Obama the Deficit Peacock
Last week the Democratic‐friendly Center for American Progress published an essay entitled: “How to Spot a Deficit Peacock: Four Ways to Tell When Someone Isn’t Serious About the Deficit.” According to the author, “Deficit peacocks like to preen and call attention to themselves, but are not sincerely interested in taking the difficult but necessary steps toward a balanced budget.”
#2 on CAP’s list is particularly interesting given that President Obama is reportedly going to propose a three‐year freeze on non‐defense discretionary spending in his upcoming budget:
Beware anyone offering easy answers. We face a very large budget gap over the coming decade, and the scale of the problem is such that no one solution is going to solve it all. It is going to take a mix of increased revenues, spending reductions, and improved government efficiency to get our fiscal house in order. Those who claim that we could get the budget back to sustainability if we only cut out earmarks, or say that the solution is to simply freeze discretionary spending, are just peddling fiscal snake oil.
If freezing discretionary spending is “peddling snake oil,” what does the CAP consider proposing to freeze only the non‐defense portion of it?
Although I want to give the administration credit for proposing to at least freeze something, it’s too little too late. The Washington Post, which spoke with senior administration officials on the details, says that “the freeze would shave no more than $15 billion off next year’s budget.” That’s chump change compared to the president’s $787 billion stimulus bill and $900 billion for health care reform. And as I warned in December, any new‐found “austerity” on the part of the president would be a political sleight of hand:
The “minibus” appropriations bill signed by the President last week jacked up funding by a combined 8 percent for programs ranging from education to housing to transportation. And that’s at a time when inflation is low. Further, funding hasn’t been passed yet for the president’s recently announced troop surge in Afghanistan, which will cost around $40 billion per year.
President Obama will be probably be announcing in his new budget a FY2010 deficit that’s even larger than FY2009’s massive $1.4 trillion deficit. He’s blowing the bank on his stimulus bill, giant health care bill, and large increase in FY2010 appropriations. He’s also looking at the polls, which show his plunging popularity and rising concerns over federal spending and debt.
He’s got to pretend to introduce an “austere” budget for his political survival and the political survival of Democrats up for election next year. That’s why I’m wondering whether the Democrats are purposely jacking up FY2010 spending so high so that they can show a freeze or even “cuts” for FY2011.
Today the Congressional Budget Office released its budget outlook for the next ten years. One paragraph in particular puts the president’s proposed deficit‐reduction effort in context:
Those accumulating deficits will push federal debt held by the public to significantly higher levels. At the end of 2009, debt held by the public was $7.5 trillion, or 53 percent of GDP; by the end of 2020, debt is projected to climb to $15 trillion, or 67 percent of GDP. With such a large increase in debt, plus an expected increase in interest rates as the economic recovery strengthens, interest payments on the debt are poised to skyrocket. CBO projects that the government’s annual spending on net interest will more than triple between 2010 and 2020 in nominal terms, from $207 billion to $723 billion, and will more than double as a share of GDP, from 1.4 percent to 3.2 percent.
In the president’s first year in office, he continued the Bush spending spree. He supported jacked‐up appropriations, and he’s proposing more defense and entitlement spending. And now he proposes a non‐defense discretionary freeze with savings that would pale in comparison to the rising cost of financing the federal debt. Calling the president a “deficit peacock” would probably be too kind.
