Tag: Rove

The Tweedle Dee and Tweedle Dum of Fiscal Policy

The fault line in American politics is often not between Republicans and Democrats, but rather between taxpayers and the Washington political elite. Here are two examples that symbolize why economic policy is such a mess:

First, we have President George W. Bush’s former top aide, Karl Rove, making the case in the Wall Street Journal that the Obama administration has been fiscally irresponsible. That’s certainly true, but as I’ve pointed out on previous occasions (here and here), Rove has zero credibility on these issues. In the excerpt below, Rove attacks Obama for earmarks, but this corrupt form of pork-barrel spending skyrocketed during the Bush years. Rove rips Obama for government-run healthcare, but Rove helped push through Congress a reckless new entitlement for prescription drugs. He attacks Obama for misusing TARP, but the Bush administration created that no-strings-attached bailout program.

Those are examples of hypocrisy, but Rove also is willing to prevaricate. He blames Obama for boosting the burden of government spending to 24 percent of GDP, but it was the Bush administration that boosted the federal government from 18.2 percent of GDP in 2001 to 24.7 percent of GDP in 2009. Obama is guilty of following similar policies and maintaining a bloated budget, but it was Bush (with Rove’s guidance) that drove the economy into a fiscal ditch.

Here’s some of Rove:

The president’s problem is largely a mess of his own making. Deficit spending did not begin when Mr. Obama took office. But he and his Democratic allies have supported, proposed, passed or signed and then spent every dime that’s gone out the door since Jan. 20, 2009. Voters know it is Mr. Obama and Democratic leaders who approved a $410 billion supplemental (complete with 8,500 earmarks) in the middle of the last fiscal year, and then passed a record-spending budget for this one. Mr. Obama and Democrats approved an $862 billion stimulus and a $1 trillion health-care overhaul, and they now are trying to add $266 billion in “temporary” stimulus spending to permanently raise the budget baseline. It is the president and Congressional allies who refuse to return the $447 billion unspent stimulus dollars and want to use repayments of TARP loans for more spending rather than reducing the deficit. It is the president who gave Fannie and Freddie carte blanche to draw hundreds of billions from the Treasury. It is the Democrats’ profligacy that raised the share of the GDP taken by the federal government to 24% this fiscal year. This is indeed the road to fiscal hell, and it’s been paved by the president and his party.

Second, we have Nancy Pelosi claiming that paying people to remain unemployed is a good way of creating jobs. She’s been appropriately mocked for this assertion, but keep in mind that she is accurately regurgitating standard Keynesian theory. It doesn’t matter that Keynesianism didn’t work for Hoover and Roosevelt in the 1930s, didn’t work for Japan in the 1990s, and didn’t work for Bush in 2008. Proponents of this approach have a childlike faith in the Keynesian model and its ability to generate very specific (albeit completely inaccurate) numbers.

Here are two videos that offer the policy-wonk version of a steel cage match. In one corner, we have the Speaker of the House arguing that subsidizing joblessness is a “stimulus” strategy. In the other corner, I explain why transferring money from the economy’s left pocket to the right pocket is not a recipe for growth.

 

Karl Rove’s Hypocritical Call for Fiscal Rectitude

Karl RoveEven though I’ve been in Washington for almost 25 years, I still get shocked by the deceit and double-talk that characterizes this town. A perfect example can be found in today’s Wall Street Journal, which features a column by Karl Rove attacking President Obama for fiscal incontinence. I’m a big fan of condemning Obama’s big-government schemes, but Rove is the last person in the world who should be complaining about too much wasteful spending. After all, he was the top adviser to President Bush and the federal budget exploded during Bush’s eight years, climbing from $1.8 trillion to more than $3.5 trillion. More specifically, Rove was a leading proponent of the proposals that dramatically expanded the size and scope of the federal government, including the no-bureaucrat-left-behind education bill, the two corrupt farm bills, the two pork-filled transportation bills, and the grossly irresponsible new Medicare entitlement program.

Not surprisingly, Rove even tries to blame Obama for some of Bush’s overspending, writing that “…discretionary domestic spending now stands at $536 billion, up nearly 24% from President George W. Bush’s last full year budget in fiscal 2008 of $433.6 billion. That’s a huge spending surge, even for a profligate liberal like Mr. Obama.” This passage leads the reader to assume that Obama should be blamed for what happened in fiscal years 2009 and 2010, but as I’ve already explained, the 2009 fiscal year started about four months before Obama took office and 96 percent of the spending can be attributed to Bush’s fiscal profligacy. Yes, Obama is now making a bad situation worse by further increasing spending, but he should be criticized for continuing Bush’s mistakes.

