David R. Henderson  

Obama's Gall

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Consider the chronology.

. In January 2009, the Congressional Budget Office projects that the fiscal year 2009 budget deficit will be over one trillion dollars, or, specifically, $1,186 billion. It also predicts a deficit in FY2013 of $257 billion.
. In early February, President Obama pushes Congress to pass its "stimulus" bill, a bill that cuts taxes in lump-sum fashion rather than cutting marginal tax rates and increases government spending in ways that are likely to remain in place well after the recession ends. This bill would drive the projected deficit higher. President Obama pushes Congress to pass a bill before mid-February because it is so urgent, he claims.
. After the bill has passed, Obama waits a few days to sign it.
. The next week, Obama holds a summit to push the idea of "fiscal responsibility."
. The day after the summit, Obama gives his State of the Union address in which he calls for more spending.
. Two days after his State of the Union address, he presents his budget proposals. In them, the deficit for 2009 is projected to be $1.75 trillion, which is more than 8 percent of projected U.S. GDP. He seems proud that the projected deficit for FY2013 will be, if things go well, only $533 billion. Compare that to the $257 billion projected by the CBO for the same year assuming none of Obama's proposals passed.

Does this guy think that words are just words? In this era in which he wants us all to be accountable, is he accountable for his language, let alone his actions? How can he talk about fiscal responsibility when he has just signed a bill proposing a huge increase in the deficit and now is pushing another bill to increase the deficit even more? And how long will it be before the main stream media start talking about the fact that he is proposing the biggest expansion of the federal government since FDR?


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COMMENTS (29 to date)
Kelsey writes:

What does everybody think about Obama's plan to raise the taxes for the wealthy? I watched a video earlier that was a great summation of information and different global perspectives about his stimulus to raise taxes for Americans who make more money than 250K a year. I don't think it is too bad of an idea, but I am a college student. I think it will decrease the margin between the upper and lower class, which is what we need right now..a middle class. Let me know what you think.

http://www.newsy.com/

Caliban Darklock writes:

The math seems right to me.

- We have passed an 800 billion dollar stimulus.

- We have only raised the projected deficit for 2009 by about 600 billion dollars, 200 billion less than you might expect from the stimulus package.

- We have only raised the projected deficit for 2013 by about 300 billion dollars, 300 billion less than you might expect from the 2009 figures.

In combination, these represent half a trillion dollars in savings... if you look at them this way. There are lots of ways to look at them. It neither surprises nor upsets me that Obama's view of the numbers makes him look good. It neither surprises nor upsets me that his critics' view of the numbers makes him look bad.

What surprises and upsets me is that his critics seem to think his view of the numbers is somehow unfair or disingenuous. Both sides are playing games with the numbers to make their points. If Obama's team is cheating, so too are his critics.

The Student writes:

Not to be mean, but the outrage is so fulfilling for me. After seeing eight years of a President who managed to rack up deficits, while creating no wealth, and ruining our foreign affairs, it is quite fulfilling to see conservatives become outraged that the government is actually going to spend money on useful things.

This is Obama's real stimulus bill, this is the progressive vision for America, and conservatives can deal with it. You controlled the debate since Reagan, and we've had years after years of slowing growth, little increases in productivity (until Clinton), burgeoning deficits, and rapidly growing income disparity.

God forbid a Liberal set the terms of the debate. Face the facts, this is the most sweeping change in American politics in years. And Obama already won. He saved his muscle for this fight, and you know what, he already scored a knock out blow against the Republicans. Now all he has to do is keep the House Democrats from messing it up.

The Conservative Agenda has no authority, and no appeal. EIght Years of the most incompetent Republican presidency in history has destroyed the American appetite for Republicans, and to an extension, conservatism. Obama has vision, he is articulate, and Americans realize that both of these have been lacking.

That's the problem with Conservatism. It's the problem with free-market ideology. It has no vision. It says, let everybody do what they want. That might be good in the short run, but without vision this country would not be the most powerful in the world. Conservatism isn't about making plans, it's about celebrating the lack of a plan.

