Great read from a MarketWatch columnist on the spending spree that wasn’t.
Of all the falsehoods told about President Barack Obama, the biggest whopper is the one about his reckless spending spree.
As would-be president Mitt Romney tells it: “I will lead us out of this debt and spending inferno.”
Almost everyone believes that Obama has presided over a massive increase in federal spending, an “inferno” of spending that threatens our jobs, our businesses and our children’s future. Even Democrats seem to think it’s true.
But it didn’t happen. Although there was a big stimulus bill under Obama, federal spending is rising at the slowest pace since Dwight Eisenhower brought the Korean War to an end in the 1950s.
Even hapless Herbert Hoover managed to increase spending more than Obama has.
Read the whole thing. Also noteworthy: the second- and third-lowest rates of spending growth in the last 30 years belong to President Clinton’s first and second terms, respectively. Remarkable.
Discuss
56 Comments . Leave a comment below.He can’t seem to get credit for slashing spending. But the economy can’t improve because he’s slashing spending, and only massive government spending can turn things around.
Ouch!
The deficit has risen to what 25% of GDP? How much more do you want to spend?
Your asshattery betrays you, Luke.
Witness, TARP. And the New Deal, BTW.
A question so interesting it deserves its own post:
http://bluemassgroup.com/2012/05/know-the-new-deal-a-quizz/
Good grief. Circular. And link-free.
Just looking at your unattributed line graph suggests that all that New Deal spending didn’t prevent another devastating spike in unemployment later in 1937-1939. Furthermore, try charting federal spending against GDP and employment. You’ll come to the same conclusion as FDR’s Treasury Secretary:
“We have tried spending money. We are spending more than we have ever spent before and it does not work. And I have just one interest, and if I am wrong … somebody else can have my job. I want to see this country prosperous. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises. … I say after eight years of this Administration we have just as much unemployment as when we started. … And an enormous debt to boot.”
Hint: FDR wasn’t fully a Liberal yet.
One word, starts with “a”, ends with “y”.
FDR changed policies in 1937, to disastrous effect, as the data clearly show.
debt-deflation theory of self adjusting markets. The slump in the recovery was the result of thinking that as prices dropped, wages would also drop and reach a new equilibrium – beware the phrase “reset the economy.” Reduced wages meant more money for investment. Problem was, debt was not deflating, reducing effective demand as folks had less wages and relatively more debt, worsening the situation.
from Dollars & Sense, Jan/ Feb 2011.
There is an argument to be made that the stimulus provided by America’s mobilization had as much to do with the recovery from the Great Depression (after 1938) as any policy decisions.
Of course, the America of that time wasn’t shy about raising taxes to pay for the war effort. Americans of that day agreed to pay a “Victory Tax”, not to mention the imposition of withholding for personal income tax.
The eagerness and selflessness of Americans to pay taxes so that America could invest in its mutual security and future stands in stark contrast to today’s GOP and it’s relentless appeals to greed and self-interest.
The link-free quotation of the Treasury Secretary floats as free from facts as from attribution. Unemployment manifestly declined during FDR administrations.
The quote is real, it is from Henry Morgenthau, Secretary of the Treasury under FDR. According to the wikipedia link above (I haven’t verified it), the unemployment rate in 1939 was higher than in 1931.
It also appears that Mr. Morgenthau was a prominent advocate of the “austerity” program that began in 1937. FDR ultimately rejected the fiscal conservatism of Mr. Morgenthau. We’ll never know for sure who was correct, because the WWII mobilization changed the entire landscape.
Nevertheless, the narrative seascraper attempts fails in the spotlight of history. In fact, the deficit spending of the “first New Deal” was working, and it was the move to impose austerity (championed by Mr. Morgenthau) in 1937 that choked the recovery and sent the economy back into a second “depression within a depression”.
The prescription (“austerity”) was far worse than the disease — then and now.
As to the argument, it is just a further playing out of the dynamic that has been in place since every single Republican member of the House voted against the stimulus plan at the very start of the president’s administration. Republicans will vote to stymie recovery, and then try to distort the reason for continued recession. The double whammy Manny describes is the chickens of conciliation coming home to roost.
took our guns away, expanded the welfare state, coddled Islamists, and instituted socialism exists, of course, only in the Tea Party imagination. The tight fit these things have with their narratives makes them sufficiently true that belief cannot be shaken by contact with fact.
Bogus analysis that defies logic, lacks common sense, ignores reality-based cash accounting, and obfuscates all economic relevance.
