COP: Stop Digging

Another day, another poll showing public support for President Barack Obama's Trillion Dollar Debt Plan sinking fast. Trying to turn these numbers around, Obama went on the offensive yesterday delivering some red meat to House Democrats at their posh Resort and Spa retreat in Williamsburg, Virginia. Defending his plan, Obama told Democrats: "[We] are not going to get relief by turning back to the same policies that for the last eight years doubled the national debt and threw our economy into a tailspin. ... I found this national debt, doubled, wrapped in a big bow waiting for me as I stepped into the Oval Office. ... What do you think a stimulus is? It’s spending — that's the whole point! Seriously."

Seriously, where has Obama been the last eight years? What does he think got us into this mess? Where does he think those deficits came from? Here are the facts. Before President Bush took office, the federal government took in $2 trillion in revenue in 2000. In 2009, the federal government is expected to take in $2.4 trillion. After eight years under President Bush, the federal government is taking in $400 billion more a year in revenue. So why did Congressional Budget Office project a $1.4 trillion deficit for the 2009 budget? Massive spending increases. As McClatchy reports "George W. Bush, despite all his recent bravado about being an apostle of small government and budget-slashing, is the biggest spending president since Lyndon B. Johnson. In fact, he's arguably an even bigger spender than LBJ." McClatchy goes on to detail Bush's spending binge including an 18% increase in education spending, a doubling of agriculture spending, the 2003 Medicare expansion which was the "biggest single expansion in the programs history", and the $295 billion 2005 infrastructure bill.

So to recap, in 2000 the federal government spent just $1.8 trillion. Now the CBO estimates that the feds will spend almost double that, $3.5 trillion, in 2009 (and that does not include Obama's Trillion Dollar Debt Plan). Combining the increased $400 billion in revenue with the $1.7 trillion increase in spending, we see that the mountains of debt Obama is whining about inheriting all came from massive increases in federal spending. It was borrowing and spending that got us into this mess. Obama's Trillion Dollar Debt Plan is not a 'change' from Bush, it is Bushonomics on steroids.

And the $816 billion price tag is a completely dishonest scoring of the plan's real size. This is because the stimulus bill pretends that most of its welfare benefit increases will lapse after two years. In fact, both Congress and President Obama intend for most of these increases to become permanent. The notion that Congress intends to temporarily increase Pell grants and Earned Income Tax Credit benefit levels for just two years and then let benefits fall back to their original status is out of touch with Washington reality. Any Congressman who, two years from now, suggests that the new welfare spending be allowed to lapse to pre-stimulus levels would be pilloried for slashing welfare.

According to a new study by Heritage senior research fellow Robert Rector, once the hidden welfare spending in the bill is counted, the total ten year fiscal burden (added to the national debt) will not be $816 billion, as claimed, but $1.34 trillion. Where is Obama going to find all the money to pay for this spending? Right now Treasury securities are selling at high prices and with low yields. But how long will credit be cheap? Will it still be when the Treasury is scrounging around in the international credit markets six months or a year from now? China and Japan account for almost 65% of total Treasury securities held by foreign owners. But their economies are also slowing. If they even start slowing their appetite for U.S. debt, a drop in world market demand for Treasurys could drive borrowing costs upward, and there could be a ballooning of the interest cost line in the budget that will worsen an already frightening outlook.

Last night Obama told Democrats, "If you’re headed for a cliff, you have to change direction." That's a decent analogy, but the problem is his Trillion Dollar Debt Plan is not a change in direction. It is a foot on the accelerator. Instead, the Senators voting today should take another saying to heart: "When you find yourself in a hole, stop digging."