Saturday, February 22, 2014

'Spending Is Austerity! Imbalance Is Balance! Red Is Blue!'

'Spending is Austerity! Raising Taxes
Is Cutting Taxes! Imbalance Is Balance!'
'With 2015 budget request, President Obama will call for an end to austerity' screamed the headlines of a recent Washington Post article about President Obama's budget submission to Congress on March 4.

What 'austerity' is the President talking about????

We have embarked on perhaps the largest and greatest economic fiscal expansion of federal spending and federal debt assumption under his Administration since the Great Depression!

It is like the USA has been trying to garner the gold medal for fiscal recklessness for all-time!

This headline made us think of several other 'headlines' the Washington Post might be 'screaming' in the near future:
  1. 'President Obama calls for more regulation of American business since we have not had enough over the past 5 years!'
  2. 'President Obama calls for more federal involvement and bailout of American business since we have not had enough over the past 5 years!'
  3. 'President Obama calls for more wall-to-wall coverage of the Winter Olympics at Sochi since we obviously have not had enough over the past 2 weeks!'
Here are the salient facts about President Obama's actual record on all things related to the national debt and federal budget and deficits, again from our friend and fellow budget-hawk and truly reasonable fellow, Chuck Blahous:

'This morning’s Washington Post contained a front-page article that included the following sentence: “With the 2015 budget request, Obama will call for an end to the era of austerity that has dogged much of his presidency and to his efforts to find common ground with Republicans.”

Rather than engage in a semantic discussion about what constitutes an “era of austerity,” over at e21 I simply present the salient facts of the US budget for readers who may be unfamiliar with them.

  • Deficits: Since 1947 the four largest deficits run by the US government, as a percentage of the economy, were in fiscal years 2009, 2010, 2011 and 2012—the first term of the Obama Administration. These deficits ranged in size from 6.8 percent to 9.8 percent of GDP. The previous annual record was 5.9 percent in 1983.
  • Spending: Since 1947 there have been only three fiscal years in which the US government spent more than 23 percent of our total national economic output—2009, 2010 and 2011, the first three years of the Obama Administration. 1982 and 1983 come in fourth and fifth. CBO projects that sixth through eighth place will belong to 2022, 2023 and 2024 (until later years produce even higher deficits)
  • Debt: Federal debt held by the public stood at 39 percent of GDP in 2008. It is now more than 73 percent of GDP, its highest point since 1950, and is projected to rise further in the future.
  • The future fiscal imbalance: CBO finds that the long-term fiscal imbalance is attributable to projected cost growth in Medicare, Medicaid, Social Security and the Affordable Care Act. The Obama Administration advocated successfully for the enactment of the ACA and the expansion of Medicaid. Medicare savings were legislated but these savings are being spent on a new federal health program rather than being used to improve federal finances. Social Security’s financing shortfall has been permitted to grow well beyond the largest size that lawmakers have ever previously closed
  • Major policy decisions: The most important fiscal policy decisions made in recent years under the Obama Administration include:

    1) The passage of the ACA, which increased projected spending in the fastest-growing component of the federal budget;

    2) The 2009 stimulus law, the costs of which were added to the deficit;

    3) A two-year cut in the Social Security payroll tax, which was added to the deficit; and

    4) The permanent extension of most previously-legislated tax reductions.

    These deficit-increasing policies are together several times greater in magnitude than occasional instances of fiscal discipline (sequestration). 

In sum, federal fiscal policy decisions in recent years added enormously to deficits and have produced the highest levels of spending, deficits, and debt relative to GDP since the aftermath of World War II.

I leave it to others to determine whether this can reasonably be termed “austerity.”

Here's what we collectively don't get about Progressive Liberals: They say they are 'for' Keynesian economic policy....but they act like they have never read anything he ever wrote or, at best, only half of it:

They say:

 'We can't cut spending in a recession! We need that stimulus 
to grow the economy and create new jobs!'

Ok, we get that. It has been used many times in the United States and around the globe post-Depression era.

What Progressive Liberals often fail to include in their economic stimulus package are significant tax cuts which were ALSO part of Sir Keynes formula for recovery after a recession.  The Obama Administration offered small targeted tax cuts but when coupled with their passage of Obamacare and other tax hikes, they are responsible for perhaps the greatest tax hikes overall in American history, precisely at the wrong time according to Sir Keynes.

(Keynes died as an out-and-out millionaire. He was a full-blooded capitalist and speculator, you know.)

Now that we are over the financial crisis of 2008 and 2009, and, apparently in President Obama's world, in a 'robust recovery' (God help us if he ever says we are only in a 'fair' recovery), Progressive Liberals say:

'We can't cut spending now either!!!!

What they have failed to comprehend from even a cursory reading of Sir John Maynard Keynes' general theory is that in a recovery, government is supposed to raise taxes AND cut spending to head off incipient inflation as the demand for money goes up when people start investing and spending again.

Progressive Liberals apparently went to only 1/2 of the classes on Keynesian economics...the half that said to increase spending...and they took that to mean 'Always!'

They get it only about a quarter-right: They like to raise federal spending, and they like to raise taxes (on rich people mostly) anytime: good economy, bad economy, or a flat stagnation economy such as the one we have today and have had for the past 5 years.

Let's face it: progressive liberals like to spend other people's money! It is that plain and simple.

How about them apples for all you Keynesians out there?

We suggest that if you are going to be a 'true' Keynesian, at least follow what he says: cut taxes/raise spending in a recession; raise taxes/cut spending in a recovery.

Otherwise, don't refer to your economic policies as 'Keynesian'.

That would be like modern-day Lutherans saying they are 'exactly like Martin Luther' or modern-day Calvinists saying they are 'just like John Calvin' without actually doing or saying exactly what they said long ago.

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