The healthcare debate overshadowed an ominous warning from Moody’s Investors Service two weeks ago that the exploding U.S. government debt could result in a downgrade of Treasury bonds.
Not to worry, President Obama has said. He is on top of it.
The government “simply cannot continue to spend as if deficits don’t have consequences, as if waste doesn’t matter, as if the hard-earned tax dollars of the American people can be treated like Monopoly money, as if we can ignore this challenge for another generation,” Obama said as he released his new budget.
Yet, in the best analysis I have seen, the Heritage Foundation’s Brian M. Riedl shows that Obama’s budget does just that. Rather than curbing spending to spare future generations, Obama’s budget raises taxes by $3 trillion and federal spending by $1.6 trillion over the next 10 years, the analysis shows.
“If enacted,” Riedl writes, “this budget would increase the 2010 deficit to more than $1.5 trillion, and leave a deficit of more than $1 trillion even after an assumed return to peace and prosperity.”
Overall, the president’s budget would double the national debt over the next decade.
Before the recession began, annual federal spending totaled $24,000 per household. Obama would increase that spending to more than $36,000 per household by 2020.
Riedl notes that, during the State of the Union address in January, Obama asserted that “by the time I took office, we had a one-year deficit of over $1 trillion and projected deficits of $8 trillion over the next decade.”
Obama blamed that on the costs of two wars, two tax cuts, and a prescription drug program.
Obama’s claim is misleading, Riedl says.
“The various policies mentioned by President Obama were implemented in the early 2000s,” he says. “Yet even with all those policies in place, the 2007 budget deficit stood at only $161 billion. The trillion-dollar deficit did not begin until 2009 (driven by financial bailouts, stimulus, and declining revenues) as the recession hit its trough.”
Although Obama has criticized the $3.3 trillion in budget deficits accumulated in eight years under President Bush, Obama now is proposing to borrow $7.6 trillion during what would be his own eight years in the White House, Riedl says.
At the same time, Obama has claimed that his budget deficits are a temporary result of the recession. “Yet his budget would increase the deficit in 2010 even as the economy moves out of recession,” Riedl notes in his analysis, produced by the Thomas A. Roe Institute for Economic Policy Studies.
As if these points were not damning enough, Riedl exposes a series of “gimmicks” that Obama uses to make his budget projections rosier than warranted. For example, Obama makes his budget appear less costly by assuming the Iraq war will continue forever and then claims credit for reducing spending by $728 billion by ending it according to his announced schedule. He claims a $132 billion saving over 10 years by cutting waste and abuse, but that is based on hope rather than reality.
Finally, Obama assumes an economic recovery that is more robust than warranted. His budget projects that in 2011, the economy will grow by 3.8 percent, twice the 1.9 percent growth rate forecast by the Congressional Budget Office (CBO), Riedl says.
“Over the next decade, the president’s budget assumes 43 percent real growth, compared to the CBO estimate of 37 percent,” Riedl writes.
That means the White House projects that, in 2020, the economy will be nearly $1 trillion larger — adjusted for inflation — than the CBO estimates.
Riedl warns, “President Obama has offered a budget that does nothing to address the nation's serious short-term and long-term fiscal problems — and indeed makes them worse. By doubling the national debt above pre-recession levels, America could be heading toward the tipping point when debt levels will become too large for global capital markets to absorb, potentially triggering a financial crisis, an interest rate spike, and crippling tax increases.”
Countries that finance U.S. debt will note that President Obama’s budget includes no plan for long-term fiscal sustainability, Riedl says.
“While he talks of controlling entitlement spending, his budget would do the opposite,” Riedl says. “By supporting a trillion-dollar healthcare expansion that is partially offset with tax increases and Medicare cuts, he essentially takes those policies off the table for any future deficit reduction. That means higher taxes and deeper spending cuts down the road.”
In short, Obama’s deceptive budget will lead the United States to disaster.
Ronald Kessler is chief Washington correspondent of Newsmax.com. View his previous reports and get his dispatches sent to you free via e-mail. Go here now.
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