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Posts Tagged ‘Bush’

The burden of federal spending in the United States was down to 18.2 percent of gross domestic product when Bill Clinton left office.

But this progress didn’t last long. Thanks to George Bush’s reckless spending policies, the federal budget grew about twice as fast as the economy, jumping by nearly 90 percent in just eight years This pushed federal spending up to about 25 percent of GDP.

President Obama promised hope and change, but he has kept spending at this high level rather than undoing the mistakes of his predecessor.

This new video from the Center for Freedom and Prosperity Foundation uses examples of waste, fraud, and abuse to highlight President Obama’s failed fiscal policy.

Good stuff, though the video actually understates the indictment against Obama. There is no mention, for instance, about all the new spending for Obamacare that will begin to take effect over the next few years.

But not everything can be covered in a 5-minute video. And I suspect the video is more effective because it closes instead with some discussion of the corrupt insider dealing of Obama’s so-called green energy programs.

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Statism is a bad idea, regardless of which political party is promoting bigger government. And it’s a really bad idea when people who should know better decide to increase the burden of government spending.

Consider, for example, the supposedly pro-marriage programs adopted last decade by Republicans. It turns out that millions of dollars were wasted and there was no positive impact on relationships.

Here are some excerpts from a story in Mother Jones.

With congressional Republicans beating the drum about profligate and wasteful government spending, they may want to take a hard look at a federal program pushed by a host of top GOPers during the Bush-era… Originally championed by Republican lawmakers including Iowa Sen. Chuck Grassley, former Pennsylvania Sen. Rick Santorum, and current Kansas Gov. Sam Brownback, a federal initiative to promote marriage as a cure for poverty dumped hundreds of millions of dollars into programs that either had no impact or a negative effect on the relationships of the couples who took part, according to recent research by the Department of Health and Human Services (HHS). …Starting in 2006, millions of dollars were hastily distributed to grantees… The money went to such enterprises as “Laugh Your Way America,” a program run by a non-Spanish speaking Wisconsin minister who used federal dollars to offer “Laugh Your Way to a Better Marriage” seminars to Latinos. It funded Rabbi Stephen Baars, a British rabbi who’d been giving his trademarked “Bliss” marriage seminars to upper-middle-class Jews in Montgomery County, Maryland, for years. …when the federal government started dumping million of poverty dollars into marriage education, there was virtually no research on how such programs would fare with poor, inner-city single moms. Now, though, the data is in, and it doesn’t look good for proponents of taxpayer funded marriage education. This month, HHS released the results of several years of research about the performance of the marriage programs, and it indicates that the Bush-era effort to encourage Americans (straight ones, at least) to walk down the aisle has been a serious flop. …Take the Building Healthy Families program…, couples in the eight pilot programs around the country actually broke up more frequently than those in a control group who didn’t get the relationship program. The program also prompted a drop in the involvement of fathers and the percentage who provided financial support.

Isn’t that wonderful? Taxpayers are financing programs that undermine marriage. Not that we should be surprised by that results. The federal government declared a “War on Poverty” and wound up increasing dependency and destitution.

And even when researchers found results that vaguely could be interpreted in a positive fashion, the cost was absurd.

…married couples who participated in a government-funded relationship class reported being somewhat happier and having slightly warmer relationships with their partners. But the cost of this slight bump in happiness in the Supporting Healthy Marriage program was a whopping $7,000 to $11,500 per couple. Imagine how much happier the couples would have been if they’d just been handed with cash.

One would hope that this evidence of government failure would motivate GOPers to eliminate this example of waste. But I wouldn’t recommend holding your breath until that happens.

Given the underwhelming track record of the federal marriage program, it would seem a ripe target for GOP budget hawks, especially given that many of the original proponents of the program are no longer in Congress to defend it. Instead, in November 2010, Congress allocated another $150 million for healthy marriage and fatherhood related programs, with another $150 million budgeted for 2013. And this fall HHS doled out $120 million worth of grants.

What really irks me is that a former Bush Administration official defends the marriage handouts because we waste even more money on a Head Start program that doesn’t produce good results.

Ron Haskins, a marriage program supporter who is a former adviser to Bush on welfare issues and a senior fellow at the Brookings Institution, thinks Obama did the right thing. He points out that research on poverty programs beloved by liberals, such as Head Start, doesn’t look so good either, but that doesn’t mean the government should simply get rid of it. “When there’s tremendous pressure on the budget, there is a reason for reducing the spending,” he says. “The exception is, if it’s a new program you ought to try to figure out if you can improve it.” Haskins notes that in the grand scheme of the federal budget, the marriage program is but a blip. “We don’t spend a lot of money on these programs. [We spend] $7 billion on Head Start, but not even a $100 million on these [marriage] programs.”

