The Congressional Budget Office released its annual Budget and Economic Outlook this week. Last year’s was a tragedy, but the new one is a horror story. The crushing burden of government debt and persistent unemployment – which, contrary to the carefully massaged statistics released for public consumption, has really been in double digits for years, when the collapsing work force is taken into account – will conspire with skyrocketing taxes after the expiration of the Bush tax rates, and leave us with only 1.1 percent projected GDP growth next year.
That will leave us with one of the slowest economies in the developed world. We might eke out a small lead over the United Kingdom, and Japan is still grappling with an outright recession. Unfortunately, the CBO tends to underestimate the negative economic effects of high taxation, so we might end up with less than 1 percent growth, when all is said and done.
The government is still spending nearly a quarter of the total U.S. economy every year, and trillion dollar deficits have become the new normal. In fact, during only one year in the CBO’s 10-year projection do we get below a $1 trillion deficit, and it’s not by much. The government will be spending over $6 trillion a year by 2022. And none of that accounts for the ticking time bomb of unfunded entitlement liabilities, due to Social Security and Medicare, which Washington deals with by officially ignoring them.
Congressman Tim Huelskamp (R-KS), whose American Freedom and Opportunity Act would extend the existing tax rates, released an angry statement reminding Americans that President Obama promised us something very different upon taking office:
In his 2009 State of the Union Address, President Obama pledged to cut the deficit in half by the end of his first term. Not only will the President fall short of that goal, but he will be double where he promised the American people where we would be. It’s not a surprise that President Obama cannot meet his pledge. After all, it is his spending sprees, his stimulus, and his health care law that are bankrupting Washington and sending our economy into shambles. Pointing fingers will not work anymore. It’s his economy and his bureaucracy.
This economic recovery is anemic at best. We may have emerged from the formal definition of a recession, but just barely. Unfortunately, the conditions are not exactly ripe for growth, which is reflected in CBO’s downward revision of its economic growth estimates. Yet, the Obama Administration policies of overspending, overtaxing and overregulating has created this anti-business climate of uncertainty.
While the President’s stimulus was supposed to jump start the economy and keep unemployment from going above 8 percent, America has known nothing except unemployment rates higher than 8 percent since it became law. Now, CBO expects unemployment to stay above that rate both this year and next. Despite the mountains of evidence showing that stimulus spending does not work, President Obama had the audacity to come before the House in September and ask for Stimulus Part Two. He made similar requests in his State of the Union just last week.
And then Obama dropped his pricey new mortgage refinancing plan on us, which he plans to finance with more deficit spending, plus another economy-crushing tax increase. His other big tax-raising brainstorm, the so-called “Buffett Rule” for a 30 percent Super Alternative Minimum Tax on millionaires, would raise a piddling $36 billion at most, while adding mountains of complexity to the enormous tax code that is already strangling our One Percent Growth economy.
Look at the tax code from the other direction: it costs Americans a good $300 billion per year to comply with it, and some estimates say it will be closer to $500 billion by the end of the CBO’s ten-year forecast period. Wouldn’t it be great to have a big chunk of that cost returned to the private-sector economy for productive uses? But no, we’re going to make it even worse, to squeeze a few more bucks out of the private economy.
The 2022 envisioned in that CBO report will never happen. We’ll never get there. There isn’t enough money to pay for our monstrous federal government. External factors, from war and natural disaster to increased debt service costs from credit rating degradation, stand poised to make the CBO’s grim estimate into a best-case scenario. How can they accurately forecast the domestic effects of the increasingly likely collapse of the Euro?
Discussing even more spending programs is delusional insanity. We have already reached the point where Big Government America is eating itself alive. Efforts to squeeze more revenue out of this exhausted economy are killing it, resulting in reduced revenue from flat growth… followed by ever more shrill demands for more vigorous squeezing.
Macro-economics and the discussion of public debt often involve numbers so huge that it makes our eyes water. Here are some simple numbers to ponder: the health of the private sector calls for growth of about 3 percent, to drive job creation commensurate with population increase. Financing our government without massive deficits would take more like 5 percent, and actually resolving the debt crisis would demand 7 percent growth or more, sustained over many years. Our government-controlled economy is completely incapable of reaching any of those growth levels. There is no way to make this equation work without making the government dramatically smaller.
America should carefully ponder those difficult growth targets before entertaining the notion of another four years under the people who got us to the “new normal” of One Percent Growth. They’re talking about buying a shiny new saddle and spurs for a work horse that’s about to drop dead in its tracks.