Massachusetts Senate candidate Elizabeth Warren, in an oft-seen video clip, describes how a thriving industrialized economy is dependent on government taxation and redistribution for the creation of key institutions, infrastructure, and social programs:
She notes, “there is nobody in this country who got rich on his own.” She mentions factory owners who “move [their] goods to market on the roads the rest of us paid for,” and “hired workers the rest of us paid to educate.” She adds that police and fire services, that “the rest of us paid for” kept them safe and prevented them from having to hire their own security and fire defense forces. She ends by saying, “Now look, you built a factory and it turned into something terrific, or a great idea? God bless. Keep a big hunk of it. But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along.”
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
President Barack Obama visited Osawatomie, Kansas last week to speak about the danger of the growing economic inequality in America and the threat this currently poses to the middle class and our country as a whole. I thought this was the most important speech of his Presidency thus far because it clearly illustrated the monumental challenges we face in dealing with a weak economy, high unemployment, and an eroding middle class. He emphatically connected the success of the middle class with the success of America and described how investments in education, infrastructure, and science and technology along with tax and financial industry reform are critical to our economic recovery. The speech was 55 minutes long, so I highlighted what I thought were his key points:Read more
Conservatives often invoke our country's Founding Fathers as well as prominent historical figures like economist Adam Smith, whose ideas about the "invisible hand" of free markets helped form the theoretical foundation of modern capitalism, when they advocate far-right economic policies. Lately, there has been a lot of talk by GOP presidential candidates about creating a flat tax system in the U.S., particularly from Texas Governor Rick Perry and Godfather's Pizza founder Herman Cain. Ironically, you'll never hear a conservative pundit or politician point out that Adam Smith and Thomas Jefferson, among other historical figures, were strongly in favor of progressive taxation.Read more
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:
I've intended since the spring to write about our country's current fiscal situation and how we arrived here. For months, Congressional Republicans have been asserting that our federal government does not have a revenue problem, it has a spending problem, and have argued for draconian spending cuts largely aimed at programs that benefit the middle class. And President Obama and many Democrats have largely conceded to the GOP on the issue, allowing them frame the debate about our economic woes as being the result of a large federal debt and ongoing budget deficit. Polling shows that a large majority of Americans blame our country's budget woes on wasteful government spending. However, it is critical to examine our country's fiscal policy during the past decade, to fully understand why our deficit and debt have become so large. The data show that the current budget deficit is primarily the result of 3 factors:Read more
Buffett states, "my friends and I have been coddled long enough by a billionaire-friendly Congress. It’s time for our government to get serious about shared sacrifice."
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
I've been meaning to do a post about health care ever since the health care reform bill was debated and passed last year. I'll approach health care in two posts, first by discussing American health care (pre-reform) and the immorality of the status quo. In my next post, I'll compare the varying types of universal health care systems and examine the recent health care reform bill.
Health care reform is not just a political issue for me- it's also a moral issue. There is nothing more fundamental to one's well-being than their health. One's ability to obtain an education, to acquire and hold a job, and to sustain a family is entirely dependent on their physical and mental health. If we, as the world's most wealthy country, were happy with the pre-reform status quo, with leaving millions of lower and middle working class Americans either under-insured or uninsured, and were content with a system that bankrupts people when they become sick and lose their jobs as a result, then we've had a significant moral lapse. As I pointed out in a previous post about a "culture of life," can one truly claim to be "pro-life" when they are content to let people become sick and die for lack of treatment in the wealthiest, most powerful country the world has ever known? I've actually had some conservative friends argue as a counterpoint that anyone can be seen in an E.R. (at taxpayer expense), thus there is no need for reform. E.R. access as the sole point of access to health care is woefully inadequate. So, say someone has cancer, do you think they can go to the E.R. for chemotherapy? It doesn't take a health care professional to explain that the E.R. can handle only emergencies, not medium and long-term care for the seriously and chronically ill, not to mention cost-saving and life-enhancing preventative medicine.