Among the many promises President Obama made three years ago when he was insisting on $800 billion in “stimulus” spending was this one: “[T]o cut the deficit we inherited in half by the end of my first term in office.”
Well, put that promise in the same category as his pledge to keep the post-stimulus unemployment rate below 8 percent. Once again, the president is not even going to come close.
Instead of cutting the $1.3 trillion deficit of 2009 by more than half to $581 billion in 2012 (as his first annual budget projected), the president’s 2012 budget now projects an annual deficit of $1.33 trillion this year, a $30 billion increase from his first year in office.
One might imagine that a failure of this magnitude would cause the administration to reconsider their faith that the economy (and federal revenues) can be reliably stimulated by massive short-term deficit spending. On the contrary, this new budget shows that the president is doubling down on the failed borrow-and-spend Keynesian strategy of trying to spur the economy with government spending on non-essential priorities. Among the president’s latest “investments in our future” are $178 billion for not-so-shovel-ready construction projects and $6 billion in Green energy subsidies. Such profligacy makes a mockery of the much-touted budget “savings” achieved in the debt ceiling package just months ago. With this budget, the president boldly proclaims “Damn the national debt, full steam ahead!”
What about the $4 trillion in debt reduction over the next ten years that the administration keeps pointing to? Well, that includes an alleged $1 trillion in savings from winding down the wars in Iraq and Afghanistan, money that was never going to be spent in the first place. Much of the rest of the purported savings comes from another budget gimmick: making unrealistically high projections of what future spending would have been otherwise, and then claiming the difference as “debt reduction.” Together, these sleights of hand enable a continued spending spree.
The Obama budget brings new meaning to fiscal irresponsibility. Over the next ten years, the administration calls for annual federal spending to increase from $3.8 trillion to $5.8 trillion, for a grand total of $47 trillion. In no year does spending decline. He proposes to add $11 trillion to the national debt, bringing our debt burden to a crushing $26 trillion.
Even more staggering is that the largest slice of the budget pie – the so called “mandatory” spending programs mostly made up of Medicare, Medicaid, Social Security and interest on our debt – grows from nearly 70% of the total budget in 2013 to nearly 80% by the end of the decade. Medicaid alone doubles in cost, while the annual interest on our debt more than doubles as a share of total spending. These mandatory spending programs are the obvious drivers of our debt. They are headed towards insolvency and taking the rest of the federal budget along for the ride. Not only does the president allow them to rapidly grow, his budget does not contain one single proposal for addressing this entirely predictable debt crisis. Real leadership requires at least the proposal of solutions to save these programs while bending the cost-curve down.
The truly amazing thing is that we will be piling on all this debt despite all the revenue the president projects from the enormous tax increases he is proposing. He plans to raise tax rates across the board on any individual or business owner making more than $200,000 ($250,000 for couples). Meanwhile, the president would eliminate investment tax rate reductions enacted in 2003 and impose a new investment income tax hike of 3.8%. The capital gains tax rate would double from 15% to 30%, as would the tax rate on dividends. The estate tax would go from 35% to 45%. Oh, and the temporary payroll tax reduction that the president has made into such a major moral issue? It would expire in ten months.
For a more accurate picture of the impact of this budget, we need only look at the record of the last three years. Three years of federal spending topping 24% of GDP, the highest since 1946. Three years of deficits topping $1.29 trillion, the highest ever. Three years of revenues at historic lows as a result of the anemic recovery. An unbelievable $5 trillion added to the debt in a single term. “If I don’t have this done in three years,” the president said when the stimulus was passed in February of 2009, “then there’s going to be a one-term proposition.”
Let’s hope so. The nation literally can’t afford another term like this.