A little recent history presented as a reminder
With these debt ceiling negotiations underway, it is useful to remind ourselves, especially with an election year looming, how we got in this spot that has Moody’s threatening to downgrade our bonds based on the possibility of default on the debt.
On spending, it is important to recall how extraordinary the blowout of the last three years has been. We’ve seen nothing like it since World War II. Nothing close. The nearby chart tracks federal outlays as a share of GDP since 1960. The early peaks coincide with the rise of the Great Society, the recession of 1974-75, and then a high of 23.5% with the recession of 1982 and the Reagan defense buildup.
From there, spending declines, most rapidly during the 1990s as defense outlays fell to 3% of GDP in 2000 from its Reagan peak of 6.2% in 1986. The early George W. Bush years saw spending bounce up to a plateau of roughly 20% of GDP, but no more than 20.7% as recently as 2008.
Then came the Obama blowout, in league with Nancy Pelosi’s Congress. With the recession as a rationale, Democrats consciously blew up the national balance sheet, lifting federal outlays to 25% in 2009, the highest level since 1945. (Even in 1946, with millions still in the military, spending was only 24.8% of GDP. In 1947 it fell to 14.8%.) Though the recession ended in June 2009, spending in 2010 stayed high at nearly 24%, and this year it is heading back toward 25%.
This is the main reason that federal debt held by the public as a share of GDP has climbed from 40.3% in 2008, to 53.5% in 2009, 62.2% in 2010 and an estimated 72% this year, and is expected to keep rising in the future. These are heights not seen since the Korean War, and many analysts think U.S. debt will soon hit 90% or 100% of GDP.
Here’s the WSJ chart talked about above:
In terms of percentage of the GDP, only WWII compares to the outlays we’ve seen in the past 3 years. And not only did the Democratic Congress and Obama “consciously blow up” the debt, they never offered a budget as required by law. This was just money thrown to the wind with the hope it would land somewhere where it might help. To call what they did a “plan” is to give real plans a bad name.
Now, suddenly, Obama is “serious” about this stuff, making demands that a fix be found, etc. Where the heck was he when this money was going out faster than little Timmy Geithner could print it? So let’s be clear, as Obama likes to say:
Congress is responsible for the way so much of this spending was wasted, resulting in little job creation and the slowest economic recovery since the 1930s. But in the U.S. political system, Presidents are supposed to be the fiscal adults. When they abdicate, the teenagers invite over their special interest friends and blow the inheritance.
The President is now claiming to have found fiscal virtue, but notice how hard he has fought House Republicans as they’ve sought to abate the spending boom. First he used the threat of a government shutdown to whittle the fiscal 2011 spending cuts down to very little. Then he invited Paul Ryan to sit in the front row for a speech while he called his House budget un-American.
How does one take this President seriously given this litany?
Easy answer – you don’t. I mean, look at this:
Now Mr. Obama is using the debt-ceiling debate as a battering ram not to control spending but to command a tax increase. We’re told the White House list of immediate budget savings, the ones that matter most because they are enforceable by the current Congress, are negligible. His offer for immediate domestic nondefense discretionary cuts: $2 billion.
As for Mr. Obama’s proposed entitlement cuts, they are all nibbling around the edges of programs that are growing far faster than inflation. He’s offering few reforms that would make a difference in the long run. Oh, and ObamaCare is untouchable, despite its $1 trillion in new spending over the next several years, growing even faster after that.
And this goes to the point of my previous post. When you look at how we got here and who is responsible (yeah, he didn’t inherit this – this is all his) it is hard to find any grounds for confidence that the same people have any idea or desire to change their ways. And yet they’re going to try to convince the American people that Obama should keep his job and Nancy Pelosi should be returned to the House speakership (with a sweeping victory putting a Democratic majority back in the House).
It’s enough to make a grown man cry.