Tag: budget

Don’t Blame Obama for Bush’s 2009 Deficit

Some critics are lambasting President Obama for record deficits. This is not a productive line of attack, largely because it puts the focus on the wrong variable. America’s fiscal problem is excessive government spending, and deficits are merely a symptom of that underlying disease. Moreover, if deficits are perceived as the problem, that means both spending restraint and higher taxes are solutions. The political class, needless to say, will choose the latter approach 99 percent of the time. A higher tax burden, however, simply means that debt-financed spending is replaced by tax-financed spending, which is akin to jumping out of the frying pan and into the fire, or vice-versa.

In addition to being theoretically misguided, critics sometimes blame Obama for things that are not his fault. Listening to a talk radio program yesterday, the host asserted that Obama tripled the budget deficit in his first year. This assertion is understandable, since the deficit jumped from about $450 billion in 2008 to $1.4 trillion in 2009. As this chart illustrates, with the Bush years in green, it appears as if Obama’s policies have led to an explosion of debt.

But there is one rather important detail that makes a big difference. The chart is based on the assumption that the current administration should be blamed for the 2009 fiscal year. While this makes sense to a casual observer, it is largely untrue. The 2009  fiscal year began October 1, 2008, nearly four months before Obama took office. The budget for the entire fiscal year was largely set in place while Bush was in the White House. So is we update the chart to show the Bush fiscal years in green, we can see that Obama is partly right in claiming that he inherited a mess (though Obama actually deserves a small share of the blame for Bush’s last deficit since earlier this year he pushed through both an “omnibus” spending bill and the so-called stimulus bill that increased FY2009 spending).

It should go without saying that this post is not an argument for Obama’s fiscal policy. The current President promised change, but he is continuing the wasteful and profligate policies of his big-spending predecessor. That is where critics should be focusing their attention.

Even Obama’s Make-Believe Jobs Are Not Real

The White House recently began claiming that the “Recovery Act” had “created or saved” 640,000-plus jobs. This turns out to have been a political mistake, in part because even sympathetic reporters understand that the “jobs saved” measure allows for creative accounting. But the White House also erred by providing (supposed) details about the jobs that were created. This made it very easy for reporters and other curious people to do a bit of fact checking, which has generated a spate of stories showing that the White House’s numbers are wrong, even using make-believe methodology. The Washington Examiner has put together a very useful interactive map which links to many of the news reports debunking the Administration’s fraudulent numbers.

Disguised Health Care Costs: The $1.5 Trillion Fraud

If House Democrats hold a vote on their health-care overhaul this weekend, they might as well vote to abolish the Congressional Budget Office too.

It would be no more audacious (and much more honest) than the way they have gamed the CBO’s rules to hide $1.5 trillion of the cost of their legislation — which has to be the biggest fiscal obfuscation in the history of American politics.

Here’s how they did it.

C/P Politico

U.S. Cutting Pay for Bailed Out Company Executives

According to reports, executives from bailed out companies Citigroup, Bank of America, GM, Chrysler, GMAC, Chrysler Financial and AIG are going to see major pay cuts this year, which will be enforced by the president’s “pay czar,” Kenneth R. Feinberg. WaPo:

NEW YORK – The Obama administration plans to order companies that have received exceptionally large amounts of bailout money from the government to slash compensation for their highest-paid executives by about half on average, according to people familiar with the long-awaited decision.

The administration will also curtail many corporate perks, including the use of corporate jets for personal travel, chauffeured drivers and country club fee reimbursement, people familiar with the matter have said. Individual perks worth more than $25,000 have received particular scrutiny.

The American people have every right to be upset about generous compensation packages for executives at financial firms that are being kept alive by subsidies and bailouts.

But their ire should be directed at the bailouts, because that is the policy that redistributes money from the average taxpayer and puts it in the pockets of incompetent executives. Unfortunately, rather than deal with the underlying problems of bailouts and intervention, some politicians want to impose controls on salaries. This might be a tolerable second-best (or probably fifth-best) outcome if the compensation limits only applied to companies mooching off the taxpayers, but some politicians want to use the financial crisis as an excuse to regulate compensation at firms that do not have their snouts in the public trough.

This would be a big mistake. So long as rich people make money using non-coercive means, politicians should butt out. It should not matter whether we are talking about Tiger Woods, Brad Pitt, or a corporate CEO. The market should determine compensation, not political deal making. Markets don’t produce perfect outcomes, to be sure, but political intervention invariably produces terrible outcomes.

I debate this further on CNBC:

C/P The Hill

Parsing Pelosi: House Health Takeover Would Cost around $2.25 Trillion

Just like the Senate Finance Committee’s government takeover, the House of Representatives’ government takeover hides more than half of its cost by pushing those costs off the government’s budget and onto the private sector.

So when Speaker Pelosi says the House bill would cost under $900 billion, what she actually means is that it would cost around $2.25 trillion.

What They Aren’t Telling You About the CBO Score

The CBO report that said the health care bill won’t raise deficits makes it clear that the Baucus bill’s reduction in future budget deficits comes not from controlling government spending or reducing health care costs, but because of a rapid escalation in tax revenues.

The bill imposes a 40 percent excise tax on health-insurance plans that offer benefits in excess of $8,000 for an individual plan and $21,000 for a family plan. Insurers would almost certainly pass this tax on to consumers via higher premiums. As inflation pushes insurance premiums higher in coming years, more and more middle-class families would find themselves caught up in the tax.

In fact, overall, the tax increases in the bill are more than double the amount of deficit reduction. This isn’t a health care efficiency bill or a cost containment bill. It is a tax and spend bill, pure and simple.

Congress Boosts Its Budget

Politico reports: ” Congress is on the verge of giving itself a bump in its annual budget — even as local governments, families and businesses across the country are tightening their belts in the worst recession in decades.”

Spending on the legislative branch of the federal government is set to rise 5.8 percent in fiscal 2010, and Politico details some of the dubious activities that will receive increased funding.

One statement in the story particularly caught my eye:

” ‘We have not seen a significant increase in overall legislative branch expenditures since nearly 2001,’ said Jonathan Beeton, a spokesman for Rep. Debbie Wasserman Schultz (D-Fla.).”

Who is he trying to fool? The bill under consideration will provide $4.7 billion in funding for Congress in 2010, which is way up from the $2.7 billion spent in 2001, according to the Congressional Research Service (page 3). 

That’s a 74 percent increase in nine years, representing a very robust 6.4 percent annual average growth rate.

And consider that the “customer base” for this spending has not increased–the number of members of Congress has remained fixed at 535. So while supporters of, say, an education program may say that spending needs to rise because the number of students is rising, much of the increased spending on the legislative branch would seem to go directly into fattening the paychecks of politicians and their staffers.