Obama Says Washington 'Doesn't Have a Spending Problem." Really?
In his Wall Street Journal interview with John Boehner, writer Steve Moore didn’t bury the lede:
What stunned House Speaker John Boehner more than anything else during his prolonged closed-door budget negotiations with Barack Obama was this revelation: “At one point several weeks ago,” Mr. Boehner says, “the president said to me, ‘We don’t have a spending problem.’”
On the face of it, such a statement is completely ridiculous — and a bit scary. Just have a look at the alternative fiscal scenario from the Congressional Budget Office.
In it, the CBO assumes a) Medicare’s payment rates for physicians remain unchanged from the current amounts, and b) the sequester’s automatic spending reductions required by the Budget Control Act don’t take effect — although the original caps on discretionary appropriations in that law remain in place.
Under this scenario, federal spending would average 23% of GDP over the next decade — climbing as the decade drew to a close. Not only is that level of spending three percentage points higher than average federal spending from 1987-2007, it represents a sustained level of spending unheard of in US history. The only comparable period outside of World War Two was the 1980s military buildup, when spending averaged 22.7% of GDP from 1981-1986. But at least that budget binge set the stage for lower defense spending in the future. It was temporary.
The current spendathon shows no end in sight. As long as the US can keep borrowing, it goes on and on and on — and up and up and up. The CBO:
Indeed, when you look at what drives US budget deficits over the next decade, it’s spending that’s above normal vs. tax revenue right at its historical average of around 18%.
Now, we find out later in the piece that President Obama does qualify his curious statement:
The president’s insistence that Washington doesn’t have a spending problem, Mr. Boehner says, is predicated on the belief that massive federal deficits stem from what Mr. Obama called “a health-care problem.” Mr. Boehner says that after he recovered from his astonishment—”They blame all of the fiscal woes on our health-care system”—he replied: “Clearly we have a health-care problem, which is about to get worse with ObamaCare. But, Mr. President, we have a very serious spending problem.” He repeated this message so often, he says, that toward the end of the negotiations, the president became irritated and said: “I’m getting tired of hearing you say that.”
A few thoughts on that:
1. It reaffirms that health care reform was about creating an new entitlement, not getting health care spending under control.
2. I assume what Obama means is that the long-term debt problem is due to Medicare and Medicaid, not discretionary spending. And he’s more or less right about that. According to CBO’s alternate fiscal scenario, the US will spend 35.7% of GDP in 2037 vs. 22% in 2012. Where does that 13.7 percentage point rise come from?
– Medicare spending increases by 3.0 percentage points, from 3.7% to 6.7%
– Medicaid spending increases by 2.0 percentage points, from 1.7% to 2.7%
– Social Security spending increases by 1.2 percentage points, from 5.0% to 6.2%
– Interest on the debt increases by 8.1 percentage points, from 1.4% to 9.5%
And discretionary spending? It actually falls by 2.0 percentage points, from 11.6% to 9.6%.
3. But health care spending by the government is still spending. Obama’s rhetorical legerdemain is unhelpful. It obscures the reality that how the federal government spends health care dollars — such as through fee-for-service Medicare — contributes to health care cost inflation by encouraging overuse of pricey health care services. It’s not some exogenous factor. We should be injecting choice and competition into the system wherever possible.
4. If Washington wants Main Street to trust it on entitlement reform, it should use discretionary spending as a proof-of-concept that it can improve the efficiency of government programs. Don’t just cut it across the board, reform and modernize it. Bring on the Romney Commission.
Is spending a problem? It sure is, Mr. President.
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Comments:
Dec '10
Re: Obama Says Washington 'Doesn't Have a Spending Problem." Really?
Obama was just elaborating on his economic theory that "the private sector was doing just fine" during the recession, it was the government sector that was suffering all of the extreme hardship.
It's all part of Obama's economic theory, as long as there is a private sector, the government sector is deprived of all the economic rewards it so justifiably deserves.
May '10
Re: Obama Says Washington 'Doesn't Have a Spending Problem." Really?
I took the President's comments to mean that he believes we are consuming too much health care and that the way we consume it is driving up prices. Both of these statements are in some sense correct, if only that we are not particularly well-informed consumers of health care. If you are the President and you think that Obamacare will fix this issue by flattening the cost curve and rationing consumption... then I guess you could believe that we don't have a spending problem.
Oct '12
Re: Obama Says Washington 'Doesn't Have a Spending Problem." Really?
Now the plan to take over the health care system (or lay the foundation for it to happen) makes sense. If health care is causing the economy to tank, taking health care out of the economy will cause it to improve, right? Plus, if the government is in control of healthcare spending, then they can set up the necessary constraints (IPAB). There was no need to "pivot" to the economy, except as a tactic, the economic intervention was already executed...we were just too stupid to see it.
