Dan Mitchell explains in the above video that Europe can grow and prosper, but only if politicians are willing to reduce the burden of government spending and lower tax rates.
I have a lot of respect for Tea Party heroes like Tim Huelskamp and Justin Amash who are willing to propose deep spending cuts so we can eventually balance our budget. Nevertheless there are some liberals like John Brummett that want us to think that President Obama did right by doing that stimulus spending and he has not been a big spender. I will straighten that out later in this post.
It is a fact that we must balance the budget soon. I do not believe that we can wait to balance the budget at some distant time in the future. The financial markets will not allow us a long time to get our house in order. Look at how things have been going the last four years and no matter how anyone tries to spin it, we are going down the financial drain fast. Dan Mitchell of the Cato Institute showed in an article that I posted earlier about how much spending has exploded the last four years.
John Brummett wrote in the online addition of the Arkansas Democrat-Gazette on May 30, 2012:
Obama did indeed run up the deficit with a stimulus measure to keep the economy from collapsing as he entered office…But in regard to budgets that he actually has proposed as president, beginning with the one for the fiscal year starting nearly a year after his election, Obama has raised spending at a slower rate than Clinton…
Republicans simply are more effective than Democrats at declaring a simple untruth loudly and repetitively through a pliable and powerful echo chamber of talk radio and cable news, thus embedding that untruth beneath the superficial consciousness of people otherwise disengaged.
Now the truth of the matter is that Obama has spent around 25% of GDP when Clinton and most of the other presidents spent 20% or less. This fact allow disproves Brummett’s assertions listed above.
Dan Mitchell of the Cato Institute sets the record straight concerning Obama’s spending:
Last week, I jumped into the surreal debate about whether Obama has been the most fiscally conservative president in recent history.
I sliced the historical data from the Office of Management and Budget a couple of ways, showing that overall spending has grown at a relatively slow rate during the Obama years. Adjusted for inflation, both total spending and primary spending (total spending minus interest payments) have been restrained.
Good questions. It turns out that Obama supposed frugality is largely the result of how TARP is measured in the federal budget. To put it simply, TARP pushed spending up in Bush’s final fiscal year (FY2009, which began October 1, 2008) and then repayments from the banks (which count as “negative spending”) artificially reduced spending in subsequent years.
The combination of those two factors made a big difference in the numbers. Here’s another table from my prior post, looking at how the presidents rank when you subtract both defense and the fiscal impact of deposit insurance and TARP.
But this ranking is incomplete. At that point, I was trying to gauge Obama’s record on domestic spending, and the numbers certainly provide some evidence that he is a stereotypical big-spending liberal.
But the main debate is about which president was the biggest overall spender. So I’ve run through the numbers again, and here’s a new table looking at the rankings based on average annual changes in inflation-adjusted primary spending, minus the distorting impact of deposit insurance and TARP.
Obama is still in the second-to-last position, but spending is increasing by “only” 5.5 percent per year rather than 7.0 percent annually. This is obviously because defense spending is not growing as fast as domestic spending.
Reagan remains in first place, though his score drops now that his defense buildup is part of the calculations. Clinton, conversely, stays in second place but his score jumps because he benefited from the peace dividend after Reagan’s policies led to the collapse of the Soviet Empire.
Let’s now look at these numbers from a policy perspective. Rahn Curve research shows that government is far too big today, so the goal of fiscal policy should be to restrain the burden of government spending relative to economic output.
This means that policy moves in the right direction when government grows more slowly than the private sector, as it did under Reagan and Clinton.
But if government spending is growing faster than the productive sector of the economy, as has been the case during the Bush-Obama years, then a nation eventually will become Greece.