In his 2011 State of the Union Address, Barack Obama gave himself five more years of trillion-dollar deficit spending, a $678 billion income tax hike, a Social Security tax increase, and the permanent extension of ObamaCare – and he gave Republicans medical malpractice reform and a joke about a salmon.
Since his inauguration, the president has gone on a two-year spending orgy unrivaled since the days of Lyndon Johnson or FDR. Faced with a national backlash against towering debt, he has come up with a “compromise”: Americans should accept the big government expansion he has forced down their throats and move on. This follows the president’s familiar pattern of forcing through costly and unpopular measures, then promising “discipline” after the fact.
The most reported aspect of the speech was Obama’s pledge to freeze discretionary, non-military spending at their current levels – exempting such major programs as Social Security, Medicare, Medicaid, and Homeland Security.
At the risk of stating the obvious, which perhaps no one has yet stated, there is no “savings.” As President Obama would say, “Let’s be clear”: Savings is when you reduce the amount of money you are spending. The president’s proposal is to spend the same amount of money. The only “savings” would come from the fact that inflation unleashed by deficit spending and quantitative easing will devalue the dollar – but this is hardly a cause for cheer.
History shows that spending freezes rarely freeze anything. The most ambitious attempt was the 1985 Gramm-Rudman-Hollings agreement, which attempted to control deficit spending by future Congresses, but many of the same politicians who voted for the bill decided they would not abide by its terms the next year. Deficits continued to mount. To give a more recent example, last year Congress approved slightly more than half of the whopping $11.5 billion in spending cuts Obama requested last year.
The amount of the budget actually affected is rather modest, indeed. It would apply to approximately 12 percent of the budget. Alec Phillips, an analyst with Goldman Sachs, estimates that if every Congress for the next five years holds to current levels, it would “save” $200 billion. The New York Times noted its higher estimate of “$250 billion in savings over 10 years would be less than 3 percent of the roughly $9 trillion in additional deficits the government is expected to accumulate over that time.” Obama’s plan would cost half-a-trillion dollars more than returning to 2008 spending levels, as proposed by the most moderate Republicans. Sen. Rand Paul has proposed a half-a-trillion dollar spending cut this year, which includes cutting food stamps and eliminating the Corporation for Public Broadcasting and the National Endowment for the Arts. Ohio Congressman Jim Jordan and Senator Jim DeMint introduced a bill to cut $2.5 trillion over ten years, eliminating the aforementioned programs as well as Amtrak and the president’s “high-speed rail” and rolling back spending to 2006 levels. Obama’s freeze is small beer in its own terms and hypocritical when paired with his calls for new spending.
The State of the Union made only passing reference to the greatest budgetary crisis facing us: out of control entitlements (and most of his “solutions” are bad ideas; see below). “Mandatory” spending alone exceeds projected federal revenues – the amount of money the government took in all year. If we eliminated 100 percent of discretionary spending – privatized the Post Office, dismantled the military, and fired every federal prosecutor and judge – we would still run a deficit.
Nonetheless, the president instructed us, “The final step to winning the future is to make sure we aren’t buried under a mountain of debt.” As though we are not already buried under a mountain of debt. As though this were not a mountain of his own making. As though it were not one he wished to greatly enlarge.
What Obama intends to freeze is big government. His proposal to hold-the-line comes after he jacked up federal spending by 84 percent. After inflating the federal government beyond the free market’s carrying capacity, he now wishes to maintain the status quo.
As usual Sen. Jeff Sessions, R-AL, had the best analysis of Obama’s spending freeze, calling it “a plan for deficit preservation.” The day after the State of the Union speech, the Congressional Budget Office (CBO) predicted the deficit for 2011 will be a record-breaking $1.5 trillion. Sen. Kent Conrad, D-ND, said, “CBO is now expecting to see deficits of more than $1 trillion a year continuing through at least 2012. And as disturbing as those near-term deficits are, the long-term outlook is even worse.” Massive overspending would be bad enough if we were getting something for our money, but CBO projected unemployment rate will remain above 9 percent this year and above 8 percent throughout 2012.
It is not merely enormous deficits Obama wishes to preserve.
Obama made clear he will not consider any effort to repeal ObamaCare. In the rhetoric of faux bipartisanship, he stated, “If you have ideas about how to improve this law by making care better or more affordable, I am eager to work with you.” He again chose to freeze the socialist status quo by instructing Republicans, “instead of re-fighting the battles of the last two years, let’s fix what needs fixing and move forward.” Then he offered Republicans the one and only substantive compromise of his speech: “medical malpractice reform to rein in frivolous lawsuits.” Huzzah.
