President Obama revealed his 2010 budget this week; it is the latest in the series of government plans to spend incomprehensible amounts of money it does not have.
He proposes $3.6 trillion in spending, which is 71% more than the projected revenues of $2.1 trillion, leaving a deficit of $1.5 trillion. This President’s first budget deficit is bigger than Bill Clinton’s entire first budget. Government spending has doubled in just ten years.
One of my tricks to help people put government spending in perspective is to divide budget numbers by 10,000 to get things down to the size of a modest family budget. The $2.1 trillion of revenue becomes $21,000, what you would earn at $10 per hour.
So imagine a family budget with income of $21,000, spending of $36,000, and running up $15,000 more in debt on your VISA card, which already had a $110,000 balance on it. Does this seem sensible to you? It does to Obama’s team.
The $1.5 trillion deficit is 12% of GDP of the entire nation – unprecedented except during the height of World War II. President Bush was (properly) mauled for running deficits 1/3 this size to finance two wars. The first of these is drawing to a close, so Obama’s deficit spending plan is all the more audacious.
The Obama budget projects massive deficits for each of the next 10 years. In ten years public debt will double to over $22 trillion. In a previous post, I explained why federal debt would soon reach $200,000 per job; the budget confirms that estimate.
In business, a budget like this would not have survived as a first draft, let alone a finished plan. Priorities would be set, decisions would be made, and spending would be cut until deficits were eliminated. In this case, spending would be cut by half. It is no easier to do this in the private sector than in the public sector; the difference is that we actually make the tough choices that the politicians talk incessantly about and never do.
The President’s budget inexplicably repeals the welfare reforms of the 1990s, and puts back in place the failed system that President Clinton and Congress dismantled. Welfare reform is one of the few examples of a government initiative that worked – moving 2/3 of the recipients from welfare to work, and putting the budget in surplus for the first time in several generations.
Taxing the wealthy was supposed to balance the budget; it didn’t. In fact, virtually none of the government’s economic strategies have worked. Trillions have been spent in a series of interventions designed to revive the economy; each has resulted in job losses, a drop in the stock market, and a contraction in GDP. Since candidate Obama became the front runner in the campaign and announced his economic plans, the stock market has dropped 49%.
The laws of economics do not change when administrations do; the forces that guide markets do not recognize bills written by legislatures. Libertarians recognize that the problems caused by too much spending, taxing, and borrowing can not be solved with more spending, taxing, and borrowing.
President Obama, alas, does not.