Despite the rosy scenario provided by the President’s State of the Union (SOTU) Speech on February 12, a far more realistic presentation was made on February 13 by Douglas W. Elmendorf, the Director of the Congressional Budget Office. The CBO is apolitical and non-partisan, relying solely on the cold hard facts about the economy that are gleaned from the data it gathers and its role of advising Congress.
The CBO are the government’s bean-counters and, not surprisingly, the mainstream media paid Elmendoft little attention, thus rendering Americans subject to the bloviations of the President and members of Congress who, as we know, have not received a budget from the White House in three years, despite the Constitutional obligation to provide one.
The government has been running on “continuing resolutions” and political battles have focused on raising the “debt ceiling”, the ability to borrow more and more to cover its spending addiction. It is government on a credit card and as the global economy slows, so does ours.
Elmendorf addressed the House Committee on the Budget because all bills affecting spending must constitutionally be initiated in the House. The bills to reform entitlement programs and the tax dode, and address the national debt that the House has sent the Senate have died there.
Elmendorft’s subject was the budget and economic outlook for the fiscal years 2013 to 2023. It is an economic forecast and baseline budget projections.
“Economic growth will remain slow this year,” said Elmendorf, but “after this year, economic growth will speed up.” But not by much. The unemployment rate will remain “above 7½ percent through next year “and, if that happens, 2014 will be “the sixth consecutive year with unemployment exceeding 7½ of the labor force—the longest such period in the past 70 years.”
While deficits (the difference between the revenue the government takes in and the spending it authorizes) will shrink to $845 billion, “its smallest size since 2008”, the CBO anticipates that they will rise in the coming decade due to “pressures of an aging population, rising health care costs, the expansion of federal subsidies for health insurance, and growing interest payments on federal debt.”
“As a result, federal debt held by the public is projected to remain historically high relative to the size of the economy for the next decade…such a large debt would increase the risk of a fiscal crisis, during which investors would lose so much confidence in the government’s ability to manage its budget that the government would be unable to borrow at affordable rates.”
Need it be said that President Obama has tripled the nation’s debt in his first term in office? Or that the nation’s credit rating was reduced?
The reality facing the economy is slow growth, barely 1.4 percent this year. “That pace is much slower than the average growth rate of potential GDP since 1950.”
The President’s proposed “investments” (spending!) on absurd “renewable energy”, wind and solar, are a very bad idea, along with the nearly 30 other proposed “investments” and projections of the costs of Obamacare, a massive government program, are characteristically unrealistic, disconnected from reality. His claims about growth in the energy sector did not include the fact that it has occurred mainly on privately owned land, while continuing to deter is expansion domestically and offshore.
The SOTU was yet another opportunity since 2008 to repeat that “nothing I’m proposing tonight should increase our deficit by a single dime.” I am still waiting for the mainstream media to challenge him on this, but unfortunately everyone will have to wait four years more before we don’t have to listen to it again.
The House Committee on the Budget has been provided with the facts, even if the public remains only vaguely aware of them. What the public will encounter is a growing population of older Americans that will be a drag on the economy through no fault of their own. Social Security and Medicare/Medicaid represent, automatically, forty percent of all government expenditures. An entire generation of younger Americans, often saddled with college debt, will encounter problems finding employment commensurate with their education and skills.
The other reality is a Congress dithering over new efforts at gun control and the usual plethora of new spending bills that are oblivious to a growing national debt that currently exceeds $16 trillion. The debt ceiling will be raised because there is no alternative. Sequestration cuts—the result of a 2011 bipartisan failure to address spending—will represent a minimum impact on domestic spending and a dangerous impact on defense if they kick in.
The President’s ideological devotion to the notion that government can “fix” every problem and create job growth is a Marxist fantasy that will affect everyone’s life in the decade ahead. The sum total of the CBO projections is that socialism does not work and capitalism, when it is allowed to function, does.
© Alan Caruba, 2013.