Don't Touch Obama's Stash

Harvard economist Jeffrey Sachs published an article in the Financial Times last week, titled "Obama has always planned to slash spending."  The claim sounds ridiculous, but in fact there's a kernel of truth in it.  Obama has proposed cutting both discretionary non-defense and defense spending, but these cuts are more than offset by rises in Social Security and Means-Tested Entitlements, which he shows no interest in reforming.

According to Sachs:

Each year [Obama] has put a budget on the table. Each year that budget has called for a sharp decline in discretionary spending as a share of gross domestic product in 2012 and later years. His rhetoric about increasing public investments in America's future has always been contrary to the budgets he has presented, though most of his supporters have been unaware of this contradiction.

President Obama and his amanuenses in the media have been flogging this narrative at every available opportunity.  On Whitehouse.gov, we read:

The President has already reduced the deficit by over $2.5 trillion, cutting spending by over $1.4 trillion, bringing domestic discretionary spending to its lowest level as a share of the economy since the Eisenhower era.

I wrote here recently about the $2.5 trillion claim.  Regarding the second half of the sentence, we can look at a Government Printing Office spreadsheet titled "Table 8.4 -- OUTLAYS BY BUDGET ENFORCEMENT ACT CATEGORY AS PERCENTAGES OF GDP: 1962-2017."

The spreadsheet easily refutes the White House's assertion that the Obama administration has "already" brought down domestic discretionary spending to historic lows.  Discretionary non-Defense spending as a percentage of GDP is as follows: 2010: 4.6%; 2011: 4.3%; 2012 estimate: 3.9%; 2013 estimate: 3.5%.

These percentages are trending down, but 3.5% doesn't break any records.  The following years were equal or lower: 1964, 1987, 1988, 1989, 1990, 1996, 1997, 1998, 1999, 2000, and 2001.

Obama will be in office until 2016, and his last budget will cover fiscal year 2017.  His projections for these years continue the downward trend.  Discretionary non-Defense spending as a percentage of GDP for 2014: 3.3%; 2015: 3.1%; 2016: 3.0%; 2017: 2.8%.

This percentage for 2017 might justify Obama's "lowest level since Eisenhower claim," with a few caveats:

1. Although Sachs claims that Obama has "put a budget on the table," and the Office of Management and Budget posts a document labeled "Budget of the United States Government, Fiscal Year 2013," the document in question is not a budget.  It's a budget request.  It's up to Congress to produce a budget, taking into account the priorities of the president's request.  Every year since Obama was elected, the House responded to the budget request, but the Senate, under Harry Reid, has refused to fulfill its constitutional duty, leaving the government funded by a series of continuing resolutions.

2. Obama's record-breaking spending cuts are in the out-years of his presidency.  A budget has to be written every year (or is supposed to be), so promises of spending cuts in 2017 are meaningless.  Tax increases in 2013, however, will remain unchanged in 2017 unless a future Congress rewrites the tax code.

3. Comparing spending to GDP is a valuable tool, within limits.  The percentage of GDP goes down to historic levels in part because Obama projects nearly a 25% rise in GDP from 2013 to 2017, from $16.335 trillion to $20.369 trillion.

4. Discretionary non-defense spending accounts for around 15% of the federal budget.  Focusing on this segment is a convenient way for Obama to distract us from the unremitting growth of federal spending on entitlements and Social Security under his reign.  The total budget is scheduled to rise by 19%, or around 4.5% per year from 2013 to 2017 (see chart below).  In contrast, President Eisenhower balanced the budget in 1960.

And yet...the fact remains that the priorities set forth by Obama do not project real increases in non-defense discretionary spending.

Five categories account for over 75% of the budget (in billions):


Total budget

NationalDefense

Non-Defense Discretionary

Social Security

Means-Tested Entitlements

Interest

2013

$3,803.4

$693.0

$568.4

$820.0

$568.4

$247.7

% of budget


18.2%

14.9%

21.6%

14.9%

6.5%

2017

$4,531.7

$581.7

$579.9

$1,026.2

$782.5

$565.5

% of budget


12.8%

12.8%

22.6%

17.3%

12.5%

Change 2013 to 2017

+$728.3

-$111.3

+$11.5

+$206.2

+$214.1

+$317.8

(That $568.4 in two columns was transcribed correctly.)

