According to numbers published yesterday, the federal debt has increased by over $4.2 billion for every single day that Barack Obama has been in office, or $3 million per minute. In Obama’s 945 days in office, the federal debt has grown over $4 trillion. As a criticism of President Obama, it’s a bit of a statistical cheap shot. When he came into power, a substantial deficit was budgeted for his first year in office, and a majority of the American people (rightly or wrongly) were prepared to accept a substantial stimulus measure in the first months of his administration. What are more disturbing are (1) the continued extraordinary level of deficit spending, (2) the projections in President Obama’s budgets for trillion-dollar deficits as far as the eye could see, and (3) the paltry results of our federal spending binge. When you see a budget that never balances, and indeed never comes close to balancing, it’s reasonable to assume that the strategy is to keep spending levels high in order to force an increase in revenue, an increase that would make the United States more nearly resemble the welfare states of Europe.
Obama’s defenders say that the Great Recession would have been even deeper if it were not for the stimulus spending. In a superficial sense, that’s correct. All that money had to go somewhere, and it did not all go overseas. Some went into jobs and (too little) into infrastructure projects, some to prevent layoffs of federal and state employees, some to extend unemployment benefits, and those salaries and benefits were then spent by consumers. You cannot spend a trillion dollars without creating some employment and consumption. The questions, rather, are (1) Was the benefit greater than the cost?, and (2) Would another approach have been more effective or more efficient in achieving our goals?
To elaborate on (1), we could ask whether financing (say) a trillion dollars in spending through debt and money-printing have done more to harm the long-term prospects of the nation than the short-term benefit we gained from the stimulus measures. How did the actions of the public sector affect the health of the private sector? Did federal spending crowd out private sector spending? Did it effectively undercut the private sector by weakening the dollar? And if the deficit spending ultimately necessitates increased taxation, or leads to inflation, or leads to a more negative assessment of the American economy and stock market, or results in a permanently enlarged federal bureaucracy, then all of those things need to be figured into the “cost” in any cost/benefit analysis.
To elaborate on (2), we could certainly ask whether a trillion dollars could have been better spent in other ways (with more devoted to infrastructure, more to developing our non-renewable energy resources, more to research and employment training, etc.), or whether a better approach would have been to restrain federal spending, return to sound economic fundamentals and wait it out until the American consumer and the federal budget have regained their balance? When $500,000 grants lead to the equivalent of 1.72 jobs, for instance, we can ask whether there were approaches that would have produced more jobs for the same (or a lesser) amount of money.
Then, of course, the even more important question is (3) Where do we go from here? The leaders of both parties have created this problem. The size of government and its debt expanded very rapidly under Bush, and has expanded twice as rapidly under Obama. And whereas Bush was bringing the deficit down, and projected its elimination entirely, the Obama budgets have allowed astronomical deficit spending indefinitely. I agree, apparently, with the majority of American economists, that cutting federal spending, even if it worsens the pain in the short term, is more in the long term interest of the United States. 56% of economists surveyed said the deficit should be closed “only or primarily” through spending cuts, compared to only 7% who thought it should be closed “only or primarily” through tax increases. More on this soon.
It’s important to remember why this matters. I’m not an economist, but I’m having to do an enormous amount of reading in the subject because budgets are indeed moral documents (insofar as they represent decisions for which we are morally accountable) and I believe it’s immoral to pass along a mountain of debt to our children and grandchildren. I also believe it’s immoral to weigh down, more and more, the energy and creativity of the free market, where the poor as well as everyone else can find meaningful work and vocation.