Free Markets, Free People

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.

The WSJ covers that for us:

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.


Twitter: @McQandO


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22 Responses to A little recent history presented as a reminder

  • Because of that gigantic spike, I’m a big fan of conditioning any debt ceiling increase on the reverting to the 2006 budget whose $2.6 trillion in outlays equals the expected $2.6 trillion in revenues.

  • Even more recenter (lol yeah I know) history that is not getting nearly enough play – the Governor of MN shut the state government down because he wanted tax increases………and wound up absolutely caving in.

    Lots of lessons out there, for anyone who wants to learn. Even Erb…

    • All depends on who the media chooses to villify over the shutdown.  When Bush I was in Office, it Bush’s fault. When Clinton was in Office, it was the Republican Congress’ fault. 

      • So…
        “Republican Congress to drown unwed gay orphans” – New York Times
        “Reptilican Congresspeople cook and eat Grandma” – Washington Post
        “They needed Killin” – Boehner hangs seniors out to dry, news at 10:00 – CBS affiliates
        “How Barack tried to save us, and how REPUBLICAN Eric Cantor stopped him” – NBC affiliates
        “Did Rupert Murdoch personally hack into everyone’s cell phone?!” – MSNBC

  • Obama claims 80% of America wants higher taxes.
    Well it’s safe then to say that most of the commentators, and certainly the posters here are in the 20% that are just insane enough to think more taxes aren’t acceptable.
    Now the question you just have to ask yourself is, is Erb getting his drugs from Obama, or is Obama getting his drugs from Erb?
    This is just amazing, purely amazing.

    • Actually, I am TOTALLY in favor of adding tax-payers to the revenue base.
      I think some LARGE fraction of the 1/2 of Americans who PAY NOTHING should be included.
      As I’ve said here often, we need to scrap the corrupt tax system we have now, and start with a clean sheet of paper.
      Also, we need to bring the central government back to its charter, which is its sole base for legitimacy.

    • And another poll, that Obama clearly isn’t using – and the hourglass flipped the other way up.
      Let’s see, most Americans didn’t want the Obamastein health care plan, but he swore we did.
      This is shaping up the same damn way.

  • the recession of 1974-75, and then a high of 23.5% with the recession of 1982 and the Reagan defense buildup

    That is not correct to lay that entirely with Reagan.  Revenue growth under Reagan outstripped his defense spending increases.  It was other spending from the Democrat Congress that increased the deficit spending.  Reagan had to sign off on it if he was going to get relief on taxes and his military spending for the Cold War. 

    In fact the Democrats tried to deliberately break the bank and then lay it at the feet of Reagan as part of their campaign strategies.  Buy votes, blame Republican President. 

    • Well, the only problem with that is the Dems had a small majority in the House until after 1982, I seem to recall, and they didn’t control the Senate until 1987. The House majority was narrowed in the 84 elections and there were a larger number of conservative Dems in the caucus then today. So no, it wasn’t a Democrat Congress that was the only cause of the deficits under Reagan. Reagan didn’t submit a balanced budget in eight years.

      • I remember a speach where he explicitly claimed he did submit balanced budgets.  And do recall any refutation of that which would have surely ensued if it wasn’t true for some of the years. 

        But what he submits is not what becomes law.

        I hate quoting this source, but don’t have time, From Wikipedia

        Most bills may be introduced in either House of Congress. However, the Constitution provides that “All bills for raising Revenue shall originate in the House of Representatives.” As a result, the Senate cannot initiate bills imposing taxes. Furthermore, the House of Representatives holds that the Senate cannot originate appropriation bills, or bills authorizing the expenditure of federal funds. Historically, the Senate has disputed the interpretation advocated by the House. However, when the Senate originates an appropriations bill, the House simply refuses to consider it, thereby settling the dispute in practice. The constitutional provision barring the Senate from introducing revenue bills is based on the practice of the British Parliament, in which only the House of Commons may originate such measures.

        Appropriations are predominately under House control and changing taxes are also under House control.  Giving the House most of the cards when dealing with Reagan.
        Add the RINO factor which was as bad then as it was now, and Republican controlled congress wasn’t necessarily a conservative congress in the least. 

      • Tell the whole story.
        How much were Reagan’s out of balance?
        What compelled Congress to pass unbalanced budgets, regardless of who proposed them?

      • IIRC, the Dem’s had the Senate for all but four years (83-87).
        They still controlled the House, when spending bills originate.
        Under Reagan, Defense spending PEAKED at 29% of the budget, which was still down from 1962 under JFK when it had it’s post WW2 peak at 51% of the budget.
        If you look at the annual GROWTH in various facets of spending, welfare spending grew much faster than defense.
        So much for the bu^#@*sh*t about the Regan budgets wrecking welfare.
        Also: (Govt spening as a % of GDP from 1930 to today)

        Research shows that from the founding of our nation, 1787-1849 (63 years) federal spending averaged 1.7% of GDP. For the next 51 years, 1850-1900 (including fighting the Civil War) spending averaged only 3.1%. From 1901 till 1930 (including fighting WWI) it never reached 8%, and averaged approximately 3.2%.

  • What’s that big spike in the late ’80s / early ’90s?  Wasn’t that about the time Bush Classic uttered something about his lips and new taxes?

    Can the dems explain why it is necessary for us to spend nearly a quarter of our GDP on the government at this time?  WIll MiniTru even ask?

    • Yeah, ‘show us the budget’ – oh, that’s right, they buggered their Constitutional responsibility to craft one in 2010 didn’t they?

  • January 2009:

    President-elect Barack Obama pledged yesterday to shape a new Social Security and Medicare “bargain” with the American people, saying that the nation’s long-term economic recovery cannot be attained unless the government finally gets control over its most costly entitlement programs.
    That discussion will begin next month, Obama said, when he convenes a “fiscal responsibility summit” before delivering his first budget to Congress. He said his administration will begin confronting the issues of entitlement reform and long-term budget deficits soon after it jump-starts job growth and the stock market.
    “What we have done is kicked this can down the road. We are now at the end of the road and are not in a position to kick it any further,” he said. “We have to signal seriousness in this by making sure some of the hard decisions are made under my watch, not someone else’s.”

    ANOTHER of those President Jell-o promises.
    Amazing what you can find on the interwebs…

  • The Republican Party has often been claimed to be the party of the rich.
    I say .. let’s make that true … let’s tax rich Democrats into Republicans today.
    I support taxing the living hell out of Democrats

    Besides, being part of the party of the “greatest President evah” should mean that you kick in another half of your paycheck, don’t you think ?
    Should five per cent appear too small,
    Be thankful I don’t take it all.
    ‘Cause I’m the taxman,
    Yeah, I’m the taxman.

  • Let’s be fair to Obama. He is inexperienced. He now knows that shovel ready doesn’t mean shovel ready at all.
    So, the first two years of his term can’t be blamed on him – he had no idea what he was doing.
    Besides we had to do “something” right?

  • More childish petulance from you sterile, inbred political idiots. Who insult me every time I point out the way things really work, for some reason.

    Can’t you just accept my wise, informed understanding, which is based on an advanced degree from a place with “advanced studies” in it’s name? The obvious thing to do is for the Republicans to sit down and trust the Democrats to do the right thing. And just shut up about how every time the Democrats make a deal offering future spending cuts in exchange for tax increases, the spending cuts get lost. It’s not true. It’s just not. I decree it. So stop posting those links that say otherwise. Posting them just proves how petulant you are.

  • Folks, you need to give Obama a break.  After all he had to leave the 9th Tee last Friday to make yet another statement regarding the deficit.  He is tired of being distracted from the really important things by Congress not doing their job.