As we can see, the Defense budget gets the biggest cut -- a lower nominal figure, not counting baseline increases normally added to account for inflation and population growth.  If the 2013 Defense budget grew at 4.5% annual along with the total budget, it would be at $826 billion -- what Washington calls an unchanged budget -- rather than the projected $581 billion.

Non-defense discretionary spending drops significantly from 14.9% to 12.8% of the overall budget.

Social Security (which includes Medicare) grows faster than the overall budget.

Means-Tested Entitlements (Medicaid and food stamps) grow even faster than Social Security.

Interest more than doubles, gobbling up nearly as much of the 2017 budget as Defense and Non-Defense Discretionary.

Jeffrey Sachs attempts to explain Obama's discretionary spending cuts:

Mr Obama probably hoped that when the moment of truth arrived, when the spending cuts started to bite, the American people would support higher taxes rather than the spending cuts long called for in his own budget proposals.

In other words, it's the old bait and switch.  Promise spending cuts in the future in return for tax hikes in the present, and then renege on the spending cuts part of the deal.

It doesn't explain, however, why Obama didn't make the same fake promises about cutting Means-Tested Entitlements.  I would guess that despite Obama's fondness for growing government, he cares more about handing out entitlements like food stamps.  The benefits that come from a government agency -- like, say, those roads and bridges built by the Department of Transportation (actually by state governments, but never mind) -- come from a vague third party, and they also benefit fat cat bankers in their limousines.  Means-tested entitlements are the purest form of redistributing wealth, and this government cash in the pocket is seen as coming directly from Obama.  As we heard from the infamous Detroit women lined up to get "Obama cash":

Reporter: Why are you here?

Woman #1: To get some money.

Reporter: What kind of money?

Woman #1: Obama money.

Reporter: Where's it coming from?

Woman #1: Obama.

Reporter: And where did Obama get it?

Woman #1: I don't know, his stash. I don't know. [laughter] I don't know where he got it from, but he givin' it to us, to help us.

Woman #2: And we love him.

Woman #1: We love him. That's why we voted for him!

Moral of the story: if Obama has to throw a few federal government bureaucrats under the bus, so be it.  But just don't touch his stash.

 

Harvard economist Jeffrey Sachs published an article in the Financial Times last week, titled "Obama has always planned to slash spending."  The claim sounds ridiculous, but in fact there's a kernel of truth in it.  Obama has proposed cutting both discretionary non-defense and defense spending, but these cuts are more than offset by rises in Social Security and Means-Tested Entitlements, which he shows no interest in reforming.

According to Sachs:

Each year [Obama] has put a budget on the table. Each year that budget has called for a sharp decline in discretionary spending as a share of gross domestic product in 2012 and later years. His rhetoric about increasing public investments in America's future has always been contrary to the budgets he has presented, though most of his supporters have been unaware of this contradiction.

President Obama and his amanuenses in the media have been flogging this narrative at every available opportunity.  On Whitehouse.gov, we read:

The President has already reduced the deficit by over $2.5 trillion, cutting spending by over $1.4 trillion, bringing domestic discretionary spending to its lowest level as a share of the economy since the Eisenhower era.

I wrote here recently about the $2.5 trillion claim.  Regarding the second half of the sentence, we can look at a Government Printing Office spreadsheet titled "Table 8.4 -- OUTLAYS BY BUDGET ENFORCEMENT ACT CATEGORY AS PERCENTAGES OF GDP: 1962-2017."

The spreadsheet easily refutes the White House's assertion that the Obama administration has "already" brought down domestic discretionary spending to historic lows.  Discretionary non-Defense spending as a percentage of GDP is as follows: 2010: 4.6%; 2011: 4.3%; 2012 estimate: 3.9%; 2013 estimate: 3.5%.

These percentages are trending down, but 3.5% doesn't break any records.  The following years were equal or lower: 1964, 1987, 1988, 1989, 1990, 1996, 1997, 1998, 1999, 2000, and 2001.

Obama will be in office until 2016, and his last budget will cover fiscal year 2017.  His projections for these years continue the downward trend.  Discretionary non-Defense spending as a percentage of GDP for 2014: 3.3%; 2015: 3.1%; 2016: 3.0%; 2017: 2.8%.

