Wednesday’s Wall Street Jouranl contained an editorial piece titled “What Austerity?”
The very pointed piece starts like this:
With the recovery sputtering, the White House and its allies have been blaming government spending cuts, or what the neo-Keynesians call “fiscal contraction.” This is a dubious economic theory even if spending were being cut, but yesterday’s mid-year report from the Congressional Budget Office shows definitively that there’s been nothing close to contraction in Washington.
That’s the real news in the CBO numbers, which show that spending in fiscal 2011 (which ends on September 30) will hit a new high of $3.6 trillion, up $141 billion from 2010. That’s higher than the previous record in 2009 of $3.5 trillion, which was supposed to be the peak of the “temporary” stimulus spending.
Ouch. Did you realize that total federal outlays have increased by about one-third in just four years, something unmatched since the “Great Inflation” of the 1970’s.
The piece continues:
Give President Obama and the two Pelosi Congresses credit for this much: They said they would spend our way out of recession, and they sure gave it the old Beltway try. The problem is that we got the spending without the promised economic growth.
Double-ouch. Spending is up again, and while there are relatively modest increases in military spending (and make no mistake – defense spending absolutely needs to be scrutinized) the biggest increases are “Medicare, Medicaid, and the usual panoply of entitlements and other payments to individuals.”
Referencing the recent CBO report, the authors point out that the slightly sunnier picture (very slight) is “based on assumptions that will never come true.” It assumes, they said, that federal spending will suddenly come to a screeching halt and grow by only $12 billion in 2012. Right. Both Obama and the Demorat-controlled Senate want to INCREASE spending.
The rest of CBO’s fantasy forecast comes from what it says will be “the sharp increases in revenues that will occur when provisions of [the Bush era tax cuts extended last year] expire.” So CBO estimates that federal taxes as a share of GDP will leap to 19% in 2013 and 20.2% in 2014 from 15.3% today. And we are supposed to believe that economic growth will soar to 4.4% and 5% in 2014 and 2015 after huge tax increases on capital gains, dividends, small businesses and workers in 2013. Beam us up, Scotty.
The editorial concludes like this:
The real story told by the CBO report is that the federal government is still pursuing a very loose fiscal policy, despite lamentations from Democrats and the Keynesian economists who populate Wall Street. The best that House Republicans have been able to do so far is to battle Mr. Obama and Senate Democrats to a draw, delaying tax increases until 2013 and preventing even larger spending increases. To really control Washington’s appetites, the voters are going to have to back up their message in 2010 with reinforcements in 2012.
I couldn’t agree more.