Obama, Spending, & 2013

Two good stories at TPM today about spending.  The first details how spending growth under President Obama is actually lower than it was under Presidents Reagan, Bush 1, Clinton, or Bush 2.  This isn't new news, but facts truly can be submerged if you repeat a lie often enough.  Politics and power versus leadership and stewardship.

The second details how the sequestration and tax cut expiration will combine to hurt the economy and how Republicans are coming around to admitting spending supports jobs in troubled economic times.  Granted, they are only for military spending and against everything else.  Sure, this makes them duplicitous, but this is only another straw on the camel.  BTW, the CBO numbers indicate that the safest path is allowing the Bush tax cuts to expire and to have the sequestration go through.  The economy won't be helped in terms of jobs, but it won't be slammed either.  Of course, having an actual plan that includes targeted tax increases and spending cuts would be ideal, but anyone who thinks that will happen anytime soon need to purchase the bridge I have for sale in Brooklyn.

From the article by Brian Beutler:

If all the fiscal tightening scheduled for the beginning of the year is allowed to take effect, it will take a huge bite out of the projected deficit for the coming fiscal year. Unfortunately, it’ll take a similarly large bite out of GDP — enough to threaten a new recession. And the resulting job losses would reduce tax revenues and increase spending on jobless benefits enough to undo billions of dollars in direct deficit reduction.


Per CBO: “Taken together, CBO estimates, those policies will reduce the federal budget deficit by $607 billion, or 4.0 percent of gross domestic product (GDP), between fiscal years 2012 and 2013. The resulting weakening of the economy will lower taxable incomes and raise unemployment, generating a reduction in tax revenues and an increase in spending on such items as unemployment insurance. With that economic feedback incorporated, the deficit will drop by $560 billion between fiscal years 2012 and 2013, CBO projects.”

Conversely, if all of current policy — the Bush tax cuts, the payroll tax holiday, federal spending, etc — is extended, economic growth will boom next year. If Congress picks a middle ground approach — extending the Bush tax cuts but nixing the automatic spending cuts — CBO forecasts modest growth, but no major economic hit.

They obliquely conclude that the wisest economic path for Congress to take would be to defer most or all of the scheduled fiscal restraint, while simultaneously enacting deficit reducing legislation that won’t take effect until the economy’s on sounder footing.

“What would happen if lawmakers changed fiscal policy in late 2012 to remove or offset all of the policies that are scheduled to reduce the federal budget deficit by 5.1 per- cent of GDP between calendar years 2012 and 2013?” CBO asks. “In that case, CBO estimates, the growth of real GDP in calendar year 2013 would lie in a broad range around 4.4 percent, well above the 0.5 percent projected for 2013 under current law. However, eliminating or reducing the fiscal restraint scheduled to occur next year without imposing comparable restraint in future years would reduce output and income in the longer run relative to what would occur if the scheduled fiscal restraint remained in place.”

23 May 2012