By Richard Larsen
Published – Idaho State Journal, 02/07/10
I’m genuinely concerned for the health of our president. At least his mental health. With increasing frequency, he evinces signs of delusion. Or maybe he thinks we’re too ignorant to recognize it. Either way, there’s ample evidence of a mental separation from reality that should be of great concern to all of us.
For example, in his State of the Union address last week, he said “Our government is deeply in debt after what can only be described as a decade of profligacy.” This statement immediately brings to mind the editorial cartoon the Journal ran a couple weeks ago where the president was attempting to fly a paper airplane that said “Blame Bush” on the side of it, and a citizen was telling him, “It doesn’t fly anymore.” It really doesn’t, especially as it deals with government spending.
In 2006, the last year the Republicans controlled congress, the federal deficit, which is tax receipts for the year minus spending, was $248 billion. But on the heels of the presidents’ comments last week, he attempts to float a lead balloon of a budget that boasts $3.8 trillion in federal government spending, more than a 50% increase over 2006 figures, and a whopping $1.6 trillion deficit. That’s fully 7 times larger than the deficit was in 2006. If the last decade represented “profligate” spending, what does that make his proposed spending? Profligate times 7? At this rate of spending growth and irresponsible fiscal policy, the U.S. will join Greece, Spain, and Portugal in having its debt instruments, bonds, notes and bills, downgraded and highly suspect to astute investors.
The news about Greece’s likely default on its debt sank markets around the globe this week. Part of the problem is that their deficit is estimated at 12.7% of GDP (gross domestic production), with debt above 110% of GDP. To put that in perspective, the U.S. right now has a deficit which is 10.6% of GDP and total national debt, with this week’s increase of $2 trillion by congress, now standing at 100% of GDP. For those who wish that the U.S. was more like Europe, at least from a financial perspective, you’ve gotten your wish. We’re about to join the ranks of nearly bankrupt countries from Europe!
Most of our federal government debt is financed by selling treasuring bonds, notes, and bills. The Chinese government currently owns about 23% of all the outstanding U.S. debt. With all this spending proposed by Obama, the assumption is made that China, and investors around the world, will be willing to buy our paper (debt). But a Chinese official said a few weeks ago, before Obama rolled out his new spend-thrift budget, that there is not enough money in the world to buy all the U.S. treasuries needed to fund Obama’s spending.
Obama also said last week, “We can't simply move beyond this crisis; we have to address the irresponsibility that led to it, and that includes the failure to rein in spending....” While castigating a previous administration with a fraction of the deficit that he’s proposing, and a budget a third smaller than what he’s proposing, he has the audacity to claim that he’s “reining in spending?” He’s not reining in anything, but kicking and spurring the federal spending stallion into a full gallop, and he’s heading for a cliff.
The president also said, “It would be a terrible mistake to borrow against our children's future to pay our way today....” Yet that’s exactly what he’s proposing. His new budget calls for an astonishing $1.7 trillion in new taxes, including the expiration of the Bush tax cuts. We will not be paying for his full $3.7 trillion budget even with all those increased taxes…our children will be. Didn’t Bernie Madoff just go to prison for doing the same thing? What the president is proposing is multigenerational larceny and a federal government Ponzi scheme.
He also made a big deal in his State of the Union address that he would freeze discretionary spending, which is about 7% of the federal budget, for three years…starting next year! That’s after he already boosted discretionary spending by 20% his first year in office. So his proclaimed “spending freeze” is no more than a façade, where the 20% increases from this year are locked into place, starting next year. Discretionary spending typically increases about 3% per year, so he’s proposed “reducing spending” growth by only locking in discretionary spending by twice that amount!
When there is such a detachment from what one says versus what one does, it moves beyond cognitive dissonance, and into the realm of detachment from reality, which is associated with a number of mental disorders. We truly hope he isn’t smitten with any of these, but the evidence is increasing daily.