Is the President in Recovery?

by Victor Davis Hanson

Tribune Media Services

President Obama does not care much about deficits — other than worrying that big debt might matter in his re-election campaign.

In his first three budgets, Obama borrowed nearly $5 trillion. Currently, the government is borrowing about 45 percent of everything that it spends. Obama’s projected 10-year plan would add nearly $10 trillion to existing US debt. This spring he proposed the largest annual deficit in US peacetime history, which is why his $3.7 trillion budget for 2012 was rejected in the Senate by a 97-0 vote.

In other words, under Obama, the government during the last three years has borrowed on average about $4 billion each day. That staggering sum is far in excess of the $1.6 billion per day during the eight-year tenure of George W. Bush, who until Obama’s presidency had borrowed more than any peacetime president.

Apparently in Obama’s worldview, there are advantages to deficits that explain his fondness for unprecedented borrowing. In Keynesian terms, massive government red ink is supposed to foster economic prosperity by creating goods and services that a purportedly less efficient private sector cannot.

The administration certainly has added an additional 100,000 federal jobs and expanded food stamps to nearly 50 million recipients — and in the process enlarged the pool of potentially grateful constituents. This belief in the superior wisdom of the state explains why almost all the Cabinet secretaries in the Obama administration came out of state or federal government, not from private enterprise.

Massive deficits not only empower more federal hiring and entitlements, but at some point lead to higher taxes. This gorge-the-beast notion is the flip-side of the Reagan-era idea of “starving the beast” of big government by cutting federal revenue through reduced tax rates

Higher taxes to Obama are not necessarily bad if they serve to redistribute income from the affluent to the less well off — a sort of “spread the wealth” government way of addressing the supposedly inherent unfairness of private-sector compensation.

So why, then, has Obama suddenly turned to deficit reduction?

In a word, politics: The downside of massive borrowing finally outweighed the upside of bigger government. The Tea Party-inspired midterm election brought Republicans to power in the House of Representatives and scared congressional Democrats silly. That’s why Democrats in the Senate voted unanimously to reject Obama’s record-deficit 2012 budget — the sort of intervention that is the fiscal equivalent of a concerned family forcing a binging relative into rehab.

That political anxiety explains why suddenly Obama is now referencing his long-neglected Bowles-Simpson commission on fiscal responsibility and reform — as if the former public relations move is suddenly welcome proof of the president’s long-held fiscal sobriety and sincerity.

The mega-borrowing also did not lead to the robust economic recovery of the cyclical sort that usually follows a steep recession. Unemployment is still at 9.2 percent. GDP remains anemic. Energy prices are still sky-high. The housing market continues to be depressed. Consumer and business confidence is flat.

Finally, it is almost impossible to find any major economist who still argues for greater deficits. Those who once advocated printing our way out of the doldrums — Austan Goolsbee, Peter Orszag, Christina Romer, and Larry Summers — have all left the administration, or intend to, about midway through its first term. They seem more likely to assign the administration’s 2009-2011 economic record to others than claim it proudly as their own.

Note that there is no current example that might suggest big deficit spending leads to national prosperity. The unsustainable debts of Greece, Ireland, Italy, Portugal and Spain have nearly wrecked the European Union. Most consider a fiscally prudent Texas or Utah to be a better job creator than debt-ridden blue states such as California, Illinois and New York. Scholars who analyzed the 2008 financial meltdown see its origins not just in Wall Street greed, but also in massive government intervention into the subprime mortgage markets and in misdirected federal efforts to ensure capital for bankers to lend to unqualified buyers.

So opposition to the president’s budget proposals amounts to more than just a know-nothing rant about no taxes, period. The unease reflects genuine puzzlement — and, yes, anger — over a president addicted to debt, who suddenly wants to preach to others about their responsibility to pay back what he once so zealously advocated that we should borrow.

In short, those in recovery rarely make good puritans.

©2011 Tribune Media Services

Share This