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August 31, 2009

Deficit Attention Disorder: Obama's Writing Checks the Body Politic Can't Cover

What's 2 trillion between friends?

$2,000,000,000,000. That's the amount by which the Obama administration raised its ten-year estimate of the nation's budget deficit from the one it made only a few months ago. Now, $2 trillion is a lot of money. But even more significant is the fact that this revision represents almost a 30 percent increase -- no tiny percentage of the earlier $7 trillion figure. It seems that expenses are higher -- up 24 percent this year, the largest increase since the height of the Korean War -- than originally estimated, and revenues are lower. The resulting deficit, says Peter Orszag, Obama's budget director, is "higher than desirable". He might have added that the administration's critics had it right when they claimed that the earlier estimate represented a turn around the dance floor with that old seductress, Rosy Scenario.

There's worse: the new estimate assumes that Medicare and Medicaid spending will be cut by $622 billion, even though Congress has made it know that it is reluctant to make any such cut. Then there is the $600 billion in revenue included for the sale of emission permits, despite the fact that the House has given away so many permits in order to buy support for the cap-and-trade emission-reduction that the program will produce at most $450 billion. Those two items alone come to almost another trillion dollars in red ink. Throw in another trillion-plus for Obamacare, and it is no surprise that senior economist Bill Gale, at the liberal Brookings Institute, says that the deficit will hit over $10 trillion over the next decade, a figure he finds "deeply alarming".

This year, the deficit will come to 11.2 percent of GDP, and by 2019 the debt will be equal to 76 percent of the value of the nation's output of goods and services, almost double the 41 percent when Obama took control of the nation's finances. No problem, say White House economists. Unsustainable, says Warren Buffett, among others.

Stelzer notes that Obama may be hanging himself in a way he doesn't even realize. Bernacke has promised he'd soak up -- remove -- all this extra money he's dropped into the country from helicopters. But when? If it's 2011... That's what happened to Bush the Elder.

George Will is on a similar roll, but hitting the Cap and Tax schemes harder.

The supposed means of paying for the president's $1 trillion health-care plan include substantial Medicare cuts that will never happen, and the auction of carbon-emission permits that, instead, would be given away by the Waxman--Markey cap-and-trade legislation the House has sent to the Senate.

That legislation is a particularly lurid illustration of why no serious person nowadays takes seriously Washington's increasingly infantile bandying of numbers. The point of cap-and-trade is to impose a ceiling on the nation's greenhouse-gas (GHG) emissions—primarily carbon dioxide. The legislation endorses the goal of holding the global carbon--dioxide level to a maximum of 450 parts per million by 2050. That. Will. Not. Happen.

Steven Hayward and Kenneth Green of the American Enterprise Institute do the math. The 450 level is less than the 2030 projected level for all countries other than the Organization for Economic Cooperation and Development's 30 developed nations. Which means the global goal would be unreachable even if in 2030 those 30 disappear—if they have zero emissions. Waxman--Markey endorses the goal of reducing all of this nation's GHG emissions 83 percent below 2005 levels by 2050. In 2005, the United States' carbon-dioxide emissions were 6 billion tons, so an 83 percent -reduction would permit about 1 billion tons—what America's emissions were in 1910, when the population was 92 million and the economy was one twenty-fifth of today's. But by 2050, the population probably will be about 420 million, so per capita carbon-dioxide emissions would have to be 2.4 tons—one quarter of 1910's per capita emissions.

Hayward and Green say that historical data indicate that the last time emissions were that low was 1875....

Obviously Hayward and Green are correct that meeting the 2.4-ton goal "is not going to be seriously attempted." So why do the same politicians who want to radically expand government's control of health care pretend otherwise? Because they are not serious people. Which is why so many Americans are seriously alarmed.

I didn't know Obama was still sneaking in that absurd $600 billion in cap and taxes into his budget math.

Update: Obama's Borrowing 10 Times Greater Than Reagan's: And Reagan's deficits were considered unsustainable. And won and ended the Cold War.

Harrowing borrowing:

According to the Obama administration’s mid-session budget update, the federal government will have to borrow nearly 40 percent of its total expenditures in 2010, reports CNSNews.com Staff Writer Matt Cover. The report shows that 39.9% of all federal income will be borrowed, making borrowing the single largest share of revenue in 2010. The next largest component of federal revenue is the personal income tax, which accounts for only 27.3% of federal funds

Obama’s borrowing is 10 times greater than Reagan’s, which was fueled largely by defense spending as America battled the Soviet Union for dominance in the Cold War. Obama’s 2010 spending is almost entirely domestic, by contrast, with mandatory spending programs, such as the bank bailout and stimulus spending programs nearly equaling defense expenditures despite two ongoing wars.


In fact, defense spending, including the wars in Iraq and Afghanistan, account for 19% of federal spending while mandatory programs such as the bailout and the stimulus spending programs account for 18.9%.



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posted by Ace at 12:53 PM

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