I realize this is heresy in Washington, but what would be wrong with saying, “Neither marriage programs nor Head Start generate positive results, so let’s get rid of both and save $7.1 billion.”

No wonder we’re likely going to be another Greece in just a few decades.

P.S. I shouldn’t have to write this (especially since I’ve already explained my socially conservative inclinations), but allow me to deflect foolish attacks by saying that being against federal programs to subsidize marriage doesn’t make me anti-marriage. I like softball, apple pie, chocolate milk shakes, and the Georgia Bulldogs football team, but I don’t want the federal government subsidies for any of those things either. Indeed, I fear subsidies and handouts will have a negative impact.

P.P.S. The conservatives who support these programs are making the mistake of legislating based on good intentions. They correctly understand that stable marriages are a good thing (as Walter Williams has explained, an intact family is a sure-fire way of avoiding poverty if accompanied by a high school education, any sort of job, and obeying the law), but they erroneously jump to the conclusion that a good thing can be made better with money from the federal government.

P.P.P.S. Conservatives who want stronger marriages and healthier families should concentrate on ending the pernicious welfare handouts that, for all intents and purposes, replace fathers with government programs. I won’t pretend that’s a full solution because it’s not easy to put toothpaste back in a tube, but it can’t hurt given the strong correlation between the growth of the welfare state and the decline in stable low-income families.

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A couple of weeks ago, I debunked the myth that Obama is a fiscal conservative by showing how TARP masks his real record.

I then followed up that post by showing that Obama is a traditional leftist who spends on social welfare programs, but also did a final post showing that Bush was similarly profligate.

Now we have some additional research confirming these points. Art Laffer and Steve Moore investigate Obama’s claim in today’s Wall Street Journal.

They start with an acknowledgement that the burden of spending declined during the Clinton years.

Here’s the picture. In the chart nearby we’ve plotted federal government spending on a National Income and Product Accounts (NIPA) basis as a share of total U.S. GDP from 1990 to the present. …The stories the chart tells are amazing. …The first is how much government spending fell during President Bill Clinton’s eight years in office and how low it was when he left office. When he became president in 1992, government spending was 23.5% of GDP, and when he left in 2001 it was 19.5% of GDP. President Clinton, in conjunction with a solid Republican Congress, cut government spending by more than any other president in modern times, and oversaw one of the greatest periods of economic growth and prosperity in U.S. history.

Since I’ve done a video highlighting the good fiscal record of both Reagan and Clinton, this is music to my ears.

Unfortunately, policy moved in the wrong direction once Bush got to the White House – and Laffer and Moore specifically highlight the negative impact of Nancy Pelosi and Harry Reid.

 …the biggest surge in government spending came during the last two years of President George W. Bush’s eight years in office (2007-2008). A weakened Republican president dealing with a strident Democratic Congress, led by then-House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid, resulted in an orgy of spending. Mr. Bush and Republicans in Congress capitulated to and even promoted each and every government bailout and populist redistribution canard put before them. It’s a long list, starting with the 2003 trillion-dollar Medicare prescription drug benefit and culminating with the actions taken to stem the 2008 financial meltdown—the $700 billion Troubled Asset Relief Program, the bailout of insurance giant AIG and government-sponsored lenders Fannie Mae and Freddie Mac, the ill-advised 2008 $600-per-person tax rebate, the stimulus add-ons to 2007′s housing and farm bills, etc.

Needless to say, Obama decided to double down on Bush’s failed policies.

After taking office in 2009, with spending and debt already at record high levels and the deficit headed to $1 trillion, President Obama proceeded to pass his own $830 billion stimulus, auto bailouts, mortgage relief plans, the Dodd-Frank financial reforms and the $1.7 trillion ObamaCare entitlement (which isn’t even accounted for in the chart).

Adding injury to injury, the so-called stimulus didn’t work. And the authors are right about the looming fiscal nightmare of Obamacare.

It’s also worth noting that Keynesian spending didn’t work for Hoover and Roosevelt back in the 1930s, and Laffer and Moore also explain how those two supporters of statism exacerbated the damage with class-warfare tax policy.

