You know how the government likes to make sure it keeps bad news out of the headlines by casually dropping the information on a Friday afternoon? Well last Friday was one of those bad-news-lets-keep-it-out-of-the-24-hour-news-cycle days. Then today, the White House took their gamesmenship to a championship level by releasing CIA documents and appointing an independent investigator to investigate past interrogation techniques. Interrogation is catnip to cable news pundits. Combined these two tried & true tactics have provided an A+ diversion for the Obama administration to add 27% to the federal deficit projection without raising any significant questions from the general public. It’s getting damn near cartoon-ish.
Reuters was the first to report on Friday that Obama was prepared to raise the 10-year deficit projection from $7.1 Trillion to $9 Trillion. As the Reuters article points out, the Obama administration has been defiant since he took office that their projection was accurate despite the Congressional Budget Office reporting the deficit would be $9.1 Trillion according to all the increased spending. A spokesman for Obama said the revised number is based on a “misunderstanding” how severe the recession is and over-estimating the tax revenues that were generated — I guess because no one assumed that when some people start losing money, they won’t pay their taxes. But wait, someone did understand the full scope of the budget deficit. The CBO did.
So now when the CBO says that a healthcare overhaul will add another $1 Trillion to the federal deficit over the next 10 years, does it seem more realistic? And more importantly does Obama even care? You may remember in his news conference held in July, Obama said this regardarding the deficit:
First of all, let’s understand that, when I came in, we had a $1.3 trillion deficit — annual deficit that we had already inherited. We had to immediately move forward with a stimulus package because the American economy had lost trillions of dollars of wealth. Consumers had lost through their 401(k)s, through home values, you name it, they had lost trillions of dollars. That all just went away. That was the day I was sworn in; it was already happening. And we had 700,000 jobs that were being lost. So we felt it was very important to put in place a recovery package that would help stabilize the economy.
Then we had to pass a budget by law, and our budget had a 10-year projection. And I just want everybody to be clear about this. If we had done nothing, if you had the same, old budget as opposed to the changes we made in our budget, you’d have a $9.3 trillion deficit over the next 10 years. Because of the changes we’ve made, it’s going to be $7.1 trillion. Now, that’s not good, but it’s $2.2 trillion less than it would have been if we had the same policies in place when we came in.
So the reason I point this out is to say that the debt and the deficit are deep concerns of mine. I am very worried about federal spending. And the steps that we’ve taken so far have reduced federal spending over the next 10 years by $2.2 trillion. It’s not enough.
So if we take Obama at face value and he is concerned about the deficit and federal spending he should be real worried now that the “changes made in the budget” have not changed a thing. If he is truly concerned by the direction Bush started with spending, he probably shouldn’t add to the federal deficit through major health care or energy reform. But realistically, this is not the case and he will continue his liberal spending.
One of the more interesting dissenting opinions to Obama’s spending came from a major ally during his presidential campaign. Warren Buffet, an ardent Obama supporter, released a New York Times editorial last Wednesday criticizing the continued spending plan by our current President. In the article, he posted facts that put into perspective how far we have gone in the red:
If we leave aside the war-impacted years of 1942 to 1946, the largest annual deficit the United States has incurred since 1920 was 6 percent of gross domestic product. This fiscal year, though, the deficit will rise to about 13 percent of G.D.P., more than twice the non-wartime record. In dollars, that equates to a staggering $1.8 trillion. Fiscally, we are in uncharted territory.
The core of the editorial focuses on how Obama can afford to continue to raise the national debt and finance his policies. The only three ways to fund these programs are to raise taxes, borrow more from foreign countries, or to print more money and await the incoming inflation. Buffett runs through each of these options for plausibility but then finishes the discussion by realistically noting that 2010 is an election year. Therefore, politicians won’t cut programs. And they certainly won’t raise taxes before an election. So that leaves one likely option – print more money. He quotes John Maynard Keynes as to why this is a likely option for our Congress to take:
John Maynard Keynes long ago laid out a road map for political survival amid an economic disaster of just this sort: “By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens…. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”
So, there you go. As the government tries to secretly add 27% to our national deficit without awaking the public and looks to continue spending more without first cutting inefficient programs or strategizing how to fund them, we can look forward to an increased likelihood that milk will cost $8.00 a gallon in the next decade. D’oh.