Once again, the news has not been kind to the president. The day after his speech, chief Medicare actuary Richard Foster testified before the House Budget Committee that ObamaCare will not hold down costs or allow people to keep their private insurance. Keen analysts already knew this, and Howard Dean already admitted it. Yet the State of the Union touted the system’s deficit reduction and its ability to sure up Medicare and Medicaid by “further” reducing health care costs.
Obama included one paragraph dedicated to Social Security, which ruled out cutting benefits for future generations or investing (note the correct use of the term) any of the proceeds in the stock market. This leaves one solution: raising the payroll tax ceiling. (Currently, the government collects Social Security taxes on the first $106,800 of income.) In 2007, Obama proposed eliminating the ceiling altogether. Social Security actuaries have estimated this would put off permanent deficits for eight years.
This was not the only tax increase he had in mind.
Read My Lips: Mo’ New Taxes
Posing as a debt-cutting crusader, Obama inveighed, “If we truly care about our deficit, we simply cannot afford a permanent extension of the tax cuts for the wealthiest two percent of Americans.” Allowing merely this portion of the Bush tax cuts to expire would raise taxes an estimated $678 billion, the largest increase in decades. Combined with his proposal to eliminate the payroll tax ceiling, the move could increase top marginal tax rates in some states to more than 60 percent. This does not include the 35 percent increase of the death tax that went into effect this year. The added tax burden will further contract economic activity, throwing more people out of work and off private insurance rolls.
This is the substance of Obama’s view of government: more government programs, more “entitlements,” more regulations, more spending, and more taxes foisted upon the private sector to pay for it all. Yet somehow he has convinced much of the media he is a born again centrist.
Huge Government: The New Normal
In fact, Obama is instructing the American people to hold at an unacceptably high, costly, and intrusive level of government. Liberal columnist E.J. Dionne rightly described the president’s actions earlier this week in a column entitled, “Obama’s Plan: Legislate, Hold, Build.” The State of the Union represents the “hold” segment. He runs up federal spending 84 percent and adds more debt in two years than America amassed in her first 200 – then tells us to maintain this level.
This is typical of Obama’s pattern of following irresponsibly far-Left actions with soothing centrist rhetoric and pledges of fiscal probity.
Take for instance his veto pledge from the State of the Union speech: “If a bill comes to my desk with earmarks inside, I will veto it. I will veto it.” In March 2009, just hours after demanding Congress pass new rules to ban earmarks, he signed a pork-laden bill containing an estimated 8,600 earmarks totaling $7.7 billion. “The future demands that we operate in a different way than we have in the past,” Mr. Obama told reporters just before signing the bill in private. “So let there be no doubt: this piece of legislation must mark an end to the old way of doing business and the beginning of a new era of responsibility and accountability that the American people have every right to expect and demand.”
Last February, President Obama signed into law pay-as-you-go rules – right after raising the debt ceiling by $1.9 trillion. He said at the time, without a sense of irony, “while in theory there is bipartisan agreement on moving on balanced budgets, in practice, this responsibility for the future is often overwhelmed by the politics of the moment.” You see, according to The Hill: “The pay-go legislation requires the government to fund any spending increases in entitlement programs by spending cuts or tax increases.” “But,” The Hill noted, there were “many exemptions – benefits like Medicare, Social Security, or annual provisions such as the Medicare “physician fix” that benefits doctors. It also would not apply to direct spending that is included in annual appropriations spending bills.”
Last November, Obama a two-year freeze on federal employee pay – after engaging in a hiring spree, raising federal pay, and extending some benefits to same-sex “partners” of federal workers last summer. That freeze, too, had exceptions: “military personnel, government contractors, postal workers, members of Congress, Congressional staffers, or federal court judges and workers.” These federal employees were already overpaid. In August, USA Today estimated federal workers earned twice as much as their private sector counterparts. The study found total “Federal compensation has grown 36.9% since 2000 after adjusting for inflation, compared with 8.8% for private workers.”
In each case, Obama hyperextends government spending, pay, or regulation before insisting we have gone far enough. As the SOTU responses by Paul Ryan and Michele Bachmann showed, and the substantive proposals from Rand Paul and Jim DeMint prove, the adults have a better solution.
Less Government, Not More Taxes
The 2010 midterm election repudiated the Obama agenda in toto. Americans caught up in the media’s romance for Barack Obama may have come to like the Chicagoland pol in 2008, but two years of misery have exposed his means, goals, and personality. Most were unhappy with George W. Bush’s spending record and now demand Republicans reclaim the mantra of conservatism by slashing government.
Rather than return to pre-Bush levels of taxation, we should return to pre-Bush levels of government spending. This can only be done by shrinking the size, scope, and role of government to its constitutional boundaries. Tea Party members must be vigilant to see the new Congress creates a government that does not take half of a worker’s wages before he sees his check, that does not bail out union pensions, and does not distribute subsidized goodies to bribe potential voters. “A government that lives within its means.” After all, that’s what Obama said he wants.