Yes, George W. Bush spent too much and proved redundantly that the term “big government conservative” is an oxymoron. And yes, when Bush left office our economy was in trouble. But how long will Obama claim that the only way for our economy to recover is to continue a spending spree that will leave us unable to recover from government debt?
Apparently, forever. In his State of the Union speech, Obama said, “One year ago, I took office amid two wars, an economy rocked by a severe recession, a financial system on the verge of collapse, and a government deeply in debt. Experts from across the political spectrum warned that if we did not act, we might face a second depression. So we acted — immediately and aggressively. And one year later, the worst of the storm has passed.”
But it hasn’t. Unemployment is still nearly 10% and — according to Reagan administration economist Arthur Laffer — the “recovery” we are in is a false one. With the Bush tax cuts about to expire, and both capital gains taxes and estate taxes to rise next year, we’re headed into a far worse economic crisis than we suffered last year. But that doesn’t deter the president one bit.
Nor does it deter his amen chorus in the media. The hyperliberal New York Times said in a Sunday editorial that the worst thing the government could do is slash spending.
And that’s the last thing President Obama plans to do. Last week, he proposed another budget — this time $3.8 trillion, $200 billion above last year’s budget — that will create an additional $1.2 trillion in debt. And this week his congressional minions are going to try to pass another “stimulus” bill to create jobs. It will have the same effect as the last one: few jobs and another huge expansion of our debt.
One Republican leader – Rep. Paul Ryan of Wisconsin, ranking Republican on the House Budget Committee – has a better idea. His “Roadmap for America’s Future Version 2.0” has a big advantage over Obama’s plan: it’s a real bill — HR-4529 — which has been subjected to analysis (“scoring”) by the non-partisan Congressional Budget Office.
CBO provided an exhaustive analysis of Ryan’s proposal in a 50-page January 27 report. It’s principal conclusions demonstrate that Ryan has it right. According to CBO:
• Federal government debt and spending — on the current course — will reach 223% of the Gross Domestic Product by 2040. Ryan’s plan — which still allows increased spending – reduces that to 99%, still far too high.
• The Ryan plan provides that Americans over 65 by 2020 will receive current and rising Medicare benefits for life. Those who reach 65 after 2020 will be given vouchers to purchase private health insurance, resulting in enormous savings in federal spending. CBO says, “Under [Ryan’s] proposal, national health expenditures would almost certainly be lower than they would under [Obama’s vague plan.]
• “The lower budget deficits under [Ryan’s] proposal would result in much less federal debt than under the alternative [Obama] fiscal scenario and thereby a much more favorable economic outlook.”
And, importantly, CBO says the Obama spending spree isn’t sustainable: “Using CBO’s ‘textbook growth’ model, it is not possible to simulate the effects of the alternative [Obama] fiscal scenario after 2058 because the deficits become so large and unsustainable that the model cannot calculate the effects.”
So Obama’s fiscal policy is not only unsustainable even by America’s massive economy, CBO can’t even say where it will lead. But unsustainable deficits can only lead to one thing: economic depression that may not be survivable.
I talked to Paul Ryan about his plan and the competing Obama plan. He’s almost apologetic about his command of the issue. I asked him if there was anything in the president’s new budget proposal that can fairly be called an attempt to reduce federal spending.
Ryan said, “No. Not all. And by their own definitions and terms, it’s not credible and it’s not sustainable. Go to, and I know it’s kind of geeky, go to Table F (or S)-9 on page 146 of the summary tables. And it shows you their budget totals. And it shows you in the definition of [White House Budget Director] Peter Orzag and [Treasury Secretary] Tim Geithner (who previously professed they have to get the deficits down below 3% of GDP) it never does that. It’s not credible.”
“So, they acknowledge that they’re bringing forward a budget that is completely unsustainable, that’s not credible, and they punt it to this commission to finish the job. That’s not leadership, that’s not budgeting, that’s punting. That’s my point.”
I asked Ryan if he’s as tired as we are of Obama’s whining about the economic mess he inherited.
He said, “This is his second budget. It’s obviously his economy. And there’s no doubt the president inherited a dire fiscal situation. That’s not in doubt. The question is “What do you do with it?” And they’re making it demonstrably worse.”
How much worse? Ryan said, “We owe more than we’re worth. Total federal debt is larger than household net wealth.”
Ryan has expended a lot of his considerable brain power on the future of our economy. He said we’re approaching a “tipping point,” an “Atlas Shrugged” moment. What will it look like?
“There’s two types of tipping points,” Ryan said. “There’s the bond market tipping point. There will come a point in the near future where the bond market will come after us because foreigners will stop giving us money at lower rates. We will have a plunging dollar and spiking interest rates and inflation. And that’s the tipping point.
“The other tipping point is how many people are hooking up to government. According to the Tax Foundation, 60% of Americans get more benefits from the federal government in dollar value than they pay back in taxes. So we’re coming to a point where more people will have a vested interest in keeping the government growing and big than they do in being self-governing. More people will worry about their dependencies and their government benefits than they will be about liberties.”
So what’s the choice between Ryan’s plan and Obama’s?
Ryan said, “We have a choice of two futures in Congress. There’s the future we are on right now, which the current government is hastening, which is a path of decline, of bankruptcy, of debt, and lower standards of living for future generations. [The other is] the choice that I am demonstrating here: of renewing the idea of having a government that’s limited and a country that is prosperous with higher standards of living.”
Ryan’s plan, though far better than Obama’s should be only a beginning for every conservative campaign this year. We shouldn’t be arguing about how to “sustain” the federal budget: we have to propose ways to cut the government’s appetite for our money. The only way to do that is — unsurprisingly — precisely the action the New York Times says is the worst thing to do: slash federal spending and shrink the government.