Back during the 2008 campaign, then-candidate Barack Obama told Americans on more than one occasion that they would see a net-spending cut during his first-term in office. But nearly four years, that promise hasn’t come to fruition. In fact, the national debt has grown by more than $5 trillion as spending was increased, as is taught in the Keynesian school, to “prime the pump” of the economy. Obama once said such out of control spending was “unpatriotic.” My, how things have changed.
During an interview on The Late Show on Tuesday night, President Obama told David Letterman that the national debt really isn’t a big deal:
President Obama said that the U.S. does not have to “worry” about its $16 trillion debt in the “short term.” He also could not “remember” what the nation’s total debt figures were when he entered office.
“I don’t know remember what the number was precisely,” Obama told talk show host David Letterman during an interview.
Letterman asked him if Americans should be “scared” of the trillions of dollars it owes to other countries.
“A lot of it we owe to ourselves. Because if you invest in a treasury bill or something like that then essentially you’re loaning the government money. In fact, the majority of it is held by folks who live here, but we don’t have to worry about it short term,” Obama responded.
“Right now interest rates are low because people still consider the United States the safest and greatest country on earth, rightfully so, but it is a problem long term and even medium-term and so we’re going to have to take care of this debt and deficit, but we’ve got to do it in a balanced way.”
“Remain calm. All is well!” shouted Chip Diller in Animal House before being trampled by a panicked mob. That’s exactly how we should take Obama. The Congressional Budget Office (CBO) has warned of a recession should action not be taken to avoid the coming taxes hikes. Even if Obama gets his way, and taxes are raised on families making over $250,000, it cause a 1.3% to 2.9% contraction in the economy, according to private studies, and cost more than 700,000 jobs.
The short-term is troublesome, indeed. And it has been made worse by Obama’s profligate spending. This, of course, doesn’t absolve his predecessor, George W. Bush, who got out of control with spending. But if Bush spent like a drunken sailor, what does that make Obama? Sure, Congress could raise taxes to deal with the issue. However, that puts economic growth in jeopardy. Remember, only after Congress cut taxes in the 1990s did the economy start to pick up.
The long-term is even more of a challenge, but that’s not because of a lack of tax revenues, which are anticipated to be around 18.5% of gross domestic product (GDP) — much higher than the 15.7% expected this fiscal year. The future challenges before the United States is because of anticipated growth in entitlement spending, such as Medicare and Social Security.
According to the CBO’s alternative baseline scenario, entitlements will account for 16.6% of GDP by 2037. Wait! We haven’t even included discretionary spending yet. Toss in another 9.6% of GDP. And let’s not forget about interest on the national debt, which adds in another 9.5%.
That’s right, folks. By 2037, the government will spend 35.7% of GDP and the national debt will be nearly 200% larger than the economy. Even with the out of control spending we’ve seen under Obama, that sort of growth in government is difficult to grasp. Greece fell apart when its national debt hit 115%. Our debt is already equal to the size of our economy. We’re not that far off, folks.
Obama wants to be so passive about the debt and deficits because those are vulnerabilities for him, but that’s truly a disservice to the importance of the issue. While the problem facing us isn’t solely a creature of his presidency, Obama has never showed any real leadership on budget issues that face the United States, in the short-term or long-term.
Passing a tax hike on higher-income earners, which is apparently Obama’s answer to the $16 trillion question, isn’t leadership, but rather a gimmick. Those revenues would be a drop in the bucket of a still-flowing river of red in flowing from Washington.