Obama’s spending ideas unbalanced

President Obama recently proposed roughly $200 billion in new spending, along with some temporary tax relief. As Congress assesses this, it will have to face some inescapable facts.  

Already under Obama, federal government spending has exploded by more than $600 billion per year. In President George W. Bush’s last full year in office, federal spending was just under $3 trillion; under Obama, it increased to approximately $3.6 trillion. That’s an increase of more than 20 percent, and it is set to rise even further. 

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On Obama’s watch so far, the size of the cumulative federal debt has increased from $10.6 trillion to $14.8 trillion — about 40 percent — and it continues to climb. 

The president’s ideas for more new spending will need to be assessed in light of his earlier spending plans. Many people recall Obama’s $800 billion stimulus bill and the trillion-dollar spending increases in his healthcare legislation, but less public attention was focused on how spending increased across virtually all agencies and government programs. 

For example, the State Department and other international assistance went from $47 billion in 2008 to $58 billion in 2010. The Labor’s Department’s budget authority went from $57 billion in 2008 to $179 billion in 2010. Medicare and Medicaid rightly get a lot of attention, but even they only accounted for increases of approximately $150 billion per year, or one-fourth of the spending explosion (some of which came from increases in federal Medicaid matching provided by the president’s stimulus bill). 

Most of the new spending was the result of policy choices by the president and congressional allies. During 2009 and 2010, federal agencies and programs saw extraordinary increases in their budgets.

How will the president’s previous spending increases affect the overall federal debt, which has grown by about $4 trillion during the president’ term so far? 

If sustained over the upcoming decade, Obama’s previous $600 billion annual spending increase would translate into at least $6 trillion, not even taking into account interest payments, inflation or other adjustments. That number — $6 trillion — is important because even the so-called “grand bargain” that the president discussed in July would not have reduced spending as much as Obama has already increased it during his term already. Because the proposed “grand bargain” would only slow spending increases by roughly $3 trillion over the next decade, at least half of the president’s expansion of the federal government would become permanent.

For fiscal conservatives, making Obama’s expansion of government permanent does not seem like a “balanced” approach. To the contrary, for many fiscal conservatives a genuinely balanced solution to the spending and debt problem has to start with a reduction in spending of $6 trillion over the next decade — the amount of new spending added in 2009-2010 on top of an existing deficit. 

But now, instead of making the stimulus and other past spending increases temporary, the president wants to spend another $200 billion and make much of his previous increase permanent.

Obama has argued that a balanced approach should include tax increases to pay for this rapid expansion of government. The trouble with this argument is that even in the “grand bargain” discussion, the president proposed to trim his $6 trillion spending increase to “only” $3 trillion, while raising new taxes. But a “grand bargain” that slows spending by only $3 trillion and raises taxes $1 trillion over the next decade would mean (1) a permanent expansion of government and (2) a big tax hike, yet still result in (3) at least $2 trillion of new debt. That is almost certain to provoke the question why Congress should raise taxes to make permanent the bulk of the 2009-2010 government expansion and not even end the deficit problem. Even before the president proposed more new spending last week, proponents of Obama’s “trim and tax” solution could have expected a challenge to the assertion that it is “balanced” to make so much of that new spending permanent.

Some of the president’s supporters have tried to reframe the question away from the actual spending numbers to whether there are any scenarios in which it could be worthwhile to increase taxes. But given how far we currently are from a balanced budget, that question is so abstract as to be meaningless. It takes $6 trillion in spending reductions just to get back to “par.”

Until Congress and the president reduce the next decade’s spending by at least $6 trillion, anything less would merely be making much of the 2009-2010 government expansion permanent, without even fixing the deficit problem. Our government would spend at least $600 billion a year that it doesn’t have, run huge annual deficits and continue to increase the federal debt — undermining our economy now, and hurting our children’s future.

 Until annual federal spending is at least reduced back to the level that existed before Obama’s previous spending spree, tax increases would not constitute a “balanced approach” for fiscal conservatives. Tax hikes would look more like the old “tax and spend” policies that so hampered our economy in the 1970s. Because the current problem was caused by spending money the government doesn’t have, the solution needs to involve stopping the excessive spending — not adding another $200 billion to it. Many think that the $6 trillion of increased federal spending that Obama already added for the upcoming decade was unwise, and any truly “balanced” approach would fix that first — not make it permanent.

Rosen served as general counsel and senior policy adviser at the White House Office of Management and Budget during 2006-2009.