When President Barack Obama took the oath of office on January 20, 2009, the U.S. economy was in free fall. During the preceding year and half, some of the nation’s largest and most important financial institutions went bankrupt, including Bear Stearns, Countrywide, and Lehman Brothers, as risky loans and other investments failed. Many other large banks were on the verge of collapse. The downfall of the financial sector had been preceded by a spectacular end to a massive speculative housing bubble that almost instantly wiped out trillions of dollars of Americans’ net worth. When Lehman Brothers and AIG went into bankruptcy during the same weekend in September 2008, panic ensued all across the economy. It felt like 1929 all over again. The Troubled Asset Relief Program (TARP), which was signed into law by President George W. Bush and was implemented by President Obama, stopped the bleeding in the financial sector, but the damage to the broader economy had already been done as other sectors of the economy continued to rapidly deteriorate. The stock markets plummeted, losing more than half of their peak market capitalization just six weeks after Obama took office. Many retirees and workers nearing retirement saw their investment portfolio lose much of its value. Millions of people lost their jobs due to no fault of their own after the U.S. entered a recession in December 2007. Over 1.2 million Americans were laid off between the election and Obama’s inauguration. All told, the Bureau of Labor Statistics estimates that 8.7 million jobs were lost due to the Great Recession. No president since Franklin D. Roosevelt has begun their tenure in the White House under such dire circumstances. An evaluation of each segment of the economy around the time Obama took office compared to now shows that we are definitely better off four years later.Read more
More has been added to our national debt under President Obama than all the other presidents combined. Partially true. However, of the $5.1 trillion added to the National Debt from 2009 to 2012, only $1.5 trillion is due legislation signed by President Obama. Of that $1.5 trillion, only $500 billion in incremental spending carries past 2010. The rest of the debt, or $3.6 trillion, can be directly attributed to legislation passed under previous administrations.
On January 20, 2009 President Obama walked into the oval office and was handed a negative annual deficit of $1.3 trillion. This was a stark contrast from his predecessor, who began his eight years in office with a $200 billion dollar surplus. However, through healthcare entitlements, unfunded wars, wealth redistributing tax cuts, and TARP that surplus had turned into the largest fiscal deficit our country had ever experienced. Obama was handed this budgetary disaster, coupled with a collapsed economy with the expectation of immediate change. Little did he know three years later, he would be held responsible for the gap he inherited, and full blame for the skyrocketing debt. Before we can understand what Obama was expected to fix, we need to first understand where our government spends money.
The federal budget is broken into five major categories; healthcare, defense, social security, interest, and everything else. The first four categories equate to 80% of the total federal budget consistently over the past 20 years. The “everything else” category includes spending from education, governmental programs, appropriations, earmarks, federal departments, etc. The “everything else” category dominates 90% of federal budget debates and discussions, and is leveraged in political perversions of reality. Here is the last 20 years of governmental spending broken down by category:
President Obama signed two major pieces of legislation that grew short and long term spending. In 2010 President Obama signed the American Recovery Act. This legislation accounts for $800B of new debt through $224b in entitlement spending, $275b in grants, and $288b in tax cuts over 2009 - 2010. You can see these amounts reflected in the 2009 and 2010 budget lines as the “everything else” category spikes and then declines the following years.
The second piece of legislation that President Obama signed into law was the Patient Protection and Affordable Care Act, also known as Obamacare. In crafting the legislation, House Democrats worked closely with the Congressional Budget Office (CBO) to ensure the new legislation would remain deficit neutral. The potential increase in spending was offset by penalties due to mandates and some additional taxes directed at the super wealthy like "cadillac" healthcare plans. The CBO produced a report confirming President Obama’s claims. The only credible report opposing the neutral claim came from the highly conservative Heritage Foundation, providing a high side of $75 billion annual increase around the legislation (roughly 8%). Since Obamacare was created to be deficit neutral, repealing Obamacare has a negligible impact on our Nation’s budget.
