Oh Joy, Another $1.6 Trillion in Deficit Spending

The big news of the day is the budget, all $3.8 Trillion of it, including a $1.6 Trillion deficit. We'll hear lots of talk of what was inherited to be sure. This CBO graph, however, puts the inheritance in context:

To be sure, Republicans spent like drunken sailors, but they don't hold a candle to the Democrats.  Rep. Jeb Hensarling made an appearance on Morning Joe this morning to discuss the budget shortfall and his famous exchange with President Obama at the Republican House retreat on Friday.  The point he makes quite early in the segment is one that bears repeating.  Congress spends the money and it was a Democratic Congress that has controlled the budget since 2006.    Republicans were certainly not without blame but they paid a dear price for their spending and were voted out in droves beginning in 2006.  

Hensarling makes mention of Paul Ryan's budget at the very end of the segment.  Ryan issued a statement today about the budget and has analysis, charts and graphs including the following graph to illustrate how fiscally responsible the Democrats have been since taking charge of government:

Perhaps this explains why Joe Scarborough concedes Paul Ryan is a star at the end of the Morning Joe segment:

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Paul Ryan Reintroduces his Roadmap - Can We Get Him a Truck?

Rep. Paul Ryan reintroduces his Roadmap for America in today's Wall Street Journal.  He highlights the differences between his plan and what is currently offered by Democrats:

The difference between the Road Map and the Democrats' approach could not be more clear. From the enactment of a $1 trillion "stimulus" last February to the current pass-at-all costs government takeover of health care, the Democratic leadership has followed a "progressive" strategy that will take us closer to a tipping point past which most Americans receive more in government benefits than they pay in taxes—a European-style welfare state where double-digit unemployment becomes a way of life.

Americans don't have to settle for this path of decline. There's still time to choose a different future. That is what the Road Map offers. It is based on a fundamentally different vision from the one now prevailing in Washington. It focuses the government on its proper role. It restrains government spending, and hence limits the size of government itself. It rejuvenates the vibrant market economy that made America the envy of the world. And it restores an American character rooted in individual initiative, entrepreneurship and opportunity.

It looks as though  Ryan is taking the lead on offering voters a clear alternative from Republicans much like Newt Gingrich did in 1994.  While Democrats were determined to ram health care through without Republican input, Ryan's health care plan was rebuffed without serious consideration.  Ryan's plan addresses the serious shortfalls looming for entitlements such as Medicare and Medicaid which are bound to force drastic measures to correct the longer they go unaddressed.  

Congressman Ryan discussed his roadmap in an appearance this morning on "Morning Joe."  While Ryan acknowledges inherited budget problems, he failed to mention that it was a Democratic Congress that has passed the budgets since 2006.  These are budgets that then-Senator Barack Obama voted for and approved.  I wish that Ryan had mentioned that point since we will likely hear the word inherited at some point in the SOTU speech tonight.  That criticism aside, Ryan does a nice job presenting his roadmap and stepping forward to fill Gingrich's role.  Shall we call him the "New Newt?"  

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Again With the $1.3 Trillion Inherited Deficit?

This time from Bruce Bartlett, a conservative economist who should probably know better than to make a statement like this:

In January, the Congressional Budget Office projected a deficit this year of $1.2 trillion before Obama took office, with no estimate for actions he might take. To a large extent, the CBO’s estimate simply represented the $482 billion deficit projected by the Bush administration in last summer’s budget review, plus the $700 billion Troubled Asset Relief Program, which George W. Bush rammed through Congress in September over strenuous conservative objections.

Ahemmm, which branch of government votes on the federal budget? Why Mr. Bartlett would that be the Legislative branch, meaning the House of Representatives and the Sentate? Next question, which party has had control of the House and Senate since 2006? Why that would be the Democratic party, wouldn't it? Now, trick question, what man who happens to reside at 1600 Pennsylvania Ave., was a member of The US Senate last year? If you guessed Barack Obama, you would be correct. How did he vote on that TARP legislation:



Of course, this is not Mr. Bartlett's sole argument in this piece. He argues that had McCain won the election the economy would be as bad as it is right now and that our anger should be targeted on George W. Bush. Bush is not President and has no control over where this country goes in the future, what's the point? Whether the economy would be the same under a McCain presidency is not certain. I am pretty sure we wouldn't have had the $800 billion porkulus bill rammed down our throats leaving the bill for our children to pay. I am sure we wouldn't have the extra $400 billion Omnibus spending bill. I am pretty sure we would not be talking about "single payer" health care or a "strong public option," whatever that means. Whether or not the economy improved under McCain or was at least equally bad, we wouldn't have added to the deficit in such a massive way and irresponsible way.

We most likely wouldn't have pent up demand for deals and mergers in the health care industry as well as in other facets of the economy. It's hard to imagine a President McCain would have nationalized the automobile industry and in so doing sent the precarious message to all, contracts don't mean what you think they mean. It seems to me with McCain we would have at least had rules, and with rules you have certainty. Markets love certainty, they like to know the rules. With a President Obama, the only thing certain is the uncertainty.

Steepest Revenue Loss Since the Great Depression.

On July 20, 2009 AP reported , the Obama Administration would delay the release of the annual midsummer budget update normally released in mid July. The update was predicted to show higher deficits, lower revenue and higher unemployment levels which could potentially derail the President's efforts to get health care legislation before the August recess. With Congress now on recess, The Associated Press was able to view the revenue numbers and the numbers were startling. The following chart shows the steep loss in revenue not seen since the Depression:



While tax revenue is set to drop 18% the federal deficit is on course to run a record $1.8 Trillion. The AP notes:

Other figures in an Associated Press analysis underscore the recession's impact: Individual income tax receipts are down 22 percent from a year ago. Corporate income taxes are down 57 percent. Social Security tax receipts could drop for only the second time since 1940, and Medicare taxes are on pace to drop for only the third time ever.

How might this revenue loss effect the Administration's agenda? William Gale, an adviser to George H.W. Bush serving on the Council of Economic Advisors responds:

"If it's just one year, then it's a remarkable thing, but it's totally manageable. If the economy doesn't recover soon, it doesn't matter what your social, economic and political agenda is. There's not going to be any revenue to pay for it."

Social Security set to begin paying out more than it receives in revenue in 2016, it is projected the entitlement could be depleted by run out of funds as early as 2029. President Obama argues that health care reform is necessary in order to prevent bankrupting the country. The Congressional Budget Office has a chart that shows factor affecting the long term debt as a percetage of GDP:


Director Elmendorf notes:

Keeping deficits and debt from reaching these levels would require increasing revenues significantly as a share of GDP, decreasing projected spending sharply, or some combination of the two.

Since medical spending on the growing aging population a key factor in long term debt, any health care reform must be more than deficit neutral, it must do as the President has said needs to be done, "bend the cost curve downward." None of the current Democrat proposed legislation does that, in fact they increase long term deficits. Passing such legislation in haste before the true picture of the current situation would have been reckless and irresponsible.