See this clearly spelled out does two things for me:
1. Makes clear the reasoning behind Obama's actions, which are completely consistent with his assumptions.
2. There is no way for Boehner to have a productive negotiation with Obama. Aside from the power issues, they are not even speaking the same language or working towards the same definition of success.
Apr '11
Re: Obama Says Washington 'Doesn't Have a Spending Problem." Really?
"I can quit drinking any time I want."
Nov '11
Re: Obama Says Washington 'Doesn't Have a Spending Problem." Really?
Anyone can quit spending. It takes a real man to face bankruptcy.
Jul '11
Re: Obama Says Washington 'Doesn't Have a Spending Problem." Really?
I try to avoid taking drug addicts seriously. Obama has the personality of a coke head and the belief system of one as well. Only rock bottom fixes such a fool.
Oct '10
Re: Obama Says Washington 'Doesn't Have a Spending Problem." Really?
This must be the second-term version of Obama's infamous "Elections have consequences, and Eric [Cantor], I won" comment. Enjoy the victory, Mr. President; you'll be eating those words soon enough.
Jul '11
Re: Obama Says Washington 'Doesn't Have a Spending Problem." Really?
Winning doesn't make him right. And it certainly hasn't enhanced Captain Unicorn's knowledge of the basest, simplest, most obvious tenets of finance and the marketplace.
Barry would wind up setting his own lemonade stand on fire, then borrowing the money to put it out. From his wife.
Knucklehead.
Aug '12
Re: Obama Says Washington 'Doesn't Have a Spending Problem." Really?
Reminds me of a slightly witty t-shirt:
I DON'T HAVE A DRINKING PROBLEM
I DRINK, GET DRUNK AND FALL DOWN ...
NO PROBLEM!
If you take him at face value, he doesn't have a spending problem. He wants to spend even more to secure the socialist state and drive out private business from the marketplace.
The problem is his administration is writing checks his country can't cash. No budget = no problem (let the poor slobs who come after him deal with it).
Oct '10
Re: Obama Says Washington 'Doesn't Have a Spending Problem." Really?
What I'd like to know is why Boehner didn't, at that very moment, walk out on Obama and cease talking with him? The manchild is something I am not qualified to diagnose, but whatever it is, he clearly is not worth wasting time or breath negotiating with. If Boehner had cojones, he'd have walked out and then used that quote to maximum GOP benefit for the duration of the cliffhanger. That quote alone should disqualify him from being taken seriously by anyone in the GOP...and would, if we had leaders with backbone, imagination, and vision.
Jul '11
Re: Obama Says Washington 'Doesn't Have a Spending Problem." Really?
Exactly dittoheadadt, I'd have got up and began screaming to the press immediately and advised no action until they put something in writing. Maybe a budget from the senate needs to be the starting point.
Jul '11
Re: Obama Says Washington 'Doesn't Have a Spending Problem." Really?
I think this would have been the best option: Walk out. Republicans are going to carry the water for what happens either way with the press, so bail, and go tell your story first to the media. Pass budget resolutions in the House and let the Senate vote on them, or fail to - and then, every day, get in front of a camera and tell the public what the Democrats are failing to do, which is execute their sworn obligations.
This certainly couldn't make things worse, could it?
Sep '10
Re: Obama Says Washington 'Doesn't Have a Spending Problem." Really?
A liberal Dem believes in taxing and spending. We are to believe this came as a surprise! Dems believe in spending more, the GOP in spending not quite as much. That is the only way compromise is possible. Too bad we don't have a party that believeds in cutting spending.
Dec '11
Re: Obama Says Washington 'Doesn't Have a Spending Problem." Really?
We have an entitlement problem, nearly everything else is either at or below average, as measured as a portion of the budget and adjusted for the known upper limit on the amount of revenues the government can collect.
If we ran on the biggest government that could be (not necessarily will be) paid for would mean cutting about a trillion from the budget.
Edited on January 8, 2013 at 9:59pmOct '10
Re: Obama Says Washington 'Doesn't Have a Spending Problem." Really?
Chris Campion: I think this would have been the best option: Walk out. Republicans are going to carry the water for what happens either way with the press, so bail, and go tell your story first to the media. Pass budget resolutions in the House and let the Senate vote on them, or fail to - and then, every day, get in front of a camera and tell the public what the Democrats are failing to do, which is execute their sworn obligations.
This certainly couldn't make things worse, could it? · 13 hours ago
Oh yes it can. Some outcomes are worse than others, and we should all want the least disastrous result we can get.