Like President Obama, President Hoover proposed massive tax increases. Unlike Mr. Obama, Hoover was successful. The highest marginal income tax rate jumped to 63% from 24% on Jan. 1, 1932. That November, Hoover lost the election to Franklin D. Roosevelt in a landslide. As if Hoover’s tax increases weren’t enough, on Jan. 1, 1936, FDR raised the highest marginal income tax rate to 79% with further rate increases up to 83% coming later. Estate and gift taxes, taxes on retained earnings, state and local taxes were also raised. This is why the Great Depression was the Great Depression—massive deficit spending and tax rate increases.

But that’s a separate issue. The key takeaway from the Laffer/Moore column is that government spending undermines prosperity.

…the most amazing feature of the nearby chart, which is rarely ever noted, is that when spending declined sharply the economy boomed under President Clinton, and when spending soared under Presidents Bush and Obama, the economy tanked.

P.S. For those who appreciated a more humorous look at Obama’s record, here are two amusing cartoons.

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Last week, I jumped into the surreal debate about whether Obama has been the most fiscally conservative president in recent history.

I sliced the historical data from the Office of Management and Budget a couple of ways, showing that overall spending has grown at a relatively slow rate during the Obama years. Adjusted for inflation, both total spending and primary spending (total spending minus interest payments) have been restrained.

So does this make Obama a fiscal conservative?

And how can these numbers make sense when the President saddled the nation with the faux stimulus and Obamacare?

Good questions. It turns out that Obama supposed frugality is largely the result of how TARP is measured in the federal budget. To put it simply, TARP pushed spending up in Bush’s final fiscal year (FY2009, which began October 1, 2008) and then repayments from the banks (which count as “negative spending”) artificially reduced spending in subsequent years.

The combination of those two factors made a big difference in the numbers. Here’s another table from my prior post, looking at how the presidents rank when you subtract both defense and the fiscal impact of deposit insurance and TARP.

All of a sudden, Obama drops down to the second-to-last position, sandwiched between two of the worst presidents in American history. Not exactly a ringing endorsement.

But this ranking is incomplete. At that point, I was trying to gauge Obama’s record on domestic spending, and the numbers certainly provide some evidence that he is a stereotypical big-spending liberal.

But the main debate is about which president was the biggest overall spender. So I’ve run through the numbers again, and here’s a new table looking at the rankings based on average annual changes in inflation-adjusted primary spending, minus the distorting impact of deposit insurance and TARP.

Obama is still in the second-to-last position, but spending is increasing by “only” 5.5 percent per year rather than 7.0 percent annually. This is obviously because defense spending is not growing as fast as domestic spending.

Reagan remains in first place, though his score drops now that his defense buildup is part of the calculations. Clinton, conversely, stays in second place but his score jumps because he benefited from the peace dividend after Reagan’s policies led to the collapse of the Soviet Empire.

Let’s now look at these numbers from a policy perspective. Rahn Curve research shows that government is far too big today, so the goal of fiscal policy should be to restrain the burden of government spending relative to economic output.

This means that policy moves in the right direction when government grows more slowly than the private sector, as it did under Reagan and Clinton.

But if government spending is growing faster than the productive sector of the economy, as has been the case during the Bush-Obama years, then a nation eventually will become Greece.

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A financial columnist named Rex Nutting recently triggered a firestorm of controversy by claiming that Barack Obama is not a big spender.

Here’s the chart he prepared, which certainly seems to indicate that Obama is a fiscal conservative. Not only that, it shows that Republicans generally are the big spenders, while Democrats are frugal with other people’s money.

In some ways, these numbers don’t surprise me. I’ve explained before that Bush bears a lot of blame for the big expansion in the burden of government this century, and I’ve specifically pointed out that he deserves the blame for most of the higher spending from the 2009 fiscal year (which began October 1, 2008).

That being said, Nutting’s numbers seemed a bit nutty. Sorry, couldn’t resist. Nutting’s numbers actually seem accurate, including the fact that he decided that Obama should be responsible for $140 billion of the spending in Bush’s last fiscal year (a number he may have taken from one of my posts).

But sometimes accurate can be misleading, so I decided to dig into the data.

I went to the Historical Tables of the Budget from the Office of Management and Budget, and I calculated all the numbers for every President since LBJ (with the exception of Gerald Ford, whose 2-year reign didn’t seem worth including).

But I corrected a big mistake in Nutting’s analysis. I adjusted the numbers for inflation, using OMB’s GDP deflator.

As you can see, this changes the results. My chart isn’t as pretty, but based on the inflation-adjusted average annual growth of outlays, it shows that Clinton was the most frugal president, followed by the first President Bush and Obama.

With his guns-n-butter Keynesianism, it’s no big surprise that LBJ ranks last. And “W” also gets a very low grade.

