Liberty. It’s a simple idea, but it’s also the linchpin of a complex system of values and practices: justice, prosperity, responsibility, toleration, cooperation, and peace. Many people believe that liberty is the core political value of modern civilization itself, the one that gives substance and form to all the other values of social life. They’re called libertarians.
Tuesday, May 29, 2012
Monday Morning Outlook
Is Obama a Big Spender?T Brian S. Wesbury - Chief Economist
Bob Stein, CFA - Senior Economist
Rex Nutting, a reporter for MarketWatch, became famous when the White House
used his analysis of government spending. He wrote that “there has been no huge
increase in spending under the current president.”
We like Rex
Nutting. He seems like a fair-minded analyst. But we emphatically disagree.
This is not personal, heck, it’s not even political. Data from the
Congressional Budget Office (CBO) shows President Obama has been a huge
a year, the CBO releases a “budget baseline” – a ten-year estimate of federal
revenue and spending, assuming no changes to tax or spending laws. Every time
it releases a new baseline, CBO explains how much it has changed due to laws
that were not in effect at the time of the old baseline. It also estimates the
impact of any change in the economy or interest rates, as well as changes due
to technical factors, like how fast banks repaid TARP.
2009, just before President Obama took office, CBO said federal spending would
be $3.388 trillion in FY 2012. Now, CBO says we’re going to spend $3.627
billion this year. That’s an increase of $239 billion.
increase can be broken down into two factors. Going through every budget report
since January 2009, economic and technical changes have actually reduced
spending by $95 billion! Meanwhile, “legislative changes” – laws passed under
President Obama – have added $334 billion.
legislative changes represent a 9.9% increase in spending, with 93% of the
increase coming in President Obama’s first two years in office. In other words,
on top of all the spending increases under President Bush (including wars in
Afghanistan and Iraq) as well as the “automatic stabilizers” that kick in when
unemployment is high – record-high Food Stamps and Medicaid – President Obama
has directly layered on an additional $334 billion.
As a result,
we think our method underestimates the surge in spending under President Obama.
Moreover, economic models show that more government spending reduces economic
growth, which, in turn, boosts spending and reduces tax revenue. In other
words, if we added dynamic effects, the President’s impact on spending would be
January 2009, CBO thought this year’s spending would be 21.8% of GDP and the
deficit would be $274 billion. Instead, it is 23.4% of GDP, with an expected
deficit of $1.17 trillion. And this is after a new Congress fought to cut
spending and came under vicious attack for doing so.
full mobilization war, our government has never spent so much. Excluding
defense and interest, before 2009, spending was never higher than 15% of GDP.
Now, at 17.6%, Obama’s own budgets show us never getting back below 15% again.
We wish Nutting were right, but spending under President Obama has soared.