Providing the first insight about his views on fiscal responsibility, Barack Obama today told reporters that:
the nation could face “trillion-dollar deficits for years to come.”
How can that be? I mean, I knew that this year was a complete write off but “for years to come?”
The last budget forecast from the Congressional Budget Office showed that we were going to run about a $455 B deficit for FY ’08. Of course this was before the CBO understood how quickly revenues were decreasing. It was also before the CBO, or the rest of us, knew that Hank and company were going to get their hands on $700 B to spend helping their friends.
After taking into account the most recent realities, the CBO will provide new projections with an expectation that it will now be $1T. The $1T is before any of of the latest, proposed stimulus package but would include at least the initial tranche of Hank’s play money.
OK, so let’s walk this back…
The difference between the new $1T deficit and the old $455 B deficit is $555B. It’s probably safe to say that the first part of of Hanks play money, say $350B, is included in the new deficit. That leaves revenue reductions of about $200B.
If we attempted to “normalize” the new deficit to Barack’s world, we would take the $1T, back out Hank’s “one time” spending spree of $350B and back down the $300B per year of spending in Iraq that we’re doing because we should have all troops back stateside or in the cost free combat zone of Afghanistan, by the end of January. That would suggest that even if the economy never improved and we just rolled forward, Barack’s normalized annual deficit should be about $350B. Of course if the economy does come back some we could expect that other $200B and perhaps even some of the original $455B deficit to come back bringing us closer and closer to a balanced budget.
So where’s the other $650B + each year coming from to make the ongoing deficit become $1T?
It’s not taxes. Remember that Barack kept telling us throughout the campaign that while he was going to be decreasing taxes on the “middle class”, he was going to increase them on the “rich.” We’re were told that the net result would be that 95% of the people would get a “tax break” but that overall taxes would stay the same.
I guess that means that if revenue – expenses = deficit and revenue is the same or improving, the only way to increase a deficit is to increase expenses and if the $650B number is accurate, by a dramatic amount as our current federal budget is only about $3.2 T!
But wait, wasn’t Barack the candidate who told us:
Q: This year’s deficit will reach $455 billion. Won’t some programs you are proposing have to be eliminated?
OBAMA: Every dollar I’ve proposed, I’ve proposed an additional cut that it matches. To give an example, we spend $15 billion a year on subsidies to insurance companies. It doesn’t help seniors get better. It’s a giveaway. I want to go through the federal budget line by line, programs that don’t work, we cut. Programs we need, we should make them work better.
I can’t say that I really liked the tax and spend liberals much but at least they understood economics enough to know that you couldn’t borrow yourself to prosperity. The new Democrats having been educated with the new math, no longer carry any pretense of balancing a budget, they go straight to “Spend!”
It looks like President elect Obama will carry one characteristic from his campaign to his Presidency, promises with expiration dates.