But then I figured we should take interest payments out of the budget and focus on inflation-adjusted “primary spending.” After all, Presidents shouldn’t be held responsible for the national debt that existed before they took office.

Looking at these numbers, it turns out that Obama does win the prize for being the most fiscally conservative president in recent memory. Reagan jumps to second place. Clinton is in third place, which won’t surprise people who watched this video, while W and LBJ again are in last place.

But I don’t want my Republican friends to get too angry with me, so let’s expand our analysis. Just as we don’t want to blame Presidents for net interest payments on debt that was accrued before their tenure, perhaps we should make sure they don’t get credit or blame for defense outlays that often are dictated by external events.

There’s obviously room for disagreement, but most people will agree that the Cold War and 9/11 meant higher defense spending, regardless of which party controlled the White House. Similarly, the collapse of the Soviet Empire inevitably meant lower military expenditures, regardless of whether Republicans or Democrats were in charge.

So let’s now look at primary spending after subtracting defense outlays (still adjusting for inflation, of course). All of a sudden, Reagan jumps to the top of the list by a comfortable margin. LBJ and W continue to score poorly, but Nixon takes over last place.

But it’s also worth noting that Obama still scores relatively well, beating Clinton for second place. Inflation-adjusted domestic spending (which is mostly what we’re measuring) has grown by 2.0 percent annually during his three years in office.

So does that mean Obama deserves re-election? Well, before you answer, I want to make one final calculation. Just as there are good reasons to exclude interest payments because they’re not something a president can control, we also should take a look at what spending would be if we don’t count the cost of bailouts.

To be sure, these types of expenditures can be controlled, but if we go with the assumption that the federal government was going to re-capitalize the banking system (whether using the good FDIC-resolution approach or the corrupt TARP approach), then it seems that Presidents shouldn’t get arbitrary blame or credit simply because some financial institutions failed during their tenure.

So let’s take the preceding set of numbers and subtract out the long-run numbers for deposit insurance, as well as the TARP outlays since 2009. And keep in mind that repayments of TARP monies (as well as deposit insurance premiums) show up in the budget as “negative spending.”

As you can see, this produces a remarkable result. All of a sudden, Obama drops from second to second-to-last.

This is because there was a lot of TARP spending in Bush’s last fiscal year (FY2009), which created an artificially high benchmark. And then repayments by banks during Obama’s fiscal years counted as negative spending.

When you subtract out the big TARP spending surge, as well as the repayments, then Bush 43 doesn’t look quite as bad (though still worse than Carter and Clinton), while Obama takes a big fall.

In other words, Obama’s track record does show that he favors an expanding social welfare state. Outlays on those programs have jumped by 7.0 percent annually. And that’s after adjusting for inflation! Not as bad as Nixon, but that’s not saying much since he was one of America’s most statist presidents.

Allow me to conclude with some caveats. None of the tables perfectly captures what any president’s fiscal record. Even my first table may be wrong if you want to blame or credit presidents for the inflation that occurs on their watch. And there certainly are strong arguments that bailout spending and defense spending are affected by presidential policies rather than external events.

And keep in mind that presidents don’t have full power over fiscal policy. The folks on Capitol Hill are the ones who actually enact the bills and appropriate the money.

Moreover, the federal government is akin to a big rusty cargo ship that is traveling in a certain direction, and presidents are like tugboats trying to nudge the boat one way or the other.

But enough equivocating. The four different tables at least show more clearly which presidents presided over faster-growing government or slower-growing government. More importantly, the various tables provide a good idea of where most of the new spending was taking place.

We can presumably say Reagan and Clinton were comparatively frugal, and we can also say that Nixon, LBJ, and Bush 43 were relatively profligate. As for Obama, I think his tugboat is pushing in the wrong direction, but it’s only apparent when you strip out the distorting budgetary impact of TARP.

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On this day last year, I posted two charts that I developed using the Minneapolis Federal Reserve Bank’s interactive website.

Those two charts showed that the current recovery was very weak compared to the boom of the early 1980s.

But perhaps that was an unfair comparison. Maybe the Reagan recovery started strong and then hit a wall. Or maybe the Obama recovery was the economic equivalent of a late bloomer.

So let’s look at the same charts, but add an extra year of data. Does it make a difference?

Meh…not so much.

Let’s start with the GDP data. The comparison is striking. Under Reagan’s policies, the economy skyrocketed.  Heck, the chart prepared by the Minneapolis Fed doesn’t even go high enough to show how well the economy performed during the 1980s.