The rest of the budget growth relies on legislated “stabilizers” that kick in based on marketplace conditions. For example, spending on Social Security will continue to increase as more individuals reach the threshold, unless we restructure the program. Defense will continue to increase unless we make changes to our policies. Medicare costs will continue to skyrocket as more individuals reach the required age. Welfare costs should hold flat unless unemployment grows, and interest expense will continue to rise as more debt is issued to pay for all of these programs. This entire group has little to do with any of President Obama’s policies, and would be growing at the same rate regardless of who sat in the Oval Office.
One of the most overlooked causes of our budgetary problem is due to governmental income, or receipts. Like our own household budget, when our income stays flat, so should our spending. Over the last decade this has not been the case. From 2000-2009, budgetary spending increased almost 96% and our nation’s receipts (income) only increased 3%. Imagine doubling your household spending after receiving a 3% pay raise! In 2000 receipts were roughly 20% of GDP. In 2009 receipts were 15% of GDP. If the 2009 receipts were equal to 2000 levels, our annual deficit would decline by $700 billion.
What caused this shortfall in income? The collapse of the economy and the 2002/2003 tax cuts. In 2002 and 2003, tax cuts were signed into legislation based on the premise that the red hot economy of the 1990’s would continue through the next decade. The collapse of the housing market and war spending were not part of the equation, nor was TARP funding and other bailouts. Even more problematic was when President Obama extended these tax cuts compromising with the Republicans to avoid a governmental shutdown. Declining receipts due to the economic collapse is straight forward; less income tax is being collected due to unemployment and less is being spent by the consumer.
As we go into the 2012 elections voters beware. You might be inclined to blame President Obama for the rising National Debt. However, if Governor Romney takes office in 2012, he will have four years of continuing rising deficits unless the big four spending categories are re-legislated. Why? Because minimal has been proposed in controlling rising spending, and any additional tax cuts will only expedite the problem. Of course the desire will again be to blame President Obama, but that will fall on deaf ears due to lack of rhetoric consistency.
If you still believe President Obama is to blame for $5 trillion in new debt, feel free to comment below identifying what legislation he signed to deliver such a disastrous fiscal decline. Whatever your belief, cut through the media’s rhetoric and read the actual budget. http://www.whitehouse.gov/omb
WhichMitt.com is a hilarious website put out by the DNC. Take the quiz! Mitt Romney's constantly changing opinions make him a really easy target. This highlights his contradictions on abortion, the need for an economic stimulus plan during the current recession, health care, and more. Romney's penchant for flip-flopping makes John Kerry look like an anchor of resolve.
Here are a few of the infamous Romney quotes:
A point was made a few months ago about the Recovery and Reinvestment Act of 2009 (a.k.a. Obama's economic stimulus plan) that really made a lot of sense to me. Most of us probably recall the tragic I-35 bridge collapse in Minneapolis in 2007. The cause of the bridge was due to a faulty design-- the use of under-sized gusset plates-- and an excessive amount of concrete overloading the bridge. The Federal Highway Administration advised shortly thereafter that there were about 700 other U.S. bridges of similar construction and asked states to inspect them. The Society of Civil Engineers recently gave our U.S. infrastructure an overall "D" grade, indicating that in many cases, our roads, bridges, and other vital infrastructure are in dire need of upgrades. I fear we will have more I-35 bridge scenarios in the future because our current national political dialogue is overly focused on deficits, repealing the health care bill (which will increase the deficit), and other distractions.Read more
Even prior to its enactment, there has been much heated opposition to the American Recovery and Reinvestment Act of 2009, a.k.a. President Obama's economic stimulus plan. Opponents have tried to smear it as a bill laden with earmarks (which is not true) that wasted money on pointless projects. Opponents have also (correctly) pointed out that it is mostly paid with borrowed money (I'll come to that later). However, the Recovery Act has gone further than any prior piece of legislation in the past half century in revolutionizing antiquated areas of our economy. And it truly has kept the economy from the brink of depression.Read more