reasonable” this morning. *wink*) Jonathan Zasloff goes so far as to honestly express what I suspect is the chief factor underlying most of the objections coming from the President’s own party.
Perhaps the worst thing about this is how it cedes the ideological ground to the Republicans.
To quote a political analyst who is generally far more talented than me… YOU’RE NOT HELPING! Don’t you understand that this is far more important than any silly political games, or who is winning and who is losing in this week’s Rassmussen poll numbers? We’re looking at a mountain of debt which is far beyond the range where we can reasonably “spend our way out” of a short term dip. You think you’re worried about America being attacked by terrorists or invaded by some foreign nation? We’re virtually unbeatable in military terms, at least for now. The real danger to the United States is the possibility that our entire economy could implode completely, leaving us with a choice of selling off vast portions of the nation to foreign creditors or defaulting on our debts. That’s the looming mushroom cloud on the horizon for the 21st century.
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30 Responses to “Obama the Fiscal Conservative?”
This spending freeze may not be much, but I’ll take it for a start.
My feelings as well. It may ignore the more bloated portions of the budget but it's a step in the right direction.
Jazz, please stop being so reasonable. There is no place for that in American politics.
“please stop being so reasonable“
LOL! I hadn't had enough coffee yet, sorry. I'll get back to being an unreasonable bastard in the next hour or so.
The way he says he's a fiscal conservative is that he's gonna eliminate 10% of government contractor payments, which is about $40 billion. We will need to spend more to invest in education, research and development, technology to market business efforts, infrastructure and health care for more Americans. We'll also have to reduce taxes on tech intensive businesses that create jobs here at home, and revise corporate tax codes to reduce percentages but also eliminate loopholes that allowed a lot of companies with $250 million in assets to pay no taxes at all. The hope is that new business growth in targeted sectors like alternative energy, combined with new federally funded research and a better educated workforce will generate, in a modified and front loaded supply side model enough new revenues to allow the investment spending to fall over the course of ten years. The workforce structure suggests that the retirement age for benefits may need to move out to 68, while benefits need to be paid for by higher preretirement payroll contributions to social security and medicare. Otherwise the ratio of retirees to total workforce gets too large in the short term, although as boomers become fewer, the problem goes away. It's a thirty year problem whoever comes next as President will have about 30 months to solve. Let the betting begin!
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Andy
Excuse me, but has anyone noticed the U3 unemployment rate at over 10%, the U6 unemployment rate at 17.3% and a labor force participation that has gone from 67.3% in 2000 to 64.6% in December 2009? Not to mention the crashing Real Estate Market and the collapsing CRE market?
NOW may just be the time to spend money like it's going out of style, unless you are eagerly awaiting the next Great Depression…
And from the sound of you people, you really, really want to live through a Great Depression…
Looks more like Clinton's ghost that Hoover's. The real test will be getting congress on board. He still has far more popularity than congress, but congress holds the purse strings. It's a lot easier to convince congress to spend than to stop spending.
Shaw, ceding ground to republicans *is* bad economically. This is the party of unfunded tax cuts, medicare populism and a moratorium on policy ideas that are not ideologically pure.
Basically, playing partisan with an opposition like this is good for the country and you own party.
However, this could be a responsible idea with a good, moderate proposal that is decently adjusted to the current situation. But considering how the GOP refuses to look in the mirror unless it is to admire itself, it might not be so selfish and shortsighted of Obama to ask himself whether voters will reward him or if they will cave in to the GOP's marketing pushes.
No new taxes!!!!!!!
– Sorry, I just had to throw that in. Sure, this is a good start, but taxes have to be part of the solution as well. It's time we as a country got down to business and stopped fooling around, that includes shrugging off stupid, obsolete, and counterproductive party platforms.
As for John Boehner, when exactly is the last time he had a good idea???
1) It's simply bad policy to cut spending in a recession, for the exact same reasons why it's bad policy to raise taxes in a recession. This is exactly what Herbert Hoover did, and we all remember how that turned out.
2) Spending money less slowly is cutting spending, due to inflation.
3) Since when is $250 billion small? Just last week we heard the people talking about the massive amounts of new spending in the health bill(s). That new spending amounted to $366 billion for the most recently scored version of the Senate bill (see page 5). So $366b is massive, but $250b is chump change? Some consistency please.
