Federal Budget, Deception in the Budget, Deficit Spending, Budget Manipulation
Friday April 3, 2009
Today's Zinger:
To Be A Hero, Start By Managing Expectations.
Morning Briefing:
Some people become heroes by rising to the occasion, some by doing heroic deeds in times of sudden need and some plan the event by managing the expectations and tell a good story. I believe that we are about to witness the latter in this President's Administration.
The Facts:
- The House approved the 2010 budget blueprint that the President requested.
- The budget incorporates $600 billion in unspecified health care spending and additional funding of social services and short-term spending.
- There is a $1.2 trillion deficit planned for the 2010 Budget.
- There is a planned $9 trillion deficit over the next 10 years. This deficit will triple from current levels.
- The budget and ten year plan assumes a very robust economy starting in 2010. The Congressional Budget Office states that this is too optimistic and anticipates the budget deficit could exceed the $9 trillion by as much as $3 trillion dollars, resulting in a $12 trillion deficit.
- Economists agree that the $800 billion stimulus package passed in February will have its greatest impact in 2010-2012 but will then result in a significant drop in economic output unless there is sufficient business growth to take up the loss of spending by the government.
Discussion:
I can hear the campaign 2012 rhetoric now. The economy should have come back from the depths of the current recession through normal market corrections and the government spending associated with the stimulus package. The 2010 budget, with its $1.2 trillion dollar deficit, will be blamed on the prior administration (a.k.a. Bush) and that the current administration (a.k.a. Obama) will declare they have cut the federal budget as promised in his 2008 campaign. We can all hoist the flag of victory and declare "the policies of this administration have corrected the failed policies of the Bush Administration". The economy has improved since they took office. They cut the deficit has promised.
But what they didn't say is they are the ones that set the initial bar. In a time of economic contraction, the federal government has raised their spending to unprecedented levels. Federal spending is like drugs. The more you do the better you feel in the short term. However, like a drug addict that runs out of money (say 2011-2012), you borrow (The U.S. Treasury mints money) until the lender (China) won't lend any more. When the ability to borrow (from the world) ends and the ability to print money (due to its inflationary effects) ends, the addict is left with the harsh reality of the consequences of the drug. You end up broke and in pain looking to your children, or anyone else, to help you.
I believe that the current administration does a masterful job of political chess. They manage communications very well. What we as the citizens of this country must avoid is being manipulated. In three to four years, when the drugs effects are at their peek we must see through the fog of politics and look a few years down the road. The rhetoric may say "are we better off today then we were four years ago?" The answer may be yes, but is it because of the drug of borrowing and the manipulation of the budget.
Most people can accept some level of government spending to jump start the economy. The budget is not the place to do this. Special funding through stimulus packages or redevelopment bills, such as infrastructure spending, should be used. These have a specified life and a defined purpose. Padding the federal budget with an 8% funding increase, combined with unspecified spending for "health care" is not responsible. However, it does give them the ability in 2012 to say they cut the budget and the economy is better. What other reason would you give for a stimulus package that doesn't really start stimulating until 2010-2012? The timing is very suspicious. Most Americans are not educated enough to understand the cocaine they have been given.
We must all be vigilant in challenging our elected representatives. Certainly President Obama was challenged in Europe this week. They have strongly cautioned as to the deficit spending and government role in health care. In the past administration, many Americans yelled at President Bush to listen to our partners and not be a lone ranger. Maybe Americans should start yelling at President Obama to start listening to our partners instead of the ivory tower group that is counseling him today. It seems to me we have a group of academic cowboys, sans hats.
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