Well that lack of a plan has gotten us here. You reap what you sow. Maybe in eight years, people will be tired of progressivism, powerful government, and Obamanism. Maybe the Republican party will offer a real plan for America and sweep back into power. At least for these eight years, our money isn't going to be disappearing into a bottomless pit.

When our medical costs drop 30% over the next eight years without any drop in quality, thank Obama. When we retake our position as the technological leader of the world from China, thank Obama. When our roads are repaired, when we don't have an inefficient power grid, and when our schools don't look like homeless shelters, thank Obama. When we become independent of Arab Oil Dictatorships, thank Obama. At least now our money is going to something more useful than lowering capital gains taxes on the rich.

And there it is. To accomplish National goals requires national leaders and national funding. Not private enterprise. Never forget that public goods require public support.

So now it's my turn.
:D

megapolisomancy writes:

[Comment removed pending confirmation of email address and for rudeness. Email the webmaster@econlib.org to request restoring your comment privileges. A valid email address is required to post comments on EconLog.--Econlib Ed.]

quanticle writes:
If this clown has his way, we will be a European- style social democratic welfare state before this presidency is over.

And what's wrong with that? Talking to Europeans, I hardly think that France, Germany, the Scandinavian countries, et. al, are third world hell-holes of poverty and strife. The way I see it, they've actually got it pretty good.

So what precisely is wrong with the US moving a bit in that direction after moving in the opposite direction for eight years? I think that a bit of egalitarianism would be refreshing after the last eight years of government built upon an ideology that, at its core, advocates letting the disadvantaged fend for themselves while the rich make off like bandits.

[The comment quanticle has quoted has been removed for rudeness.--Econlib Ed.]

dcpi writes:

Yes, to Him words are just words ...

Craig writes:

Finally David,

You have stopped pulling punches, but is it too late?

Mr. Econotarian writes:

What does everybody think about Obama's plan to raise the taxes for the wealthy?

The marginal rate rise will decrease employment, especially of well-paid female professionals. When some women do the cost/benefit analysis of a $100k job with day care costs and with a husband who makes $150k pushing them into a higher bracket, she may decide to cut the day care costs and added tax costs and just stay home.

The reduction of itemized deductions (for things like mortgage interest and charity) will slightly hurt the housing market and will reduce charitable giving. However both of these deductions are a bit distorting to the marketplace, and probably should be eliminated anyway.

Income is mostly determined by your skill level and years of experience. If we want people to make more, we need to encourage them to get skills. Progressive tax rates provide a mild negative incentive to acquiring skills, as it removes some of the benefits of obtaining them.

"What surprises and upsets me is that his critics seem to think his view of the numbers is somehow unfair or disingenuous. "

The future deficit numbers are only disingenuous because they depend on 3% GDP growth in 2010 and 4% GDP growth beyond that. I rather doubt that, we've barely had one year of 4% GDP growth in the last decade, and that was without a president who is trying to blame big business and rich people for our problems.

"That's the problem with Conservatism. It's the problem with free-market ideology. "

If the GOP put into place more of their free-market ideology, that would be a different matter. They instead, spent their money on the Medicare Drug Benefit and silly wars, while maintaining support for the two GSEs that contributed to the housing bubble. The GOP had little use for actual free-market ideology beyond their propaganda.

"When our medical costs drop 30% over the next eight years without any drop in quality, thank Obama."

US health care costs per capita are double the OECD average.

You do realize that already many states have stronger medical coverage requirements for insurance than public health systems? Take IVF for example. So unless we are going to back down from the already mandated coverages for private insurance, US public coverage will probably still cost more than most other public health systems.

By the way, let's look at the UK NHS:

http://www.ft.com/cms/s/0/20477626-044f-11de-845b-000077b07658.html

"Latest figures on how long patients have to wait before treatment to begin after seeing a GP reveals that the median wait is down to 7.6 weeks for in-patient treatment and 4.1 weeks for outpatient treatment."

