My George Mason colleague Veronique de Rugy has an excellent article on the explosion of federal spending built into the Obama Administration's budget plans for the next decade. As Veronique points out, there will be massive increases in both spending levels and the deficit even under the administration's optimistic projections, which unrealistically assume extremely high rates of economic growth, fail to consider much of the administration's proposed increases in health care spending, and also assume that all of the "temporary" stimulus spending will be completely phased out - despite long experience showing that it is extremely difficult to cut budget items once spending on them has increased. Even the administration's optimistic calculations predict a deficit of $712 billion in 2019 (compared to $455 billion in 2008). The administration also predicts that nonmilitary federal spending will be 17% in 2019, about 15% higher than in 2008 and some 30% higher than in the last year of the Clinton Administration. The Democratic-controlled Congressional Budget Office has reached even more pessimistic conclusions in its analysis, which uses more realistic growth projections.
Back in October, I expressed my fear that the combination of an Obama victory, simultaneous Democratic control of Congress and the executive branch, and the economic crisis, would lead to a massive expansion of government. Sadly, that prediction seems to have been vindicated.
It's true that Obama's spending policies are in some respects a continuation of Bush's. The Bush Administration also presided over massive increases in federal spending and regulation, and I often criticized them for it (e.g. here and here). However, Obama's spending plans far exceed even Bush's dubious record. Justifying Obama's spending proposals by reference to Bush is much like an already obese man claiming that upping his consumption of hamburgers to twenty every day is fine because he spend the last eight years eating ten per day.
Liberal Washington Post economics columnist Robert Samuelson makes some related points in this op ed. Samuelson also considers the clever political strategy behind the Administration's spending policy:
One reason Obama is so popular is that he has promised almost everyone lower taxes and higher spending. Beyond the undeserving who make more than $250,000, 95 percent of "working families" receive a tax cut. Obama would double federal spending for basic research in "key agencies." He wants to build high-speed-rail networks that would require continuous subsidy. Obama can do all this and more by borrowing.
Consider the extra debt as a proxy for political evasion. The president doesn't want to confront Americans with choices between lower spending and higher taxes — or, given the existing deficits, perhaps both less spending and more taxes. Except for talk, Obama hasn't done anything to reduce the expense of retiring baby boomers. He claims to be containing overall health costs, but he's actually proposing more government spending...
Implicitly, the administration is hoping to exploit voters' political ignorance. If voters were well-informed about federal budget and tax policy, they would understand the contradiction between the Administration's plans to massively increase spending and its tax cut promises. At some point, the bill for all that debt will have to be paid in the form of either inflation or massive tax increases that go well beyond "the rich." But since most citizens are "rationally ignorant" about politics, they are likely to be unaware of the problem. Thus, Obama and other politicians can promise massive spending increases while at the same time promising tax cuts, and reap political benefits for doing so. Of course there will be political fallout for whoever is president in 2020 and has to face the resulting serious fiscal crisis. But that is of little concern to today's incumbents, who are understandably focused on their own more immediate political future.
Obama is far from the first political leader to exploit public ignorance. Certainly, the Republicans have used similar tactics in the past, including under the Bush Administration. That fact, however, doesn't make our current situation any better.
UPDATE: It's important to recognize that the gargantuan deficits and looming fiscal crisis likely to result from the Administration's spending plans are just one part of the danger we face. Such massive increases in federal spending also exacerbate the more general problems caused by expanding government control over society. In particular, growing federal spending and regulation will make it even more difficult for rationally ignorant voters to impose meaningful democratic control on public policy. And they will provide numerous opportunities for interest groups to exploit the growth of government for their own benefit, at the expense of the general public.
I discuss both these dangers in more detail in the January post linked earlier in this update.
Related Posts (on one page):
- The Coming Explosion of Federal Spending:
- Larry Summers Channels Gordon Gekko:
- Obama Chief of Staff Hopes to Exploit the Economic Crisis to Expand the Growth of Government:
- Richard Epstein on Obama:
- Fear Itself, Con't:
- Exploiting Crises to Expand Government and Curtail Civil and Economic Liberties:
- Fear Itself.
- Why I'm Concerned About an Obama Victory: