June 13, 2012
Obama's Spending and the Dog That Didn't BarkBy Greg Richards
Sometimes the most important thing to notice is a void.
In the case of spending by the Obama administration, the "dog that didn't bark" is the U.S. Senate, which has refused to pass a budget since 2009. Why would the Senate, with their guy in the White House, do this, or, as with the dog in the night, not do it? Therein lies a tale.
First, let's look at the spending of the Obama administration:
This table looks pretty bland. Let's see what federal spending as a percent of GDP looks like in perspective -- on a chart which shows spending since the Eisenhower administration (the first post-Korean War administration):
Oops! See the problem?
Under Obama, federal spending has surged to unprecedented levels as a proportion of GDP! And since 100% is all there is of the pie, if the federal government takes proportionately more, the private sector accounts for proportionately less, and it is the private sector which is the wealth-generating part of the economy -- the part which carries the load of government and generates our standard of living. Spending got almost this high during the Reagan administration, but then there was a policy to bring it back down which was ultimately successful. There is no such policy now. The Obama administration is not even recognizing, at least publicly, that spending has increased as it has!
How did this surge in spending happen?
While the spending shown in the chart is not entirely due to Obama because part of it represents increased claims on the federal entitlements programs, a lot of it is.
In 2009, after Obama came into office, two spending bills were passed by the Democrat-controlled Congress:
In addition to this, TARP from the Bush administration had authorized $700 billion to rescue the financial system. While the $410-billion bill was for "normal" government spending, it layered on more spending than the original Bush proposals for the same government functions. The other two -- the stimulus and TARP -- were "temporary" spending.
Stimulus + TARP = $1.5 trillion. Since not all TARP was spent, and perhaps not all the stimulus bill was spent in a single fiscal year, let's round this down to $1 trillion in "temporary" spending as it would appear in the budget.
But where, in the Table above, is the reduction in spending by the $1 trillion of "temporary" spending? I.e., the logic of "temporary" spending is that it occurs and then it stops, like a deer moving through a python. And herein very likely is the reason for the Senate's dereliction of its duty to pass a budget for each fiscal year. The conclusion an observer draws is the Senate wants this estimated $1 trillion of "temporary" spending to be added to the permanent budget baseline by stealth.
Which brings up a Washington concept called the current services budget. Stick with us here; this is important.
In the 1974 Budget Act, Congress slipped this concept into the budgeting process. What it means is this: spending in the next fiscal year that supports all the programs -- the current services -- in the current fiscal year is automatic: it is the baseline.
Think about that for a second. The "no change in spending" condition in Washingtonese means that if, for instance, there are more claimants to a service such as Social Security or Medicare, that is "no change." It also means that all the expenditures to maintain current services represent "no change." That is, the promotions, pay increases, adjustments for inflation to maintain current services represent "no change."
Why is this important? Because the method for financing the government without a budget is a "continuing resolution." And a continuing resolution is used to maintain current services.
Bottom line? If the Senate blocks the budget process, which it has for the last three fiscal years, then current levels of spending, even if initially "temporary," as was the intent with the stimulus bill and with TARP, get folded into government operations. And, presto, government spending has increased by 4%-5% of GDP without anybody ever (a) having proposed it (the president) or (b) having voted for it (Congress, but it is the Democrat Senate which has blocked the process).
What this has also meant is shown in Column 5 of the Table. The deficit has exploded to 9%-10% of GDP without solving any of our budget problems! Prior deficits in our history can be thought of as "rounding processes" -- increments added to the budget to make it balance. But these deficits at 9%-10% of GDP are different -- now whole programs, whole departments of the government, are being supported by borrowing. And the Obama administration has no plans to change this!
The Democrats want to duck responsibility for this condition of the budget. The president could be running as "the 25% man." He could be saying, "This is my spending; this is what I believe in; this is what you are getting if you vote for me -- a big increase in the take of the federal government from the economy." But is he running this way? No! He is hoping that nobody will notice what is happening, and he is being helped by articles on the web saying he is the most frugal president since Eisenhower!
The numbers tell a different story. The Democrat-controlled Senate is hoping that the country does not hear this story, and that is why it is not barking. Suppose that it had been proposed we double defense spending, which is equivalent to the increase in spending shown on the chart. Do you think the dog would be barking then? But what do we hear? Silence.
What is it that the Senate dog is familiar with and not barking at? Stealth socialism.
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