"Far from all hospitals have hit the target in all specialities and 7,000 patients needing orthopaedic treatment and 350 awaiting neurosurgery were waiting more than 18 weeks at the end of December."

You don't get something for nothing. Private insurers in the US deal with the tremendous regulation and thus provide expensive policies (through employers mostly because of tax rules). Private specialist doctors in the US are fairly efficient at seeing people rapidly and cost a lot of money.

Nationalized systems are pretty good at getting you to a GP rapidly and cheaply, but ration speciality care through wait times and rules. National systems have less administrative costs because they employ the doctor and thus there are fewer disputes where doctors try to get the insurer to pay, as the insurer owns the doctors and can tell them what to do and how fast. National systems also can call on the justice system faster for fraud issues, or they can just ignore fraud as they don't have stockholders looking out for the bottom line.

Greg writes:

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John Galt writes:

But he speaks so well...


Oh well....Shrugg

John Thacker writes:

David,

There's a total disconnect between the (reasonable) criticism of Bush's deficits, and the promises in Obama's budget to run a deficit larger than Bush averaged over his entire 8 years after the economy recovers. He's proposing a 2.9% to 3.1% deficit every single year between 2013 and 2019, and that's with the standard rosy assumptions of how the economy is going to grow in those years far out.

SheetWise writes:

"And how long will it be before the main stream media start talking about the fact that he is proposing the biggest expansion of the federal government since FDR?"

It will happen when the average journalist becomes a target instead of a recipient. When the average journalist earns over $250,000 -- or, whenever rich is redefined to include them.

Scott Parkis writes:

If all of this finger pointing is going to continue. And people are content yelling about Bush and the past eight years. I ask you this - Why when Bush pushed for more regulation on Fannie & Freddie did Obama block it.

Why didn't Barnie Frank resign and why are those in congress that were responsible for regulating and monitoring NOT being held accountable.

[Presumed typo corrected: "die" edited to "did"--Econlib Ed.]

shayne writes:

A note to Sheetwise and Kelsey:

You've hit on one of the most problematic topics for liberals - the definition of 'rich folks'. That topic was pressed by many non-liberals during the presidential campaign, and eventually Obama defined 'rich' as anyone making over $250K per year. Okay, we have a definition of 'rich' now.

But the definition just changed again yesterday. In Obama's budget, income taxes will increase on HOUSEHOLDS making over $250K. Inasmuch as first-cut presidential budgets seldom make their way through congress unscathed, I suspect the definition of bad old 'rich' folks will change again. Probably to NEIGHBORHOODS making over $250K per year.

However, like some other postings here, I have every confidence that these newer, better tax standards will restore prosperity to the United States. I'm only left to wonder how the liberals will define 'prosperity'.

8 writes:

Has anyone run the numbers on the budget scenarios? My back of the envelope calculation with a 5% drop in GDP and slow growth leads me to conclude Obama's 4-year deficit total will surpass Bush's 8 year total. In year 2012, for instance, if I assume -5% in 2009, 0.5% in 2010, 3% in 2011 and 3% in 2012, and revenues are about 20% of GDP, the gap in Obama's assumptions will be almost $500 billion. That's my rosy scenario, but what do I know?

Obama assumes -1.2%, 3.2%, 4.0% and 4.6% over the four years.

Lee Kelly writes:

The Student's comment near the beginning of this thread is reminiscent of early 20th Century fascism. Very interesting to read, because it neatly captures the paradigm of society in which so many supporters of Obama continue to think.

[Note: I am not trying to insult anyone, but simply making an interesting observation.]

George writes:

Caliban wrote:

Both sides are playing games with the numbers to make their points. If Obama's team is cheating, so too are his critics.

Ah, tu quoque, that wondrously bright dividing line between rational discourse and politics.

Barbar writes:

I rather doubt that, we've barely had one year of 4% GDP growth in the last decade, and that was without a president who is trying to blame big business and rich people for our problems.

Check out GDP growth under FDR. It beat anything that happened in the 1920s.

LemmusLemmus writes:

"When our medical costs drop 30% over the next eight years without any drop in quality, thank Obama."