Under Obama’s policies, by contrast, we’ve just barely gotten back to where we were when the recession began. Unlike past recessions, we haven’t enjoyed a strong bounce. And this means we haven’t recovered the output that was lost during the downturn.

This is a damning indictment of Obamanomics

Indeed, I made this point several months ago when analyzing some work by Nobel laureate Robert Lucas. And it’s been highlighted more recently by James Pethokoukis of the American Enterprise Institute and the news pages of the Wall Street Journal.

Unfortunately, the jobs chart is probably even more discouraging. As you can see, employment is still far below where it started.

This is in stark contrast to the jobs boom during the Reagan years.

So what does this mean? How do we measure the human cost of the foregone growth and jobs that haven’t been created?

Writing in today’s Wall Street Journal, former Senator Phil Gramm and budgetary expert Mike Solon compare the current recovery to the post-war average as well as to what happened under Reagan.

If in this “recovery” our economy had grown and generated jobs at the average rate achieved following the 10 previous postwar recessions, GDP per person would be $4,528 higher and 13.7 million more Americans would be working today. …President Ronald Reagan’s policies ignited a recovery so powerful that if it were being repeated today, real per capita GDP would be $5,694 higher than it is now—an extra $22,776 for a family of four. Some 16.9 million more Americans would have jobs.

By the way, the Gramm-Solon column also addresses the argument that this recovery is anemic because the downturn was caused by a financial crisis. That’s certainly a reasonable argument, but they point out that Reagan had to deal with the damage caused by high inflation, which certainly wreaked havoc with parts of the financial system. They also compare today’s weak recovery to the boom that followed the financial crisis of 1907.

But I want to make a different point. As I’ve written before, Obama is not responsible for the current downturn. Yes, he was a Senator and he was part of the bipartisan consensus for easy money, Fannie/Freddie subsidies, bailout-fueled moral hazard, and a playing field tilted in favor of debt, but his share of the blame wouldn’t even merit an asterisk.

My problem with Obama is that he hasn’t fixed any of the problems. Instead, he has kept in place all of the bad policies – and in some cases made them worse. Indeed, I challenge anyone to identify a meaningful difference between the economic policy of Obama and the economic policy of Bush.

  • Bush increased government spending. Obama has been increasing government spending.
  • Bush adopted Keynesian “stimulus” policies. Obama adopted Keynesian “stimulus” policies.
  • Bush bailed out politically connected companies. Obama has been bailing out politically connected companies.
  • Bush supported the Fed’s easy-money policy. Obama has been supporting the Fed’s easy-money policy.
  • Bush created a new healthcare entitlement. Obama created a new healthcare entitlement.
  • Bush imposed costly new regulations on the financial sector. Obama imposed costly new regulations on the financial sector.

I could continue, but you probably get the  point. On economic issues, the only real difference is that Bush cut taxes and Obama is in favor of higher taxes. Though even that difference is somewhat overblown since Obama’s tax policies – up to this point – haven’t had a big impact on the overall tax burden (though that could change if his plans for higher tax rates ever go into effect).

This is why I always tell people not to pay attention to party labels. Bigger government doesn’t work, regardless of whether a politician is a Republican or Democrat. The problem isn’t Obamanomics, it’s Bushobamanomics. But since that’s a bit awkward, let’s just call it statism.

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The 2012 Index of Economic Freedom has just been released. This is my favorite publication from the Heritage Foundation, and second only to the Economic Freedom of the World Index as a measure of global public policy.

The news scores for 2012 are not pretty. We have bad news, we have worse news, and we have worst news.

Economic Freedom Declines in America

The bad news is that the score for the United States dropped from 77.8 to 76.3, which caused America to drop from 9th place to 10th place in the global rankings.

The worse news is that the U.S. dropped only one spot because other nations also adopted more statist policies. America would be in 12th place if Denmark and Bahrain simply maintained their positions from last year.

The worst news is that America’s decline is not just a one-year phenomenon. The chart shows how the U.S. has dropped from being a “free” nation to being a “mostly free” nation over a four-year period.

But it’s not just the past couple of years. The second chart, using data from the Economic Freedom of the World Index, shows that the United States has declined over the past 11 years thanks to Bush-Obama statism.

In other words, America is paying a real prices for bad government policy. As jurisdictions such as Hong Kong and Singapore continue to liberalize their economies and maintain high levels of economic freedom, jobs and investment will leave the United States in search of friendlier policy.

The only silver lining to this dark cloud is that other major economies – especially in Europe – are deteriorating at a faster rate. So America will benefit from flight capital in the short run even though our long-run prospects are equally dismal.

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