February 27, 2009 [LINK / comment]
The projected budget figures from the White House are so enormous as to defy comprehension or even reason, but there must be some method behind the evident fiscal madness. His budget proposals envision a Federal deficit of $1.7 billion [make that trillion!] next fiscal year, and several hundred billion dollars for the indefinite future. He would borrow nearly half of the FY 2010 budget which totals $3.6 trillion, and of course most of that money would come from China. See the Washington Post. (Is it any wonder that Secretary of State Hillary Clinton was so meek and deferential toward her Chinese hosts while visiting Beijing last week?) Somehow, Obama also seeks to restore "fiscal responsibility," an astonishing example of rhetorical audacity.
Many Republicans are up in arms about President Obama's spending plans, criticizing him for fiscal irresponsibility -- and rightly so. I share those sentiments quite emphatically, but I am also painfully aware of a fatal weakness on the part of such critics: the fact that the Republican Party in recent years has largely abandoned its historic commitment to fiscal prudence. Under the Bush administration, there was hardly any pretense of spending discipline, while revenues were curtailed by the dogmatic pursuit of tax cuts for every reason and every occasion. Hence my criticism of "Bush's fiscal profligacy" -- see my marathon blog post of Jan. 10.
So what is Obama really up to? After all of the alarmist rhetoric about the dire consequences of failing to pass his emergency measures, one could be forgiven for concluding that he is actually trying to talk down the stock market and spook investors. In other words, he may be deliberately fomenting a crisis of capitalism as a means to effectuate his (evident) desire to transform the American economy into a European-style social democracy. Every time he makes a speech, it seems, the Dow Jones Industrial Average starts sinking again, and it is falling steadily toward the 7,000 mark.
More evidence for Obama's intentions comes from the Washington Post, which reported that the President is asking Congress for $634 billion as a "down payment" toward his goal of universal health care. He hopes to economize by making the health care system more predictable and thus more efficient than at present, while pressuring insurers and health care providers into keeping costs down. If he is serious about this, it would spell the effective end of economic freedom in America -- period. The term "down payment" is a strange (and misleading) label to attach to new entitlement spending, however. It ordinarily means money that is paid up front for a leveraged (debt-financed) purchase of real estate or durable goods. It's another example of Obama confusing "investment" expenditures with current spending that is not expected to yield a net payoff.
Notwithstanding the above harsh criticisms of Obama, his administration is at least fulfilling his pledge of greater accountability and transparency. They are eliminating certain "accounting gimmicks" used by the Bush administration that apparently underestimated national indebtedness over the next decade by about $2.7 trillion. See the New York Times; hat tip to Waldo Jaquith.
Some day in the not-so-distant future, most Republicans will come to bitterly regret going along with the Bush-Rove-Norquist idea that "deficits don't matter." They do.