Rove then has the gall to complain that Obama is “…growing the federal government’s share of GDP from its historic post-World War II average of roughly 20% to the target Mr. Obama laid out in his budget blueprint last February of 24%.” Yet a quick look at the budget data shows that the burden of federal spending jumped from 18.4 percent of GDP when Bush took office to more than 25 percent of economic output when he left office. Even if the (hopefully) temporary bailout costs are not counted, Bush and Rove are the ones who deserve most of the blame for today’s much larger burden of government. It should be noted, by the way, that none of the new spending under Bush was imposed over his objection. He did not veto any legislation because of excessive spending.

Finally, Rove concludes by writing that, “After a year of living in his fiscal fantasy world, Americans realize they have a record deficit-setting, budget-busting spender on their hands.” I’m almost at a loss for words after reading this sentence. All during the Bush years, I would complain to people in the Administration about wasteful spending. It didn’t matter whether I was talking to people at the Office of Management and Budget, the Council of Economic Advisers, the Treasury Department, or the National Economic Council. They almost always expressed sympathy for what I was saying, and then complained that the decisions were being made by the “White House political people.”

There’s an old joke about chutzpah and it features a guy who murders his parents and then asks the court for mercy because he’s an orphan. Karl Rove has taken the joke to the next level, but there’s nothing funny about the consequences for America.

Defending Obama…Again

I caught a lot of flack from my Republican friends for my post blaming the FY2009 deficit on Bush instead of Obama. Well, I must be a glutton for punishment because I can’t resist jumping (albeit reluctantly) to Obama’s defense again. I’m venting my spleen for two reason. First, FoxNews.com posted a story headlined “Obama Shatters Spending Record for First-Year Presidents” and noted that:

President Obama has shattered the budget record for first-year presidents – spending nearly double what his predecessor did when he came into office and far exceeding the first-year tabs for any other U.S. president in history. In fiscal 2009 the federal government spent $3.52 trillion …That fiscal year covered the last three-and-a-half months of George W. Bush’s term and the first eight-and-a-half months of Obama’s.

This story was featured on the Drudge Report, so it has received a lot of attention. Second, Bush’s former Senior Adviser wrote a column for the Wall Street Journal eviscerating Obama for big budget deficits. Given Bush’s track record, this took considerable chutzpah, but what really nauseated me was this passage:

When Mr. Obama was sworn into office the federal deficit for this year stood at $422 billion. At the end of October, it stood at $1.42 trillion.

I’m a big fan of criticizing Obama’s profligacy, but it is inaccurate and/or dishonest to blame him for Bush’s mistakes. At the risk of repeating my earlier post, the 2009 fiscal year began on October 1, 2008, and the vast majority of the spending for that year was the result of Bush Administration policies. Yes, Obama did add to the waste with the so-called stimulus, the omnibus appropriation, the CHIP bill, and the cash-for-clunkers nonsense, but as the chart illustrates, these boondoggles only amounted to just a tiny percentage of the FY2009 total – about $140 billion out of a $3.5 trillion budget.

There are some subjective aspects to this estimate, to be sure. Supplemental defense spending could boost Obama’s share by another $25 billion, but Bush surely would have asked for at least that much extra spending, so I didn’t count that money but individual readers can adjust the number if they wish. Also, Obama used some bailout money for the car companies, but I did not count that as a net increase in spending since the bailout funds were approved under Bush and I strongly suspect the previous Administration also would have funneled money to GM and Chrysler. In any event, I did not give Obama credit for the substantial amount of TARP funds that were repaid after January 20, so the net effect of all the judgment calls certainly is not to Bush’s disadvantage.

Let’s use an analogy. Obama’s FY2009 performance is like a relief pitcher who enters a game in the fourth inning trailing 19-0 and allows another run to score. The extra run is nothing to cheer about, of course, but fans should be far more angry with the starting pitcher. That having been said, Obama since that point has been serving up meatballs to the special interests in Washington, so his earned run average may actually wind up being worse than his predecessor’s. He promised change, but it appears that Obama wants to be Bush on steroids.