Why would that happen?

Caliban Darklock writes:

@Kelsey:
"What does everybody think about Obama's plan to raise the taxes for the wealthy?"

Meaningless rhetoric.

The wealthy have tremendous freedom to shuffle their money into whatever position is advantageous, and if NO position is advantageous, to shuffle themselves into another tax system elsewhere in the world.

So if there's any way to avoid the tax increase, the wealthy will do it, and not have one. If there isn't, they'll drift off into other countries and take what taxes they WERE paying with them. Since the latter is terribly undesirable, the former will prevail, and the wealthy will see no real difference in their taxes.

Most people don't understand taxes. What they want to see is a big tax rate on a high income bracket. Obama will give them that, but it won't really matter. By the same token, when they cut taxes on the rich, it doesn't really matter either.

Scott,

You asked, "Why when Bush pushed for more regulation on Fannie & Freddie did Obama block it?"

I'd encourage you to look at his donor list and advisors the President was close to the leadership of these organizations.

Carter writes:

This isn't spending, this is “investment”. Investing in education will lead to everyone becoming really smart. Investing in "Green Power" will lead to the discovery of a cheap, non-polluting energy source. Once those things happen we will witness an explosion of wealth unlike any in human history. Therefore the spending pays for itself, a thousand times over.

Methinks writes:

Carter,

Obama is the only one who seems to see all this investment with all that positive return. Is it possible that this one man with no expertise in either education or energy is better able to analyze potential returns than the many private investors and experts in those field who are itching to make money? Isn't the belief of the supremacy of on man over all others a bit magical and dangerous?

Randy writes:

I suspect that there is going to be some serious disillusionment going down in about 3 or 4 years. These young people really believe they are on the path to utopia. So what will they do when the bill from the utopiate general arrives at their door? When they open their eyes to see that most of the problems have gotten worse?

Phil writes:

The government produces nothing that is in demand by a consumer. However, economists and government officials state that the use of government spending is beneficial to the economy since it increases aggregate demand. By the aggregate demand identity, certainly this is true - that is, if aggregate demand could be defined with this type of mathematical model.

As Hayek stated in his speech in 1974, "To act on the belief that we possess the knowledge and the power which enable us to shape the processes of society entirely to our liking, knowledge which in fact we do not possess, is likely to make us do much harm. " You cannot define aggregate demand with an algebraic formula, if only because human action cannot be mathematically defined. The controllers in government think that they know more or have better insight into the actions of 300 million participants, much to the detriment of the US economy - actually to the world economy, since this is a world-view now.

Cyrus writes:

Interesting, put "Obama" in a blog title and his supporters appear out of the virtual ether to defend him on a site they've likely never visited before nor will visit again. I'm willing to admit that it's possible I'm wrong about the potential outcomes of the president's proposals. But, I think Mr. Henderson's point is that, at the very least, the president's words are frequently contradictory. E.g., deficit spending during the Bush presidency helped get us into this mess and more deficit spending is the only way to get us out. Such sentiments are supported neither by history nor theory (nor commone sense for that matter); and therefore appear to be nothing but self-serving rhetoric (something we've all come to expect from politicians).

@Methinks, I think Carter's comment was meant to be ironic. At least, I hope so!

Cyrus speculated:

Interesting, put "Obama" in a blog title and his supporters appear out of the virtual ether to defend him on a site they've likely never visited before nor will visit again.

For the record, the commenters in this thread so far have mostly been regular commenters on EconLog.

Your hypothesis is a reasonable one, though. Perhaps a few newcomers will drop by--on both sides!

SydB writes:

"Does this guy think that words are just words? In this era in which he wants us all to be accountable, is he accountable for his language, let alone his actions?"

Fiscal accountability and responsibility should have occurred when the economy was sailing along fine. Not when it is in the ditch.

Obama is consistent. Deficit spend during this down turn, then put the federal budget back onto a sound path, as Clinton did, before "strangle the government" and deficits don't matter policies took hold in the Bush administration.

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