The NYT mag last Sunday had a piece by Matt Bai called “The Great Unalighnment” which notes that in the online 24-7-365 news cycle, political allegiances have rapidly changed from transactional deal-making to ideological shifts. Bai insists that when Obama & the Dems became in '08 what GWB's Repubs were in '04, they became the enemy.
The mood of the country is throw the bastards out, whoever they are, and fix the underlying problems of a system that is terribly broken. Education, agriculture, special interest groups on both sides, all are disliked in principle even by people who benefit occasionally by their largesse.
Like pixels on a screen, politics tends to “refresh” almost automatically. The answer to whether there is a longer-term “reset” button out there, the one that the independent-conservative supermajority is flailing to find at the ballot box, is probably no.
Spending money didn't get us out of the first Great Depression, World War II did. Spending money without creating jobs is a con. And the Pork Barrel $787 billion produced more unemployment.
The first thing that ever needed to be done was to cut the debt, and freeze discretionary spending at the level it was at in 1990. Cutting the debt now may make it painful short-term, but long-term will put us in a better situation. More importantly, FD-Rooseveltian Ideas appear to have actually prolonged and worsened the Great Depression.
Keynesianism is a failure in fact. Look at the economic data from the Depression. You will notice all that Government Spending raised GDP, but prolonged the depression.
[...] Moderate Voice, suggesting a widespread underwhelming effect, notes the reax: John Boehner came out quickly with [...]
Daveinboca: what exactly about World War II got us out of the Great Depression? (Hint: it wasn't cutting spending)
Also, see this chart, keeping in mind that deficits increased from 1933 to 1936, at which point FDR decided to cut back and reduce them.
PJBFan: Actually, I invite you to look at the chart I linked in a previous post. The actual data validates, rather than refutes, Keynesianism in every way.
1) The economy tanked when the Fed let the money supply shrink following the 1929 crash.
2) The economy recovered when in 1933 FDR increased spending and the Fed loosened up the money supply.
3) The economy tanked again when FDR engaged in fiscal tightening in 1936-7.
4) The economy recovered when WWII necessitated larger government spending.
All of these are evidence of Keynesian theory.
Well, $250 billion is small compared to the roughly $30 trillion (hopefully not a lot more) the government will spend over the next decade.
On the substance, I think the starting point is a discussion on how much of our GDP the government at all levels should take. Over the last 35 years, the government's share of GDP (revenues) has been between 17 and 20 percent every year while spending has ranged from 18 to 22 percent and is projected under the administration's last budget submission to exceed 24 percent in the out years.
A short-term freeze on a small portion of total spending (even if Congress lets it happen) isn't going to do much to slow the long term growth in spending. Without doing that, it's pretty hard to get a budget in balance.
1937. This is why reasonable people can worry about how worrying about the deficit now instead of a little later could be bad. Anyone who really pays attention and doesn't wear hyper-partisan blinders knows that Obama always talked the talk of a fiscal moderate. I didn't have any problems with that when I voted for him and don't have a problem now as long as he treads carefully and remains cognizant of the numbers that DQ mentioned.
I'll agree that $250 billion small compared to the $30 trillion. But this line of argument implies two things:
1) The health care bill, which increases spending by $366 billion, isn't really a big deal either. So all the fuss made over it is just making a mountain out of a molehill.
2) The source of future spending and debt isn't domestic spending programs, so we really need to consider cutting military spending and reform health care to include cost-containment policies (since Medicare by far the largest budgetary issue in the out-years).
Ageed.
Personally, I don’t care if he’s doing it because somebody is blackmailing him with a picture of him smoking cigars with Fidel Castro. The point is, we’ve finally got the President acknowledging that spending is out of control and the mounting national debt is threatening to crush us.”
Yeah. Send Congress to SA (Spenders Anonymous).
[...] become apparent — conservatives have mixed emotions on how to approach it. Many have, as Jazz Shaw puts it, “heaped scorn” on the idea for reasons I’ve already outlined. Others [...]
How is this remotely equivalent to 1937? Roosevelt actually created a surplus in 1937. Obama's number is rounding error to the existing deficit, which is slated to increase in 2010 about the same amount it did in 2009.
Keynesians should relax…..we're still spending like there is no tomorrow.