Couple of thoughts:
First, accelerated spending was a mess under Bush — 2 wrongs don’t make a right — although there were 3 mitigating circumstances: 9/11, the Iraqi/Afghan wars, and the financial panic/TARP. Whether one agrees with any of these temporary spreading initiatives, I would claim they are all non-systematic.
Second, these are percentage increases so they don’t tell anything about the real fiscal story. I suggest that gross figures for tax receipts, spending, borrowing, accumulated debt, % GNP, and % population in the workforce are all much more important metrics. If progressives see no danger in tripling our debt, or spending at 25% of GDP, or unanimously rejecting the president’s budgets in the House and Senate, then go ahead. Keep citing this meaningless statistical comparison. Keep burying your head in the sand. Keep trying to spin these numbers.
Third, notice the double-asterisks on FY 2012 and 2013 in the next graphic illustrating budget figures from which the percentage changes are calculated. The tell is when one sees “CBO Baseline estimate.” This is always inaccurate, and, in the case of pending budgetary fiasco that is the reality of Obamacare, does not account for the whopping deficit coming down the pike. (Automaton CBO only calculates the garbage Congress gives it. It’s always fiction.)
No one is going to buy the fact that Obama isn’t a reckless spending machine, and his policy intentions aren’t to increase federal spending in terms % GDP, growth be damned. This is what likely voters everywhere are coming to realize he means by “radical transformation.”
Percentage increases don’t tell anything about the real fiscal story? Really?
You contradict yourself in the following paragraph: “If progressives see no danger in tripling our debt”. Sorry but “tripling our debt” means increasing our debt by 300%. That will take a long time at 1.4% per year.
Your last paragraph is a long-winded way of saying “I’ve already made up my mind, don’t confuse me with the facts”. It would be more honest to say “I am not going to buy …”, and nothing in the remainder of that sentence is “fact”.
I do think you’ve characterized your own posture rather well:
It’s opinion.
This is a non-sequitur:
Obama has already increased the debt by 300%. In 3 years. You completely disregard the delta between receipts and outlays. The percentage change in spending is a weak measure of fiscal performance.
The gross federal debt was around $10 T in FY2008. It is around $16.4 T today (give or take). It is NOT $30 T today.
President Obama has most certainly not “increased the debt by 300%”.
You do understand the difference between “debt” and “deficit”, right? The “debt” is the total outstanding money owed by the US government. The “deficit” is the amount borrowed in a given year. With some handwaving about on-budget, off-budget, and similar shell-games, next year’s debt is the this year’s debt plus this year’s deficit.
I have no clue what you mean by “the delta between receipts and outlays” — do you mean “the deficit”?
I’m wrong on the 300%. Bush added $5t to the debt, in 8 years. Obama has added $6t in 3.
Please look up “delta,” as used in math, not geography.
Obama came into office with a $1.3 trillion deficit before I had passed any law. … We came in with $8 trillion worth of debt over the next decade.
http://www.politifact.com/truth-o-meter/statements/2010/jan/29/barack-obama/obama-inherited-deficits-bush-administration/
Bush increase total debt by 86% or $4.9T. Obama increased it by 45% or $4.3T. Pretty much the same amount but lower percent because the baseline is higher. What is interesting is Bush racked up all this debt before the crash and the gift that keeps on giving: atx cuts.
That guy who works for MarketWatch obviously doesn’t know anything about money! Especially because his facts upset my world view!
Hey David. I never attacked the writer’s numbers. They’re accurate. But mostly immaterial. Do they prove something? Bush was also a profligate spender so it’s no accomplishment just to keep spending level.
Besides, aren’t progressives in favor of more spending? Sounds like you think spending is bad and so you need to justify it not growing in Obama’s tenure.
Voters’ main concern isn’t the 2nd derivative of federal spending, it’s our borrowing all that money, and having Washington spend it. Keynes was all for pump priming, but this is shoveling money into the furnace.
From actual polling voter’s main concern is not the deficit at all.
It might be the main concern of movement conservatives and pundits but it is not the main concern of polled people.
Yes, you are right, “the deficit” is a bit wonky to poll with any strength. Pardon my semantics.
“The debt”, on the other hand, is usually at the top or very near the top as a most important issue for voters. They understand that spending more than you take in — “the deficit” — leads to systematic economic trouble, a la Greece.
You can’t have debt without a deficit. People get this.
Source: http://www.pollingreport.com/prioriti.htm
Bloomberg National Poll, March 2012: Top important issue Unemployment and jobs 42%. Federal deficit: 21%
CNN/ORC Poll March 2012: The economy: 53%. Federal deficit 20%
CBS News/NYTimes April 2012: Economy/Jobs: 48% Budget deficit/national debt: 5%
In other words, the debt is never at the top or very near the top as a most important issue.
