What? No, It Is Not The Onion

January 26, 2010

by Mario Rizzo

The Wall Street Journal print edition has a headline today: Budget Freeze is Proposed. At first I thought it was going to be about some Republican plan. But the first sentence said: “President Obama intends to propose a three-year freeze in spending …” What?  Did The Onion take over the WSJ? Is it April Fools Day?

Then the sentence continues, the freeze will be “in spending that accounts for one-sixth of the federal budget — a move that is meant to quell rising concern over the deficit but whose practical impact will be muted.” We further read that, if enacted and (by implication) not violated over the next three years it will save $250 billion over the next decade.

What? A three-year freeze saves $250 billion over a decade ? First, of all, that is just $25 billion per year. Second, it depends on whether, after the freeze is over, the next Administration decides to make up for the years of no growth.

Where will the savings come from? Social Security and Medicare are untouched (presumably also Medicaid as the states are going nuts over their shortfalls here). The savings will come vaguely from the Departments of Housing and Urban Development. Justice, Energy, Transportation, Agriculture, and Health and Human Services — areas that Obama requested a 7.3% increase in spending last year.

He thinks Americans are fools. Yes, many of them are. But not enough of them for this new policy.

Our readers here know that (1) the whole rationale of Team Obama’s stance during this recession has been to stimulate spending to stimulate emloyment — either directly or by restoring “confidence;” (2) the Democratic Party is not about cutting spending; (3) the special interests will make minced meat of a president without the convictions, credibility, and credentials to cut spending; and (4) there is no promise, of course, to cease new initiatives that will cost money. In fact, as to the latter, more help to the “middle-class” is on the way.

This is so absurd. Of course, I am not against cutting spending. I am against insults from the people whose salaries I am paying.

This too shall pass.

5 Responses to “What? No, It Is Not The Onion”

  1. Bob Murphy Says:

    It’s amazing how many commentaries on government policies lately invoke The Onion. And I’m not criticizing Mario’s post title… The references are usually appropriate.


  2. To strike a positive note: ordinary people now recognize that government spending is a drag on the economy, and the true measure of the tax burden. When will the economics profession catch up to the wisdom of the people?

    Investment creates wealth, and savings is the ultimate source of finance for investment. (What is saved is also spent, as Adam Smith understood.) Stimulating spending at the expense of savinsg is wealth-destroying.

  3. Terry Noel Says:

    Hee hee…Mario, I have to agree with you. When I first saw that headline, I thought it was a joke as well. I try to resist cynicism as best I can, but one wonders if Obama really does think of the American people as hopelessly stupid and criminally naive. This is what we get when we elect someone who “knows what’s best for us.”

    Terry

  4. Andreas Hoffmann Says:

    Mario,

    I had a similar notion yesterday. He proposed a big spending stop. I thought, wow. But then, he leaves out most of the budget, including social security and military. So only addresses a sixth of the US budget. The costs for the rest may as well grow faster. But anyways. Let us assume it does not!

    Then he may take care of 3 % of the 11-12 trillion deficit or 250 billion over a period of 10 years (25 bn a year?) with that initiative. That seems enough for him, because he does not feel responsible for the 11 tri. as only 1 trillion was caused by him. The rest is due to Bush and the crisis. Thus for Obama, there is no need to deal with other people’s mistakes. I wonder why he wants to take care of Afghanistan or the health care issue. That problems all existed before he came to office.

    Of course the spending stop will not start until next year. So there is a lot room for more spendings. I guess he assumes that by 2011 growth picks up and the budget improves by higher tax revenues and so on. But as he said ‘this is how budgeting works.’

    Interestingly he addressed some other point. He wants to double (is that correct?) exports within the next 5 years. You do not have to be a prophet that his goals on doubling exports, reducing debt and getting the economy going again may well be possible due to the invincible hand of Ben Bernanke who can give out money at no costs to everybody asking for it, thereby depreciating the dollar to increase exports and bringing about inflation to reduce debt.


  5. The proposal makes no sense, and even before the State of the Union Address Jared Bernstein was backpeddling on the Whitehouse blog, claiming they’d continue with stimulus at the same time(?).

    But almost everything Obama (and before him, Bush) proposed in SOTU was first of all PR. And the fact that this issue (debt) is now being discussed is a real breakthrough.

    OTOH, Andreas Hoffman is probably right — maybe our ultimate way out of debt will be via Ben Bernanke’s helicopter.


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