President Barack Obama has pledged that his administration would be the most ethical and transparent that the US had ever seen. Key to his pledge of transparency was the legislative and budgeting process. In fact, David Axelrod and other Obama spokespeople have been touting the candidness of the President’s budget with comments such as:
“The president is determined to treat the American people as adults and be straight-up about what we’re facing and what we need to do to move forward,” said David Axelrod, senior advisor to the president.
As a blogger, I suppose I should be happy when political types make absolute statements about issues that aren’t absolute. It becomes easy fodder for the next post. However, as a citizen, it annoys me greatly because it leaves me trying to decide if the person saying it is either stupid enough to believe or think that I will be stupid enough to believe. Oh, whatever.
You can see the detail of the “most transparent budget ever” here.
A quick and by that I mean no more than 15 minutes, review of the transparent budget reveals a few issues:
- Contrary to Obama’s claims that there would be no tax increases until the Bush tax cuts expire, you will see on page 123 that the increase of the capital gains rate of “rich people” will begin in FY 2010. For those of you unfamiliar with a fiscal year, it would mean that those tax rates could go into effect on 10/1/09. I suspect for implementation reasons they will actually go into effect on 1/1/10 but that is still a year earlier than the tax cuts are due to expire.
- While President Obama is lauding himself for reducing deficits to “merely” $500 billion by the end of his first term, he’s not telling you the whole story. On page 133 you can see what is happening to debt. In 2013 when Obama says his “transparent” deficit is on $500 B, his total debt increase is $925 B! In fact, he proposed 10 year budget shows that debt will increase at a rate close to $1 Trillion each year past Obama’s first term!
- Page 114 shows the projected total debt and projected GDP. As I told you here, the GDP figures have as much reality as unicorns and mermaids, they’re too high. On the flip side, if Obama spends all he says he will, the debt is likely under forecast. Rater than nitpicking, let’s take the “transparent” numbers at face value. If debt comes to be as Obama’s forecast has it, we will for the first time since WWII have debt that is greater than our annual GDP. In FY 2008 our debt was 70% of GDP. Obama’s plan shows us increasing debt as a % of GDP every year of his forecast reaching 101% of GDP by 2019! This after increasing revenues (taxes and such) 76% during that same time frame!
- Finally, US debt is only partially held by the public. At the end of FY 2008, $5.8 T of debt was held by the public. Approximately $3 T of that amount is held by foreign entities. Somehow the Obama administration has concluded that while GDP will increase just 60% they will convince foreign entities to increase their purchasing to support a 230% increase in debt. If that’s not miraculous enough, they’ve added the extra difficulty of financing all of that debt with rates that are below the historical norm! The Obama budget assumes that the long term rate for the 10 yr. Treasury is 4%. A look at this table shows that since 1960, the 10 yr treasury has only averaged 4% or less 3 times. While not statistically accurate, a simple average of the rates for the past 48 years is nearly 7%. I don’t care who’s doing the rounding, that doesn’t get close to 4%!
It looks like we will continue with the redefinition of words for the New Obama English. From now on, “Transparent,” when used by someone in the Obama administration will mean:
“Truth”, not based in reality but if not questioned and sprinkled with lots of hope, could fool that portion of the populace for whom “it feels right.”
