Obama and the Debt

The vindication of the Tea Parties continues. The President has been disingenuous about his budget from day one. Not that this isn't the norm from Obama be it his absurd job's claims or his health care savings nonsense. After receiving accolades for not using supplemental' s to mask the size of his budget (he included the costs of the wars in the budget instead of as a later add on as Bush had done) it clearly became apparent that the budget was not based on realistic economic predictions. It was called delusional for a reason. Now after a stimulus bill and an expansion of government spending to the point that the fiscal solvency of the United States has been questioned it is finally becoming apparent that Obama's budget is a fiscal disaster. Of course in Obama world the trick is talking points about PAYGO or laughable 100 million dollar cuts, its has been noticed, from The Economist:

“PAYING for what you spend is basic common sense. Perhaps that’s why, here in Washington, it’s been so elusive,” said Barack Obama on Tuesday June 9th. He was urging Congress to pass a new “pay-as-you-go” (PAYGO) plan that would oblige it to pay for new spending either by raising taxes or by cutting outlays. By following the same principles that guide “responsible families managing a budget”, he said, Americans could dig the country out of the “very deep hole” that “the reckless fiscal policies of the past have left us in.”

Laughable

As usual the "New Era of Responsibility" that Obama espouses begins with him blaming other people, either way no one is going to enact PAYGO no matter what rubbish he spouts and higher interest rates have already been seen . By the way every reporter, political insider, and Congressmen knows he is lying, but this is Obama so he gets a pass on it.

Yet budget hawks are far from reassured. Bad as the deficit was under Mr Bush, it will quadruple this year, from $459 billion in 2008 to $1.845 trillion, according to the non-partisan Congressional Budget Office (CBO). Mr Obama vows to slash it in half within four years, but that will still leave it bigger than the deficits for which he once lashed Mr Bush. His aides hint that he will get tough when the time is right, but he is reluctant to break campaign promises of tax cuts for all but the rich just yet. The CBO reckons the deficit will still be running at more than $1 trillion a year in 2019.

All such projections are tentative, of course. The bank bail-out could cost less than expected. Health-care reform could cost more. Congress seems determined that a proposed cap-and-trade system for carbon emissions, which Mr Obama was counting on to raise hundreds of billions of dollars, will raise only a fraction of that. A faster-than-expected economic recovery could restore the national balance sheet to something resembling health. A sluggish one could rip it to shreds.

For the record even if the economies is stronger then predicted and the programs cost less then thought you still have massive deficits and a fiscal disaster! As for his PAYGO nonsense:

Sceptics fret that PAYGO will do little to address the deficit because it has four big loopholes. The rules will not apply to the annual “patches” passed to lessen the impact of the Alternative Minimum Tax, a levy originally aimed at rich tax-dodgers but which now ensnares millions of middle-class Americans. Also exempted are Mr Obama’s planned extension of many of Mr Bush’s middle-class tax cuts, modifications to the estate tax and some increases in payments to doctors by Medicare (the public health plan for the elderly). Those exceptions would add $2.5 trillion to the deficit over ten years, reckons Maya MacGuineas of the Committee for a Responsible Federal Budget, a non-partisan watchdog. “This is like quitting drinking, but making an exception for beer and hard liquor,” she says.

So how bad is it including the entitlement programs:

Meanwhile, the long-term fiscal outlook grows ever grimmer. Americans are getting older. The government’s unfunded obligations to give them pensions and health care are equivalent to a debt of $483,000 for every household.....“There’s going to come a point where it’s going to be impossible to get people to buy our bonds at affordable prices,” says Paul Ryan, the top Republican on the House budget committee. He fears that the Democrats will create a huge new spending programme—a national health-care plan—while making little effort to curb spending in other areas. That, he predicts, will lead to crushing taxes on middle-class Americans, a lower standard of living and higher unemployment.

Higher taxes first, then it will be cutting defense spending, then it will be printing more money. This story will end badly and blaming Bush and the GOP will only last so long.


Debt Held by the Public, 1965 to 2019 (Percentage of GDP)




And of Course the overall budget: