President Obama: A Fiscal Moderate who has shown spending restraint?

I'm sure most here have seen the dueling arguments this week about whether President Obama is a big spender or a surprising fiscal conservative. The new argument is that under his presidency federal government spending has risen at its slowest pace in about 60 years, at less than 2% per year. And it was a relatively conservative publication that first released this news. While it is true that the federal deficit has risen faster over the past 3 years than at any time in history, the argument goas that it's been a revenue problem and not a spending problem that is causal. In other words, the fact that a severe recession reduced both individual and corporate tax receipts meant far less revenue and therefore a balooning deficit. And numbers on the expense side suggest that Obama has actually showed spending restraint.

Now there is a new argument being spread by conservatives that "proves" that Obama is a big spender by looking only at discretionary spending which has risen 7% per year under this president. But it is actually hard to assess this figure because it includes spending in entitlements that would naturally rise during a severe recession when people have more needs. And this president did not change the rules regarding entitlements to make them easier to get - people are getting them under the same rules that existed before Obama took power.

So are the Republicans just playing off of stereotypes here, in this case that Obama and Democrats are big spenders, when it may not be true? I am hoping that people can share arguments that get beyond stereotypes and dive into actual "proof" on either side.
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A Collective Good: Political Issues explored from a new perspective

 

The problem isn't that spending is increasing rapidly, it's that it skyrocketed around the time of the financial crisis and has not decreased since.

 

What made him think he could cut the deficit in half by the end of his first term? He promised to do so.

 

I agree - stupid thing to say. I guess he thought the turnaround would happen more quickly. And they will both make stupid promises for the next 5 months. What could have been amazing is that if he "promised" to hold spending under a 2% increase each year we would have thought that was a stupid promise true, but it looks to be the case.

 

..../End Thread.


For even the lunatics out there who believe Owebama is a Fiscal Conservative........

.......the one fact you cannot deny.....Barack HusSame Obama--The Most expensive President in World History...........

...........WANTS TO SPEND EVEN MORE.
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.......if props are to be given to anyone for fiscal discipline, its the Tea Party in the House, who have managed to stop the hair brain and bankrupt agenda of Obama.
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You've gotten to the heart of the problem and it comes on top of a truly great financial tragedy known as the National Debt! Two simple statistics tell the whole story:

1. When Obama stumbled through the Oath of Office in January 2009, the National Debt was $10.6 Trillion Dollars.

2. Today, after three years and four months of President Clueless, the National Debt is $15.7 Trillion Dollars -- and he'll continue to push it skyward until we throw his incompetent ass out of office, because this is the only thing that Keynesian-minded socialists know how to do! http://www.usdebtclock.org/

It is destroying the Eurozone, and we are on the same general trajectory -- but with a much more disastrous prospect because the US represents much greater "tonnage"....

 

"the argument goas that it's been a revenue problem and not a spending problem that is causal."

Of course it is a spending problem and has been for 100 years. If you don't have X revenue then you shouldn't do X spending. Just like a business has to trim itself in hard times, so should government. Instead it just grows and grows and grows and grows. It is a deficit spending problem.

 

When the economy is in recession heading towards depression, cuts in spending is only going to create more unemployment and slow down the economy even further. Had he done that, the economic crisis would probably be a lot worse. Look how austerity worked out for Europe.

 

These are kind of the statements that make educated economists jobs very hard. How do you deal with a country full of idiots who think they know how a $15 trillion monetary system is supposed to work.

I don't get why you guys wouldn't even try to understand why countries do what they do. Cutting Govt spending during a recession is a guaranteed way to cause a depression.

 

"Cutting Govt spending during a recession is a guaranteed way to cause a depression (?)" What kind of malady does insane increases in government spending produce? On Obama's watch, the National Debt has increased more than 50% in three years and four months! I'm not making any of this up: http://www.usdebtclock.org/

The only people who have been helped to any significant degree are the investment bankers (Bernanke's buddies, of course), the stock markets (big Obama supporters), and a gaggle of exporters. Over 40% of Americans don't even pay any Federal taxes, but over 50% of Americans are currently receiving one kind of welfare or another from Uncle Sugar. How the hell does THAT make any sense, and how long do you "Keynesian theory" people imagine this kind of idiocy can go on...?!

 

You are correct.

 

How did it work? I mean, I know they had tax increases, but did they actually cut spending, or merely slow the increase and called it "austerity?"

 

Over the last 4 years, inflation has been around 8 to 10% while spending has decreased by one or two percent is some cases but mostly there has been decrease. I did say if you take the real value of money, it would be around 10% decrease in spending, if not more. Its also the reason France has elected a Socialist as President because austerity from all the evidence available, is simply not working but is only creating increased employment.

According to the IMF, which analyzed 173 episodes of austerity, cutting the deficit by 1 percent of GDP can be expected to reduce real incomes by 0.6 percent and raise unemployment by 0.5 percentage points.

Here's what austerity looks like:
http://www.washingtonpost.com/blogs/ezra-klein/post/what-austerity-looks-like-in-three-graphs/2012/05/10/gIQACLWkFU_blog.html

 

Those charts in your link didn't address what I think is the major issue, were there actual spending cuts? And no, not phony "reducing the increase." That's not a cut. Did they actually reduce spending?

The charts show that there were deficit declines, but as far as I can tell, that's based on tax increases. So the evidence presented so far as that European states hiked taxes, and then sunk into another recession with rising unemployment. So if I understand your argument, raising taxes damages economic growth. Correct?

 

I think:

Obama did not know the depth and breadth of the financial collapse, no one did.
Obama assumed he would be able to end some of the bush tax cuts and increase revenues. He did not. He extended them added the payroll tax cut and added more tax cuts in the stimulus.
Not knowing the depth of the collapse he failed to estimate the full impact on tax revenues.

I cannot be sure that the Bush administration knew either. I would like to think that they did not understand what was happening because no one had seen this type of collapse before. Lots of people saw it coming but, I think, very few predicted the depth and breadth of the collapse.

This is not to excuse Obama.

The stimulus was wrong headed. Too much tax cuts and not enough infrastructure spending. People without jobs and with collapsing businesses don't need tax cuts, they need work. While I was disappointed in the structure of the stimulus, it did work, just not as well as if it had been more jobs focused than tax.

I like Obama but I do wish he had been less condescending to congress from the beginning.

 

I already told you, in terms of nominal amounts, spending has only increased by 1 or 2% in few cases and decreased or remained the same in most cases. Take into account inflation of 8% over the period and spending cuts in terms of real moneywould be in the range of 8 to 10%.

 

First of all, inflation in the Euro Zone is at 2.5%. The highest it's been in the past couple of years is at 3%. I'm not sure where you are getting the 8% from.

Secondly, inflation is irrelevant for the argument you're making. It sounds like European "austerity" was simply raising taxes to reduce deficits.

 

Yes. 2.5% to 3% per year. So over a 4 year period, the total interest will be 8 to 10%.

How is inflation irrelevant? If a household was spending USD 100 five years ago, with an inflation of 10%, they did have to spend 110 USD to maintain the same standard of living. However, if they are spending only 98 or even 100 USD today, their buying power would have diminished considerably meaning that they would have had to cut back on some expenses or that they are not buying as much as they were buying 5 years ago.

Raising taxes had little to do with it. When the economy is in the state it is in, taxing the poor or middle class who are living paycheck to paycheck, is not going to make a difference because in this case the only thing that will happen is that the government will be spending the money rather than the individual. However, it makes sense to tax the rich because they would have their money in the form of savings that needs to be injected into the economy. There is a need to revise the whole taxation system in the US. raising tax on the poor and even the middle class to some extent, would be counter productive while the economy is recovering. However, it makes sense to raise taxes on the rich or at least to get them to pay their fair share and not a lower rate than what the middle class are paying. Case in point. Mitt Romney.

What's the main difference between what US did and what Europe did. US increased money supply while Europe raised taxes. The effect of both was to ensure government revenue does not increase sharply even as taxable income decreased. The real difference between the approach of the 2 countries was that US increased spending while Europe decreased it. (yes decreased. In terms of real money, they are spending less than they were 4 years ago) What happened is for all to see. The US economy is improving while Europe's economy is showing little or no signs of improving.

 

take out the war spending and the stimulous to help get us out of the hole republicans got us in and what spending are we left with?

 

OK it sounds like your saying that even if Eurozone countries didn't actually reduce spending, they didn't raise it enough to keep up with inflation, so the share of government spending for your typical Eurozone country should actually be a smaller share of GDP than it was four years ago. Is that your argument?

I'm trying to keep up with this slippery definition of "austerity." It sounds like austerity doesn't really mean austerity.

 

The real value of spending has decreased. If the government was hiring 10 workers, now its hiring. That's austerity.

Imagine a person with USD 100 income the full of which he spent on buying 10 loaves costing 10 USD each. Inflation erodes the real value of money so that although his income has not changed, not his spending, he can only buy 9 loaves now. He is having to "cut his belt". To be more frugal. That is exactly what austerity means. That is what the economists says. But of course, you don't listen to experts. You only listen to Faux News.

 

I don't really understand the gratuitous comment about "Faux" News. If it matters, my primary TV news source is MSNBC, although I admit, I'm into it mostly for the laughs.

Now, as to the meat of your argument, this inflation example would only apply if the actual amount of Eurozone national budgets remained the same. But let's take France for example, which recently changed governments because it was straining under the crushing demands of austerity. In 2005 it's national budget was 288.8 billion Euros. For 2011, it's budget was forecast as 359.8 billion Euros (this was the target, I bet the actual figures were much higher). That means the budget increased approximately 20 plus percent during that time frame, which comes out to more than the inflation rate. Now is this what you are calling austerity?

Now if the 2011 French national budget were the same amount in Euros as it was in 2005, 288.8 billion, then you would have a point.

How much does national spending have to increase above the inflation rate before it's not considered "austerity?"

 

Who cares. The national debt increased 184% during Reagan's tenure. We didn't collapse then why do you think it's such a big deal now? Spending and debt are relative. And Govt spending is not deficit spending. They are two completely different terms.

We are not using Keynesian theory at all right now. We are as conservative as we've been in the past 50 years. What a surprise we are struggling.

Keynes is rolling in his grave right now wanting to get out and slap some conservatives!