And yes, the “like Greece” argument may have taken off in the popular mind, but the U.S. economy is nothing like Greece’s. We have our own currency. Taxation and spending are more responsible. The interest rate on our national debt has been remarkably low because the market (yes, the market) has judged our national debt to be secure.
Ah – it’s Bush’s fault. OK, that makes more sense.
Or stated differently, “is not in accord with the belief system within my conservative bubble.” For example, “No one is going to buy the fact that Obama isn’t a reckless spending machine” is something that only someone would assert who practices close-mindedness as if it were some kind of virtue.
We should let the furnace go out.
Would it kill the republicans to pass a highway bill, or bridge repair? Would it really affront their manhood to offset the spending with taxes on the wealthy?
Besides, I would think you would be taking credit for holding spending down, in spite of all the claims that Obama spends like a drunken sailor.
And since you factored in Bush’s TARP gift, you overlooked the wittle asterisk thingy that says the 1.4 includes Obama’s stimulus.
Republicans really need to shut up about economic matters since they destroyed the economy, won’t let democrats fix it with, yes, spending, and offer absolutely no evidence that low spending and low taxes inspire the “job creators” to actually create a job or two.
By “we” you mean government. Then, you claim Repubs
There’s ample empirical evidence that reducing marginal tax rates increases investment, and creates jobs. See: Kennedy, Reagan administrations. Government spending, preceded by government taxation, retards growth and jobs in the long run.
Why do you think Christine Romer bugged out of the WH? See here.
this tired old saw again. Yeah and a stitch in time saves nine too, whatever that means.
Kennedy (not to be confused with Brown – different guy) cut taxes when we were running surpluses, not deficits.
Reagan got away with this parlor trick once only, when he lowered corporate taxes that shifted the tax rate to the right hand side of the Laffer curve – and then he raised taxes 12 times.
Say, could you give us the Cliff Note version of the Romer tome – we’re just to stupid.
I think Kennedy took office in 1961. The deficit for that year was 3.3 billion. In 1962 the deficit was $7.1 billion even though revenues increased by nearly $5 billion.
Wait! That’s not possible. Kennedy cut rates on the wealthy and tax receipts increased $5 billion from 1961-1962 and $6 billion from 1962-1963?
Today the rate is 35% from 39%. How much should they be cut before we see tax receipts increase again, because it ain’t working this time around?
can be found here.
Here’s its Cliff Notes preface:
The economic effect of increasing taxes is independent of fiscal surpluses or deficits. Gravity works whether it is raining or sunny.
A good example is the 2.3% excise tax on medical devices (that’s 2.3% on GROSS revenues, not on the bottom line — devastating.) Elizabeth Warren AND John Kerry both have stated this tax should be repealed because it would hurt the medical device industry. Is this industry some sort of aberration?
For those of us old (and wise) enough to remember the 1989 luxury tax on boats, increasing taxes kills growth, hurts job creation, and often reduces tax receipts. This was certainly the case in the boat industry…even the NYTs reported it.
Just as Keynes pointed out, we have a lot of large businesses sitting on a lot of cash. Were that cash invested, economy activity would pick up and we’d have more jobs. One way of getting these idle reserves of cash back to work is to tax them and invest them. Taxation does not always have the same effect because we don’t always have the same economy.
I found the thesis of the post and the article underlying it very surprising so I did some additional research.
However, a couple of sources call those statements into question. According to a Wickipedia article President Bush requested $3.1 trillion in spending. The budget that was passed by a Democratic controlled Congress and signed into law on March 12, 2009 by President Obama called for spending $3.5 trillion.
I am unclear how one attributes that $400 million increase in spending to President Bush and not President Obama.
Granted, one can’t always believe what’s written on Wikipedia but this NPR report seems to confirm the $3.1 trillion Bush budget.
In addition, Nutting claims that in 2013, spending is scheduled to “fall” to $3.58 trillion. However, according to the administration spending is scheduled to be $3.8 trillion. Who says so? Those are the numbers are found at WhiteHouse.gov.
It is also interesting according to the chart David includes in his post, that Mr. Nutting credits the 2002 budget to George Bush who was elected 2001. Yet Nutting skips a year for Barack Obama who was elected in 2008 but does not get credited with the 2009 budget.
After looking at the numbers I think a more accurate measure of increased spending would be to look at the 2002 spending under Bush of $2.0 trillion and his 2009 budget request of $3.1 trillion, a 55% increase or 6.875% per year.
Using the same $3.1 trillion baseline for spending under Obama and looking at the White House’s own 2013 number of $3.8 trillion that is a 22.5% increase or 5.65% per year.