It's nothing of the kind, though it has the far lefties already throwing fits this morning. (One of the “males” on Stepanie Miller's all-girl show was carrying on about how he hates or loathes the idea of a spending freeze, and that Obama's a Republican now; he wants “more taxes on the windfall profits!”)
At the least, it's a clumsy move to try to fool people into believing he's “responsible” now that he has dwarfed the worst of what Bush and Republicans did before him. It's not convincing to anyone with any intelligence. In other words, it's a clumsy way to try to distract the public or dispel its concern about the spending (and other misconduct by the Dems this past year) — they're out of touch with the real world, again.
At worst, and more likely, it's a setup ahead of time to appear “responsible” and encourage Congress and the two parties to proceed with the bipartisan deficit reduction panel that will rationalize more taxes (both higher levels of current taxes, and all-new taxes, is my guess). It also gives Obama and the Dems political cover not only for higher taxes but also for entitlement reform if they actually attempt the latter, too (it's also mentioned as a task of the panel, but experience teaches us never to be convinced they will do anything, before they actually do it someday).
We're probably being set up for more taxes later. First this smaller gimmick, then the bi-partisan panel meeting and reporting on the “need” for unpleasant measures, then the taxes (accompanying more spending, probably continued deficits, given who these people are). Bump, set, spike. We're what's going to be slammed.
galtin,
first, the health care bill has spending of roughly 1.5 trillion over a ten year period where the actual provisions are implemented. The number you are using is the 10 year number with only 7 years of implementation and is net of the Medicare reductions. The provisions of the bill itself cost about $160 billion per year on average (last analysis I saw). Said differently, 2 years of HCR is greater than the proposed spending freeze.
2. 59 percent of the Federal budget today and 67 percent in 2019 according to the latest CBO report is Medicare, SS, Medicaid and interest. Total military spending, including Iraq and Afghanistan is about $750 billion.
The only solution to our financial challenges is all of the above. Trying to protect anything in the current context makes any solution highly unlikely.
I guess the rest of the US should gear up for aCalifornia style budget hell now that we cannot get benefits or military spending cut and we cannot raise taxes one iota. Maybe we should ship our Fort Knox bullion to cash4gold.com. That'll solve all of our problems.
” I think the starting point is a discussion on how much of our GDP the government at all levels should take.”
It's beyond the reach of many to then note that most should be local, then state, and least taken by the federal government.
“ooks more like Clinton's ghost that Hoover's.”
Yes, just a bad imitation of Clinton. Those kids dressing up and playing government are at it again.
I have to wonder what a President (Hillary) Clinton would have done differently with the earlier stimulus (the greatest excuse in the world, with the slump, to do what otherwise would be inexcusable, spend vast amounts of money), with health care reform (would it be limited to real reform, or her own up-to-date version of federal takeover?), and the other lib Dem nonsense (like climate politics legislation).
Well heck, if WWII era was the magic cure, then how about we go back to WWII tax levels too eh? Or tax levels of the 50's, or the 60's for that matter. No rocket science involved. Just a return to a more traditional, and moral value system. It worked for most of the 20th century, must have had something going for it.
JSpencer
The rate of taxation (Federal government receipts at a percentage of GDP) has been remarkably consistent since the 1960s. Don't confuse marginal tax rates with average tax rates. The former move a lot, the latter not so much.
I assume your comment about a moral revenue system is a reference to the progressivity of the tax code which has actually increased since 1980.
Here's the link from the cbo if you'd like to see the data
http://www.cbo.gov/publications/collections/tax…. The share of taxes paid tab more or less makes the point.
Actually, the tax rate/GDP, or really anything per GDP, is deceptive, because the GDP is a badly manipulated number, officially and transparently manipulated, mind you, but manipulated nonetheless. It's really hard to tell what truth is when the numbers (like unemployment and inflation) are official lies.
That being said, the whole concept of borrowed stimulus can't have the historical effect if we're only borrowing from ourselves. Previous forays into debt involved borrowing from foreign countries, which I would liken to a family borrowing money from a new credit card — it feels good when the outside money hits, but it hurts when the money runs out and all that's left is the debt. Try writing IOUs to yourself and debt that you owe yourself won't hurt so much, but there's really no thrill without any new spending either. Since foreign countries aren't buying US bonds like they used to, these stimulus packages probably aren't going to have the same effect.