The Reality Behind Obama and Bush’s ‘Spending Binge’

President Barack Obama

Former President George W. Bush

Posted by  at 12:50 PM ET, 05/25/2012

 
(Ezra Klein/Todd Lindeman)There’s a confused and confusing debate going on over whether President Obama has presided over a “spending binge,” as Republicans claim, or whether, under Obama, “federal spending is rising at the slowest pace since Dwight Eisenhower brought the Korean War to an end in the 1950s.”The key is fiscal year 2009 — and who you blame for it. By any measure, spending popped that year. If you’re looking at raw dollars, it rose by $535 billion. And “the 2009 fiscal year,” writes Market Watch’s Rex Nutting, “which Republicans count as part of Obama’s legacy, began four months before Obama moved into the White House.”That’s true: The federal fiscal year stretches, somewhat weirdly, from October to September. So fiscal year 2009 began in October 2008.

And that’s the point of Nutting’s analysis: if you attribute most of fiscal year 2009 to George W. Bush then, after adjusting for inflation, federal spending under Obama has actually dropped by 0.1 percent. Politifact checked the numbers and agreed: “Using raw dollars, Obama did oversee the lowest annual increases in spending of any president in 60 years,” they write. “Using inflation-adjusted dollars, Obama had the second-lowest increase — in fact, he actually presided over a decrease.” Here’s Nutting’s graph:


(Rex Nutting/Market Watch)Republicans point out that Bush was negotiating with a Democratic Congress. His 2009 budget request asked for considerably less money than we actually spent. And Obama actually signed the last part of the budget in March 2009. All of which is true. (Here’s an infographic summing up some other problems Republicans have with Nutting’s analysis.) Nutting points out that in 2010 and 2011, Obama was negotiating with a Republican Congress, which is part of what restrained his spending. That’s also true.

But I’d point out that this entire conversation is nonsense. So far, we haven’t mentioned the only fact that really matters, which is that the economy began to collapse in late-2008, and continued to crater through much of 2009. Or, as Donald Marron, director of the Tax Policy Center, puts it, “the real issue is that 2009 is an anomaly driven by crisis.”

That there’s an implicit taunt in this debate just goes to show how blinkered our fiscal conversation has really become. It was proper that spending jumped in 2009. If the Ghost of Ronald Reagan had occupied the Oval Office, spending would have jumped in 2009. That’s just what happens when you hit a once-in-a-generation recession.

It is proper that, since 2009, spending has remained high in order to support a badly wounded economy and help unemployed workers and struggling families. The question isn’t which president to blame for elevated spending in 2009 — the blame there goes to the financial crisis, though Republicans conveniently forget that in order to score points. The question is where should spending be now?

”Obama chose not to reverse that elevated level of spending,” writes Jim Pethokoukis, a blogger for the conservative American Enterprise Institute, “thus he, along with congressional Democrats, are responsible for it. Only by establishing 2009 as the new baseline, something Republican budget hawks like Paul Ryan feared would happen, does Obama come off looking like a tightwad. Obama has turned a one-off surge in spending due to the Great Recession into his permanent New Normal through 2016 and beyond.”

That last line, by the way, isn’t true. Obama’s budget plans to bring spending down to 22.5 percent of GDP in 2016 — which is about where it was in the Reagan years, and our demographics are worse now than they were then. But Pethokoukis’s broader point is correct: The real debate here is what spending should have been in 2010 and 2011.

The Obama administration wanted it to be higher. After all, unemployment rose through 2010, and remains high today. It has proposed a raft of additional stimulus bills since 2009. Republicans in Congress, however, refused to pass most of their plans. Properly understood, the fact that inflation-adjusted spending has fallen since fiscal year 2009 is the result of Republican obstruction in Congress. That Democrats are now crowing about these numbers — the DNC is e-mailing them around — and that Republicans are now viciously disputing them is an embarrassment to both sides. You could as easily imagine Democrats lamenting these numbers as evidence of our failed policies and Republicans celebrating them as evidence of their congressional successes.

But Republicans don’t want to admit that they bear substantial responsibility for the economic policy of the last few years. If they did, then it would be hard to argue that the economy’s performance in 2010 and 2011 is all Obama’s fault. And the Obama administration doesn’t want to clearly say that we should have been spending more in recent years, even if that’s what they believe, and what they proposed, because it polls poorly. And so here we are.

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Posted on June 8, 2012, in News, Politics and tagged , , . Bookmark the permalink. 5 Comments.

  1. This is quite an assessment of the the spending over the last 3 years. You’ve included a number of sources I had not seen before.

    Well done!

  2. Anyone who actually investigates the cause of the housing crisis knows it was caused by too much government. All establishment politicians of both parties, including Obama, are responsible for the elevated spending levels in 2009 that included the first bailout and TARP. Obama followed with another bailout/stimulus upon taking office with his one-and-only passed budget.

    Any discussions attempting to absolve Obama from his share of the blame of the high spending is at best political maneuvering, and at worst ineptitude. Keynesian policies do not work. They do not work regardless of what names are attached to them, whether they be Bush, Reagan, or Obama. It is time to shrink back government and reduce spending.

    • G> I think we’ve seen what cutting spending (austerity) has done to Europe. That strategy does not work when recovering from a deep financial crisis like the Great Recession. Had we gone that route (employed to GOP plans) we would have very likely ended up in a double-dip recession or a depression. Stimulus and government spending IS how we pull out of such events. It worked under FDR, Reagan and it worked as much as it could under Obama given the realtively small amount.
      The time to pull back on government is when the economy is back to its health state.

  3. Europe is an example of what happens when countries spend beyond their means for too long. Most of Europe’s socialist countries are so far in the hole and are resistant to the level of spending cuts necessary to climb their way out.

    If the USA would drastically cut spending and provide stability for businesses to know what the tax rates were going to be for the foreseeable future (a low flat tax preferred), the economy would come roaring back. As it stands now, high spending creates an atmosphere where businesses expect taxes to be jacked up at some unknown point in the future. This forces businesses to prepare for the expected expense down the road and makes it less likely they will spend their own capital now.

    Government spending allocates money from the productive to the unproductive. It saturates some markets while ignoring others. If the money were left in the hands of the people, markets could ebb and flow naturally and be more productive in creating wealth. Too much government meddling in the markets is what got us into this mess to begin with and both parties are to blame.

    • “Europe is an example of what happens when countries spend beyond their means for too long.”

      Not really. The recession slashed ALL countries’ (including the US’s) tax base. THAT is the major reason we/they ended up with so much debt spending. Loss of revenue will do that when the bills still need to be paid.

      “If the USA would drastically cut spending”

      That is what Europe did and it has curtailed their recovery significantly and has caused worry about a double-dip. It was also what happened when we saw the double-dip in 1937.

      “As it stands now, high spending creates an atmosphere where businesses expect taxes to be jacked up at some unknown point in the future. ”

      Hardly, G. Hardly. Business primary concern over and above anything else is DEMAND for their products and services.

      “Government spending allocates money from the productive to the unproductive.”

      LOL!! Where did you come up with that? The vast majority of large projects, the most significant technological/scientific innovation and the mass of infrastructure we ALL use are were started with government investment and partnership with businesses. Those are the facts that are lost on the current “government is the evil of everything” mentality.

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