Based on those numbers I think it is fair to say that spending under President Obama has increased, on a percentage basis less than it increased less than under President Bush. I think it is a distortion to say that spending under President Obama has only increased by 1.4% per year.
Bradm points out many of Nutting’s distortions.
But missing in this discussion is the assumption that emergency government spending and liquidity under TARP is now cooked into the budget. One can include Iraqi/Afghan war spending in that, too (major contributors to Bush’s debt legacy.)
Most of the posters here on BMG now consider this spending “baseline.”
This is what the 2012 election is all about.
Where else would you cook it? Duh-herp.
And intellectually shallow, too. High school come-backs and ad hominem attacks always reveal progressives are unwilling to debate.
Believing TARP and government spending is fixed now at 25% of GDP — going to 30% — is the debate. I predict Obama will lose this debate handily come November 2012.
You really do think we are idiots… Why in the world would anybody, when measuring reality, use as a metric, a request THAT NEVER BECAME REALITY??
I guess by that logic we can say your childhood dream to become an astronaut, though never actually materialized, is why you are such a space-cadet today…
I am suggesting that President Bush was out of office before a Democrat controlled congress and President Obama increased the 2009 budget by $400 billion.
Why should that amount be attributed to President Bush.
I also pointed out that Nutting attributed the 2001 budget to Bush and not Clinton when Bush was elected in 2000. I am curious why Nutting uses a different standard attributing the 2009 budget to Bush when Obama was elected in 2008?
But that is beside the point.
I think there is a good argument to be made that President Obama only increased federal spending by $100 billion above the baseline.
Federal Budget Calculations assume that federal spending increases by 8.5% per year. When spending increases less than 8.5% liberals claim that is a “devastating cut.” Conservatives call it more accurately a” slower rate of growth.”
So assuming as the government does, an 8.5% annual increase in spending, Obama only spent in 2011, $100 billion more than would have been spent without the stimulus.
That might be a more accurate way of expressing the numbers.
Bush was elected in 2000, took office in 2001, and FY2002 is his first complete budgetary year.
Obama was elected in 2008, took office in 2009, and FY2010 is his first complete budgetary year.
Nutting is being completely consistent in this. You are not.
SO it turns out that it was Nutting and Obama distorting the numbers.
http://washingtonexaminer.com/opinion/editorials/2012/05/examiner-editorial-big-spending-obama-frames-himself-scrooge/650536
With all due respect, I wouldn’t trust anything I read in the “Examiner” without pretty detailed backup. And nothing of the sort is to be found at your link.
But his tax cuts were to spur demand and not supply side patter about sparking investment – big dif. The 92% rate was a hangover from the war years (an issue that never seemed to bother the W.)
(USNews) Kennedy’s economic policies were rooted in a Keynesian belief in the stimulative effects of budget deficits. While FDR and his aides had embraced countercyclical deficits as necessary in times of recession or depression, Kennedy was the first to advocate planned deficits in a time of neither war nor economic emergency. The aim was for the tax cuts to stimulate demand, driving the economy from the bottom up.
Kennedy would never have argued against extending unemployment benefits on the grounds that it was not paid for.
JFK did this in a time when debt to GDP was dropping from 120% in the late 1940′s due to the war to bottom out at around 30% of GDP at the end of Carter’s term.
It should be obvious by now that cutting corporate taxes to 35% has not encouraged investment and focusing on reducing deficits at this time is really digging the hole deeper.
Even Romney doesn’t believe it. Witness his exchange with Mark Halperin the other day:
Halperin: Why not in the first year, if you’re elected – why not in 2013, go all the way and propose the kind of budget with spending restraints, that you’d like to see after four years in office? Why not do it more quickly?
Romney: Well because, if you take a trillion dollars for instance, out of the first year of the federal budget, that would shrink GDP over 5%. That is by definition throwing us into recession or depression. So I’m not going to do that, of course.
A tax cut is a tax cut. Whether one’s “aim” is to induce demand or spur investment is immaterial, cuts do not affect JUST consumption but savings and investment, too. Did you make this up? Are you channeling JFK? He would have extended unemployment benefits? You can’t prove or disprove a dispositive.
Actually, JFK said LOTS about the tax cut. His comments included thoughts about investment, incentives, growth, and consumption. Here are some of his own words:
“It is a paradoxical truth that tax rates are too high and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the rates now … Cutting taxes now is not to incur a budget deficit, but to achieve the more prosperous, expanding economy which can bring a budget surplus.”
– John F. Kennedy, Nov. 20, 1962, president’s news conference
“The largest single barrier to full employment of our manpower and resources and to a higher rate of economic growth is the unrealistically heavy drag of federal income taxes on private purchasing power, initiative and incentive.”
