Budgets, Deficits, and Debt

In his press announcement last week, President Barack Obama made a lot of…interesting…comments.  Here are some, with some editorial remarks associated.

We’ve created more than 6 million jobs in the last 35 months.

However, if our economy were undergoing the recovery he promised his stimulus spending would produce, it would have produced 8 million jobs in that time, and we wouldn’t have fewer Americans working today than at the start of that spending.  If we were undergoing a normal recovery, we’d have even more jobs “saved or created” by now.

But we’ve also seen the effects political dysfunction can have on our economic progress.  The drawn out process for resolving the fiscal cliff hurt consumer confidence.  The threat of massive automatic cuts have already started to affect business decisions.

And

Deep, indiscriminate cuts to things like education and training, energy, and national security will cost us jobs and will slow down our recovery.

True enough.  But given that, he shouldn’t have demanded such indiscriminacy in his sequester demand of 2011.  Today, he needs to get out of the way and let budgets be passed that cut spending responsibly and in a carefully targeted manner.  More, he needs actively to help this process by requiring his Party-controlled Senate to put House-passed budgets (see below) up for vote and passage.

[W]e’ve been reminded that while it’s critical for us to cut wasteful spending, we can’t just cut our way to prosperity.

As someone said repeatedly in 2008, “Yes, we can.”

He also had this riff:

Democrats and Republicans have been able to come together and cut the deficit by more than $2.5 trillion….  [A] balanced approach [of tax increases and spending cuts] have achieved $2.5 trillion in deficit reduction.  That’s more than half way toward…$4 trillion in deficit reduction…required to stabilize our debt.

And

There’s no reason why we should keep [loopholes and deductions] at a time when we’re trying to cut down on our deficit.

And

If we’re serious about paying down the deficit, the savings we achieve from tax reform should be used to pay down the deficit.

Notice that: deficit, and not debt.  Obama cares not a fig for the magnitude of our national debt—100% of our GDP today, including all of our national debt, not just the publicly held portion—and its rapid growth.  “Reducing” our deficit leaves a continuously growing debt—not stabilization.

He also was careful to include his stock demand for higher taxes as a quid pro quo for even token spending reductions:

And I still believe that we can finish the job with a balanced mix of spending cuts and tax reform.

Obama’s speech adds up to an ignorance of how a free market economy actually works that’s breathtaking in its scope.  Or a cynical disdain for free markets and the associated individual freedoms.

The WSJ noted,

House Democrats have drafted a plan to replace all of the March 1 spending cuts with a plan that calls for both tax increases and spending cuts.  The proposal, drafted by rep. Chris Van Hollen (D, MD), calls for tax increases on the wealthy, reducing tax breaks for oil and gas companies and a reduction in farm subsidies.

Notice this, too: more tax increases, especially on the hated wealthy, and the Progressives’ standard singling out of evil oil and gas producers.  Van Hollen carefully is seeking to protect “green” energy companies (I hesitate to call them producers) from a similar reduction in tax breaks or subsidies for “green” energy companies.  The Progressives—not just Obama—are busy designating winners and losers in our economy.

There are, though, some in Congress (not on the left side, alas) who do understand.  House Ways and Means Committee Chairman Dave Camp (R, MI), for instance:

Tax reform should be about making the code simpler and fairer for American families and helping employers create more jobs.  The president’s proposal is nothing more than another tax hike to pay for more Washington spending.

House Speaker John Boehner (R, OH) said before Obama’s speech,

Republicans have twice voted to replace these arbitrary cuts [Obama’s sequester] with common-sense cuts and reforms that protect our national defense.  We believe there is a better way to reduce the deficit, but Americans do not support sacrificing real spending cuts for more tax hikes.  The president’s sequester should be replaced with spending cuts and reforms that will start us on the path to balancing the budget in 10 years.

Because balancing the budget—actually eliminating the deficit, not just “paying it down”—is a critical first step to reducing—paying down—our debt.  After all, the CBO says that

continuing large deficits would push the level of government debt held by the public—a commonly used measure that excludes the US Treasury bonds held in Social Security and various trust funds—to 76.3% of GDP at the end of September, the highest level since 1950.

and

[Failure to fix will cause] the gross domestic product, the value of all goods and services produced in the US, to grow by just 1.4% this year, measured from the fourth quarter of 2012 to the fourth quarter of 2013.

That’s less than last year’s 1.9% growth.  And full employment won’t be reached before 2017, the CBO says.

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