Boldness Of Obama 2010 Budget Should Not Have Been A Surpise
The federal government typically moves slowly. There are, in fact, only a handful of times when Washington makes anything other than an incremental change from what it is already doing. A decision to go to war is one of the most frequently-cited non-incremental changes; the decision to go to the Moon is another.
It's understandable, therefore, that the Obama 2010 budget, which was released yesterday, was hard for many people to digest: it was a very sharp depature from the budgets and fiscal plans of the past eight years and, although it didn't include a brand name, in many ways it rivals the New Deal and Great Society for its boldness.
There are three reasons why the Obama 2010 budget shouldn't have been that big of shock.
1. This was the first budget of a newly elected president and those budgets often show the biggest changes from what was done before. The first budget usually is the first time the new president gets a chance to put his or her whole vision, program, and priortities in one place for all to see. That is frequently jarring to everyone who by the end of the previous administration has become accustomed to the same proposals and language being offered again and again and...
2. This also was the first budget of a new president of a different political party from the one that had been in the White House. It was also the budget from a new president who had run against the policies of the person he replaced. Therefore, the bigger suprise would have been if the new budget in any way was similar to what had come before.
3. The new budget was submitted in a time of multiple crises and when there was increased call for Washington to do something big on a number of issues.
Put all this together and the boldness of the Obama budget should definitely have been expected. It included:
- The willingness to project a larger-than-expected deficit for the current year
- The inclusion of health care reform
- Substantial tax changes, including some increases
- A slowdown in the growth rate for military spending
- A direct challenge to many of the most egregious budget accounting gimicks from the Bush years
- A big domestic agenda including energy and environmental initiatives
- Medicare changes that in the past would have hardly been discussed let alone actually proposed
- An forecast that shows the economy not just recovering but growing substantially in 2010.
- Domestic spending reductions that others might have tried to hide...or avoid
- The inclusion of funds for more help for Wall Street
Any one of these would have been a stand alone major initiative in previous years. This time each one was just part of the whole.
Shock doctrine to reverse disaster capitalism ??
No doubt he and Rahm have read Naomi Klein's book.
The biggest changes can be implemented in a time of crisis because the political will exists to "please do something!". People out here are begging for these changes -- especially a return to honest government. So Obama is taking full advantage, and the policies will reinstate a more regulated capitalism, New Deal type programs (building infrastructure which has been badly neglected), enhancing education, and of course the biggest change will be healthcare reform.
He promised greater transparency in government, and is delivering it with this budget. No shifts or gimmicks or "off budget" or other deceptions as we had under the previous administration.
A bold 2010 budget indeed!
"A forecast that shows the economy not just recovering but growing substantially in 2010."
Yes, 3.2% growth ... with a trillion dollar deficit!
That's something we've never seen before, to be sure.
And to run a $1.1 trillion deficit in a >3% growth year while describing same as increased "fiscal responsibility" is bold indeed!
I'm trying to imagine, if Bush had run a trillion dollar deficit in a >3% growth year coming out of the 2001 recession, would Krugman's hair simply have changed color with rage (white, red?) or would it have flown off of his head?
No doubt he and Rahm have read Naomi Klein's book.
Rahm has his own saying that Summers calls Rahm's Doctine: "You never want a serious crisis to go to waste, it’s an opportunity to do things you could not do before."
Like if you are in the worst economic crisis since the Great Depression, you can pack in enough new program spending to run a trillion dollar deficit in a >3% growth year, without anybody noting the incongruity.
Shock doctrine
"You never want a serious crisis to go to waste, it’s an opportunity to do things you could not do before."
I think Bush said this after 9/11, when deciding to invade Iraq.
At least he didn't let that opportunity go to waste.
No, Rahm says it.
Watch him yourself:
http://www.youtube.com/watch?v=_mzcbXi1Tkk
I bet you imagined that was a bad sort of thing to say, so Bush must've said it.
But now you know it is a good thing to say, because the Obamaites say it.
Bush wasn't smart enough to say it
but it's what he was doing, that is, using a crisis to push his agenda (invasion of Iraq)
At least Rahm is being transparent about it, and it is a REAL crisis. WMDs did not exist (a convenient lie is what that turned out to be . . . ask Colin P).
But the collapse of our banking system and economy is not a lie . . . it's actually happening.
Well, let's consider the timing.
"The collapse of the economy is really happening" in 2009. CBO and private forecasters all predict GDP growth in 2010 and later. Obama's own budget projects *strong* growth soon -- 3.2% in 2010, the strongest in 10 years, and *over 4%* the following three years.
So "the worst economy since the Great Depression", the sole justification for this massive all-time record deficit, is concentrated in 2009, say Obama and his people.
Thus, when would you want to stimulus to be felt -- maybe, *in 2009*??
Yet CBO says only 23.5% of the stimulus ($185b/$787b) lands in 2009 ... 50% lands in 2010, when healthy growth is projected to be back ... and a good 26% of the "stimulus" lands in 2011 and later in the era of projected >4% growth.
Just what is the "stimulus" effect of $200 billion of new, expanded government program spending in 2011 and later in 2009??
Is that a REAL response to the REAL crisis -- via causality running backward through time?
Or, maybe Rahm is "not letting a crisis go to waste" here, by getting new post-crisis spending programs going now as part of the "urgent emergency response", when they'd have a much tougher time getting enacted if subject to individual scrutiny?