This percentage for 2017 might justify Obama's "lowest level since Eisenhower claim," with a few caveats:

1. Although Sachs claims that Obama has "put a budget on the table," and the Office of Management and Budget posts a document labeled "Budget of the United States Government, Fiscal Year 2013," the document in question is not a budget.  It's a budget request.  It's up to Congress to produce a budget, taking into account the priorities of the president's request.  Every year since Obama was elected, the House responded to the budget request, but the Senate, under Harry Reid, has refused to fulfill its constitutional duty, leaving the government funded by a series of continuing resolutions.

2. Obama's record-breaking spending cuts are in the out-years of his presidency.  A budget has to be written every year (or is supposed to be), so promises of spending cuts in 2017 are meaningless.  Tax increases in 2013, however, will remain unchanged in 2017 unless a future Congress rewrites the tax code.

3. Comparing spending to GDP is a valuable tool, within limits.  The percentage of GDP goes down to historic levels in part because Obama projects nearly a 25% rise in GDP from 2013 to 2017, from $16.335 trillion to $20.369 trillion.

4. Discretionary non-defense spending accounts for around 15% of the federal budget.  Focusing on this segment is a convenient way for Obama to distract us from the unremitting growth of federal spending on entitlements and Social Security under his reign.  The total budget is scheduled to rise by 19%, or around 4.5% per year from 2013 to 2017 (see chart below).  In contrast, President Eisenhower balanced the budget in 1960.

And yet...the fact remains that the priorities set forth by Obama do not project real increases in non-defense discretionary spending.

Five categories account for over 75% of the budget (in billions):


Total budget

NationalDefense

Non-Defense Discretionary

Social Security

Means-Tested Entitlements

Interest

2013

$3,803.4

$693.0

$568.4

$820.0

$568.4

$247.7

% of budget


18.2%

14.9%

21.6%

14.9%

6.5%

2017

$4,531.7

$581.7

$579.9

$1,026.2

$782.5

$565.5

% of budget


12.8%

12.8%

22.6%

17.3%

12.5%

Change 2013 to 2017

+$728.3

-$111.3

+$11.5

+$206.2

+$214.1

+$317.8

(That $568.4 in two columns was transcribed correctly.)

As we can see, the Defense budget gets the biggest cut -- a lower nominal figure, not counting baseline increases normally added to account for inflation and population growth.  If the 2013 Defense budget grew at 4.5% annual along with the total budget, it would be at $826 billion -- what Washington calls an unchanged budget -- rather than the projected $581 billion.

Non-defense discretionary spending drops significantly from 14.9% to 12.8% of the overall budget.

Social Security (which includes Medicare) grows faster than the overall budget.

Means-Tested Entitlements (Medicaid and food stamps) grow even faster than Social Security.

Interest more than doubles, gobbling up nearly as much of the 2017 budget as Defense and Non-Defense Discretionary.

Jeffrey Sachs attempts to explain Obama's discretionary spending cuts:

Mr Obama probably hoped that when the moment of truth arrived, when the spending cuts started to bite, the American people would support higher taxes rather than the spending cuts long called for in his own budget proposals.

In other words, it's the old bait and switch.  Promise spending cuts in the future in return for tax hikes in the present, and then renege on the spending cuts part of the deal.

It doesn't explain, however, why Obama didn't make the same fake promises about cutting Means-Tested Entitlements.  I would guess that despite Obama's fondness for growing government, he cares more about handing out entitlements like food stamps.  The benefits that come from a government agency -- like, say, those roads and bridges built by the Department of Transportation (actually by state governments, but never mind) -- come from a vague third party, and they also benefit fat cat bankers in their limousines.  Means-tested entitlements are the purest form of redistributing wealth, and this government cash in the pocket is seen as coming directly from Obama.  As we heard from the infamous Detroit women lined up to get "Obama cash":

Reporter: Why are you here?

Woman #1: To get some money.

Reporter: What kind of money?

Woman #1: Obama money.

Reporter: Where's it coming from?

Woman #1: Obama.

Reporter: And where did Obama get it?

Woman #1: I don't know, his stash. I don't know. [laughter] I don't know where he got it from, but he givin' it to us, to help us.

Woman #2: And we love him.

Woman #1: We love him. That's why we voted for him!

Moral of the story: if Obama has to throw a few federal government bureaucrats under the bus, so be it.  But just don't touch his stash.