– John F. Kennedy, Jan. 24, 1963, special message to Congress on tax reduction and reform
“Our present tax system … exerts too heavy a drag on growth … It reduces the financial incentives for personal effort, investment, and risk-taking … The present tax load … distorts economic judgments and channels an undue amount of energy into efforts to avoid tax liabilities.”
– John F. Kennedy, Nov. 20, 1962, press conference
.
… and so it became: Taxes are yet significantly below what they they were when JFK made the statement. Yet have we ever had full employment?? Have we ever correlated higher growth with lower taxes?? Taxes were lowered and raised in fits since 1960 and starts but GDP since 1960 is fairly smooth and linear. I’ve looked at quite a great deal of empirical evidence and have yet to find any correlation between income taxes and private purchasing power. I can find no incentive between initiative, incentive and taxation. None at all.
It’s not like JFKs statement exists outside of empirical evidence: look for yourself.
We’re constantly told of this magic low-tax chimera… but at some point reality has to enter the conversation.
And corporate taxes were at 92% when Kennedy cut them to 70%. And the debt was on a continuous downward trend from 120% of GDP in the late 1940′s (due to the war spending) to about 30% of GDP when Carter left office.
Today the rate is 35%, down from 39% under Reagan. Reagan said deficits don’t matter (which is essentially what JFK said when it was 92%) and apparently he meant it, because we have running deficits higher and higher since Reagan.
How much should they be cut before we see tax receipts increase again, because it ain’t working this time around?
All of this numerical debating is sort of beside the point. As a society, we need to figure out what we want to have for services and how we want to pay for it. Regardless of growth, I think we can all agree that we need some level of taxation and some level of services. Right?
The existing conservative assumption is that whatever level of taxation we have at the moment, it is TOO MUCH! That assumption logically leads to a policy of continual tax cutting. Eventually, tax cuts will undercut services that lead to growth that taxes allegedly undercut. At what point are tax cuts do tax cuts become detrimental?
Christy Romer called for $1.8 trillion in stimulus during the battle for stimulus and lost. Where did she think the money would come from to pay for this? As a New Keynesian, does she really believe only in cutting taxes? Do you think she doesn’t believe that taxes should never be increased? This paper, as you’ll note from its subtitle, is basically about a new methodology for estimating the effects of tax changes. It’s not about tax policy, which involves another set of questions and variables.
Also ignored in this discussion are the limitations of the study,
This paper adds a new variable to the mix of estimators. It is hardly authoritative, even if Romer worked for Obama.
was that JFK’s tax cutting was in a completely different context than today’s economy. It is irrational when conservatives say that any level of taxation is too much; there has never been a model showing the results of 0 taxes because it is unworkable. So they will ultimately tax workers. Besides conservatives don’t believe it either.
Tax cuts are detrimental now, I think. The Bush tax cuts are a badly needed revenue loss.
would agree with you about context mattering.
Conservatives like to bring up JFK because they think he’s a Democratic saint and that if he did something, we are hypocrites if we don’t agree with him.
The politics now are so damn awful that I don’t see much hope of coming together to decide what services we all want and how to pay for it – not as long as this kamikaze defense by the right continues. It really doesn’t matter if, in their heart of hearts, they don’t believe their own talking points.
Quoting mark-bail from December ’11:
Mark Zandi of Moody’s gives multiplier effects for several fiscal stimuli.
Spending has more effect than tax cuts, but it doesn’t have the added benefit of transferring more wealth to the 1%. “Extending food stamps,” according to Zandi, “is the most effective way to prime the economy’s pump. A $1 increase in food stamp payments boosts GDP by $1.73.” (The problem is that it goes to poor people who we all know don’t deserve the money).
Here are the rest of the multipliers:
Tax Cuts
Nonrefundable Lump-Sum Tax Rebate 1.02
Refundable Lump-Sum Tax Rebate 1.26
Temporary Tax Cuts
Payroll Tax Holiday 1.29
Across the Board Tax Cut 1.03
Accelerated Depreciation 0.27
Permanent Tax Cuts
Extend Alternative Minimum Tax Patch 0.48
Make Bush Income Tax Cuts Permanent 0.29
Make Dividend and Capital Gains Tax Cuts Permanent 0.37
Cut Corporate Tax Rate 0.30
Spending Increases
Extend Unemployment Insurance Benefits 1.64
Temporarily Increase Food Stamps 1.73
Issue General Aid to State Governments 1.36
Increase Infrastructure Spending 1.59
citing me! It’s another point the good shepherd has missed.
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