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Works and Days

St. Obama and the Debt Dragon

July 16th, 2011 - 9:37 pm

“Reckless Fiscal Policies”

Why did Obama only enumerate George W. Bush’s big spending as responsible for the out-of-control $14 trillion-plus debt, while not mentioning his own contribution of $5 trillion? Why is there a debt limit standoff now, rather than, say, in 2009 or 2010? Why did this latest $1.6 trillion Obama budget prompt the current crisis? Why did not Obama earlier start debt limit talks the moment that his own hand-picked Simpson-Bowles commission presented their findings? Why did Obama just recently submit, and have rejected, a budget that would have scheduled even larger deficits of the sort he is now warning against (“Armageddon”)?

Why is voting against the debt limit reckless now, but in 2006 Obama lectured us thusly:

“The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies. … Increasing America’s debt weakens us domestically and internationally. Leadership means that ‘the buck stops here.’ Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better.”

(He then failed even to vote on the issue in 2007 and 2008 when the limit was raised again. So Obama has an even weaker case than the weak case of the congressional Republicans who approved the Bush deficits, given that if Obama was right at the time to vote “no,” then $6 trillion later, with a ruined, rather than robust, economy, he could now be really right to vote again “no,” when he has the political power not to raise the debt ceiling.)

Why is Obama talking of new tax increases when he ruled that out in December 2010: taxes then bad, now seven months later good? Why does the president claim 80% of the people want taxes when polls prove no such thing?

Failure, Failure Everywhere

In 2009, newly arrived Obama was convinced of redistributive Keynesian postmodern economics, a sort of updated fable that borrowed money would spawn more money, or at least would not have to be paid back, or could be excused along the lines: “If a Republican Bush borrowed nearly $5 trillion in eight years, then, dammit, why cannot a liberal Democrat be allowed to borrow more than $5 trillion in three?” And if Reagan gave us “starve the beast” (cutting taxes would cut revenue that would force smaller government), Obama could console himself with “gorge the beast” (growing government in extraordinary fashion would force higher taxes that in turn would redistribute income from those who “didn’t need it” to those who work for or receive from the government and who most certainly did need it).

The architects of his economic policies — Austan Goolsbee, Peter Orszag, Christina Romer, Larry Summers — did not even last three years. All now are either back in tenured academia, making millions in the revolving door that Obama once blasted, or writing op-eds why following their former advice is leading to insolvency, or all three combined. None are making the argument any more that we need more of their stimuli or ObamaCare will save us billions and create “400,000 new jobs.”

Their borrowing did not stop unemployment from plateauing at 9.1% or prevent the housing market from getting worse, or growth from stalling, or gas from soaring, or the beginnings of a new inflation. In the meantime, the model of Obamism (e.g., Greece, Portugal, Italy, Spain, Ireland) in Europe of high taxes, redistributive government, astronomical debt, and unsustainable pensions has crashed. So Obamism did not work, and now is the politically opportune time, before the 2012 election, to follow the famed Obama reinvention stratagem: Cite straw men and extremists on both sides, and put St. Obama plop in the middle as the sober, great dragon slayer, who blames both his contemporaries and his predecessor. Hard to do, I know, when you wasted $5 trillion, but do it nonetheless he has. In the word of Obama, wasted borrowed money is “stimulus,” not so shovel ready jobs are “investments,” and hiking taxes on someone else is “revenue enhancement.”

2012 on the Brain

The Tea Party won the largest midterm election victory since 1938 on the theme that Obama’s rate of borrowing and debt-creation were unsustainable and made worse, not better, by massive new Obama health care and green initiatives. So Obama, now well below 50% in the polls, is to be reinvented as a reasoned budget cutter. Note the logic that suddenly after ObamaCare and green fiascos we pause in midstream, and talk of fiscal restraint and again more taxes. The thinking is analogous to this: the adolescent takes the chronically indebted family Master Charge card, maxes it out, has no more credit, and then asks his father and mother to take on additional jobs to find the money to pay off the debt, but while insisting that he keep all his previously charged junk — and the card as well. At some point in July 2011, all the money borrowed since 2009 was deemed absolutely essential. Nothing was wasted. There was no fraud. Instead, all that $5 trillion saved lives and the planet as well. Borrowing a trillion dollars for ObamaCare cannot be renegotiated.

Obama 2.0 is talking, then, of some cuts to projected added expenditures, not going back and cutting a $1 trillion ObamaCare initiative or the tens of billions in green subsidies, much less just balancing the budget by adopting the 2007 budget levels. Any argument that government expenditures have reached a record percentage of GDP, or that combined state, federal, and payroll taxes can gobble over 50% of one’s income, or new figures that the U.S. is the most progressively taxed of the Western democracies, or that almost 50% of the population pays no income taxes, or that 5% now pay almost 60% of the aggregate income tax obligation — all that is rendered meaningless.

Sacred Borrowing

Again, today everything borrowed since 2009 is considered wise “investment,” and thus pruning back any of the unnecessarily added spending is deemed heartless. Remember the logic of the debtor (I knew it well during the dark years of farming in the early 1980s when I saw the indebted everywhere): the debtor always asks himself why he should have to pay anything back, since his lenders still have more money than he. A Greece shrugs that even without their $180 billion paid back, Germans are still wealthier than Greeks; an Obama shrugs that even with higher taxes, the “wealthy” still have more than the recipients of federal largess.

If anyone thought that past Obama lamentations about the Supreme Court’s failure to force “redistributive change,” about the need to spread the wealth, about the notion that at some point we have made enough money were aberrant, then examine the most recent Obama toss off that he has hundreds of thousands in income “he doesn’t need” and thus doesn’t mind paying higher taxes on it (so should we all if we just had a government-paid-for house, car, plane, food, and expenses).

There Is a Pattern Here

Note well this pattern of suddenly turning to the neglected debt: Obama lectured for most of 2008 that “drill, baby, drill” was silly, given his belief that increased supply would only marginally affect then climbing prices, and his religion that high gas prices are good in that they make wind/solar subsidized energy more attractive, encourage less energy use and thus cool the planet, while favoring government mass transit rather than the mindless individual’s use of a private car. Then as reelection neared, he tapped the strategic petroleum reserve on the logic that while drilling more new oil does not lower prices, pumping previously drilled oil most surely does.

Note well that suddenly Obama called for withdrawal in Afghanistan, on the logic that, while a few months ago a surge, a new commander, and a sustainable commitment were vital to winning the “good war,” now, with reelection looming, it is time to start packing it in.

Aspirin for Cancer?

So what is the status of the debt limit crisis now? The annual deficit and the aggregate debts are so massive that all the talk of a few billion cuts here and there, or even a trillion or so, means little. To save us, we would have to slash two or three entire departments (e.g., perhaps energy, education, agriculture, etc.), end all agriculture subsidies, raise the retirement age, freeze cost of living raises for Social Security, clamp down on food stamp and entitlement abuses (almost 50 million now receive them), and do far, far more — while encouraging the private sector to drill, mine, grow food at unprecedented rates, as government trimmed regulations and revised the tax code to encourage wealth creation.

But it is far easier to create monsters and joust over the slices of a shrinking pie. So the current economic paralysis will persist as we continue demonizing the mythical “them” — until we stop acting like Greeks cursing better off Americans as if they were German bankers who are to be damned for their success.

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