And maybe Matt Miller, former Clinton budget officer, is correct here when he happily describes the Obama budget as operating politically in the same way as the Republican "starve the beast" budgets, only in reverse -- as "feed the beauty", get the programs enacted now without the taxes to pay for them, get people hooked on them, then they'll have to pay later. Note that he says this as praise...
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Here Comes Obamanomics
"Starve the Beast" ... held that the shrewdest way to restrain the supposed runaway growth of evil (and thus “beastly”) government was to cut taxes perennially. Combined with the fact that politicians had little interest in cutting popular government programs, this starvation would, by design, create big budget deficits. The hope was that pressure to do something about spiraling debt would eventually force politicians to do the unnatural, and cut spending ... Like Godot, of course, that courage never arrived.
With President Obama’s first budget we are therefore embarking on an epic new paradigm which deserves its own metaphor. Though it’s a little clunky, for symmetry’s sake we may as well call it “Feed the Beauty.”
In fiscal terms, the failed wager of “Starve the Beast” was that spending would eventually shrink to come in line with lower taxes. The tacit wager of "Feed the Beauty" is that taxes will eventually rise to come in line with higher spending...
The paradox of this revolution in governing philosophy is that its success relies on the same underlying political dynamic. Instead of fiscal sanity depending on pols doing something the American people won’t like (cutting popular programs), it will now depend on pols doing something the American people won’t like (raising taxes).
Now, to be sure, beyond the expiration of the Bush tax cuts for the top, and some controversial new levies on those making more than $250,000 a year, Obama isn’t coming clean on this yet. But this higher-tax blueprint is plain enough...
My own sense is that, unlike "Starve the Beast," "Feed the Beauty" will actually work. (If it doesn’t, we’re pretty much out of options)....
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Wait, where's all his discussion of all this $787 billion being a REAL response to the REAL economic crisis right now? It's not there, because it's not true.
Rahm is transparent enough to him, "plain enough" -- if not to many others, it seems.
But otherwise, 75% of the "stimulus" landing after the recession year is projected to be over is rather tough to explain.
Politicians are politicians, they are all subject to the same incentives, and in response they all use the same tactics and ploys, regardless of party. Republican and Democratic budget strategies are mirror images of each other -- as Miller praises the Democratic strategy for being!
This is why Libertarians continue to exist (an otherwise inexplicable phenomenon).
Proclaiming "My party's operatives are transparent, moral and honest; your party's operatives are lying, immoral thieves", is futile.
You can believe the "official" stats all you want
We'll still need stimulus next year.
The truth is things are getting worse. Ask Warren Buffet. They WERE saying that we'd start to pull out of this 3rd quarter 2009. Now that has slipped into 2010 . . . where do you think that prediction will be by 4th quarter? Headline unemployment is 7.6 percent, but the real unemployment rate is far higher, and rising.
The stimulus will still be needed in 2010. And quite frankly, I think Obama will have to go for round #2 -- the first package won't be enough. Even Krugman admitted as much. It's not like the auto industry will suddenly be turned around in 6 months. Or the housing crisis.
Obama has to appear optimistic . . . that's his job. But I think everyone knows the reality of this . . . it is very, very bad. DOW is going to 5000 or lower. AIG needed another 30 billion prop today, and that's not over. Government had to take a huge stake in Citigroup. Runs on the market and banks are still happening. Many investors have completely thrown in the towel, and won't be back in the markets in their lifetimes . . . I just spoke with an authority on this last night . . . among active small investors 50-60% have pulled out of the markets completely.
When was the last time that happened? Not in my lifetime, and I'm no spring chicken. These folks won't be back in 2010 . . . or 2011. This is a lost decade event.
Rahm isn't lying about the crisis. This is a credit freeze and crisis of confidence, and we are in uncharted territory (the only similar event to compare to is Great Depression).
The previous administration was prone to lying about just about everything, and tossing out oversight and regulation to the point where greed and corruption took hold and thrived. Madoff and Stanford and a host of others are testimony to the destruction that was supported during those years.
And that's why this admin has to come clean. The public won't tolerate more nonsense. Obama knows this, he campaigned on it, and he has to follow through.
Yes, the crisis opens a window of opportunity to make changes. Is that a bad thing? After all, the Bush model wasn't working so well. This is a REAL crisis, and it calls for real change. Nobody is disputing that out here . . . come on out and take a tour. Tomorrow our state economist will announce the updated revenue forecast. It's going to be horrendous, and not getting better for the 2011-12 biennium . . . the experts think it will actually be even worse 3-4 years out.
Does that sound like an economy that is rapidly improving to you? Obama et al. are between a rock and a hard place . . . they are trying to deal with the confidence issues while everything goes to heck.
I'm glad they are doing something . . . the "do nothing" approach or "tax cut only" approach wouldn't be nearly as stimulative as what Obama has pushed through. In fact I think the tax cuts are pretty useless. People without jobs don't pay taxes anyway, and those with jobs will just put that money to savings.
Politicians are politicians,
Politicians are politicians, they are all subject to the same incentives, and in response they all use the same tactics and ploys, regardless of party. Republican and Democratic budget strategies are mirror images of each other -- as Miller praises the Democratic strategy for being!