Government Still Growing, Even After Compromise

Now that the dog and pony show surrounding last week’s budget brinkmanship is over, it is more clear than ever that neither political party truly grasps the magnitude of the government’s spending problem (or they do, but do not care).

$38 billion is a rounding error on the President’s proposed $3.8 trillion budget. Now members of each party are patting each others’ backs for successfully bamboozling the American public.

Before the compromise, the OMB projected President Obama’s FY2011 budget would grow by 10.5% over FY2010. After the compromise, it will still grow by 9.4%.

In essence, the compromise did nothing to reduce the size of government. It merely slowed its growth rate by a paltry 1%.

At this rate, government is expanding more than 3.2 times faster than The Economist Intelligence Unit forecasts the American economy will grow in 2011.

Our political leaders are failing us.

They are not serious about cutting spending. It is now clear that both Republican and Democratic politicians are focused on nothing but self-preservation and expansion of government power and influence. The drama and brinksmanship were nothing but a distraction that lulled the American people into a false sense of security.

Enough is enough.

About Sean Patrick Hazlett

Finance executive, engineer, former military officer, and science fiction and horror writer. Editor of the Weird World War III anthology.
This entry was posted in Business, Finance and Economics, International Security, Media, Policy, Politics and tagged , , , , . Bookmark the permalink.

14 Responses to Government Still Growing, Even After Compromise

  1. Scott Erb says:

    You’re right on the basic facts, but I think (hope) you’re wrong on the big picture. I don’t think it was feasible at this point to do more than start the process. Think of it like you’re driving a car at high speeds and you suddenly have to shift to reverse. You can’t suddenly go from 100 MPH forward to 100 MPH in reverse without first stopping and then starting at 0. I see this as doing that. To really make a dent we’ll have to go after sacred cows — entitlements, military spending, tax increases, etc. These will be much harder, but that’s where the meat is. Those were impossible to tackle at this juncture, there wasn’t enough time to fully debate and vet those issues. Moreover, we’re starting to pull out of a huge recession, too quick a cut in the budget might hurt the recovery. It took us thirty years to get where we are (the debt started really climbing around 1981, that’s also when the current account went into deficit), it’ll take us thirty years to undo the damage. The great Democratic-Republican compromise of the last thirty years — we’ll spend more but tax less — has to be reversed.

    • Scott,

      I agree that the government cannot cut everything all at once. However, you have to admit that it is insane that our government is still growing at over 3 times its projected GDP growth.

      To me, cutting spending implies that the government will spend less than it did the prior year. It is still spending 9.4% more.

      Our government is projected to grow faster than China’s economy in 2011!

      This is insane.

      • Scott Erb says:

        OK, the car is still slowing, getting ready to turn!

      • “OK, the car is still slowing, getting ready to turn!”

        Believe it or not, the car was slowing. Under Obama, the budget actually declind by 1.7% from FY2009 to FY2010 (I know, I am just as surprised as you probably are). However, that is after it grew by 17.9% over FY2008, when it was prudent to deficit spend.

        After reining in spending very slightly in FY2010, now government is speeding up at 9.4%.

        Anyway, I say tomato, you say tomato…;-)

  2. nemo235 says:

    I thought you were a rational republican. If you knew anything about economics you would know that spending is good for the economy, Praticularly domestic spending. By forcing cuts to Obama’s budget, congress is cutting out programs that will help get america out of it’s economic crisis. If Republicans were really concerned about cutting spending, they would be trying to end the wars that have bankrupted the country. If money is spent on domestic programs, tax money is put back into the American economy.

    • Nemo,

      First, thank you for taking time to comment on my blog.

      “I thought you were a rational republican. If you knew anything about economics you would know that spending is good for the economy, Praticularly domestic spending.”

      Nemo, even after the “cuts”, which are nothing more than a rounding error, the U.S. government will grow more than Chinese GDP will in 2011. Is this rational?

      To grow government at this rate, the U.S. will have to run a $1.6 trillion deficit. To add $1.6 trillion, the country has to raise more debt. If you knew anything about economics, the more debt one issues, the more worthless it becomes. Therefore, to attract additional capital, you have to raise interest rates. When you raise interest rates, the cost of capital to expand businesses and the cost for people to finance major purchases like automobiles and homes, rises. As a consequence, business can hire fewer people and the economy lurches back into recession.

      At the depths of an economic recession, I agree that running reasonably-sized deficits is pragmatic. Now that the American economy is technically out of a recession, there is no rational reason for the government to expand by more than 9.4%. This is insane.

      I can understand the argument for cutting spending at a moderate pace and over time, but our government isn’t even doing that. It is cutting the rate of growth from 10.5% to 9.4%.

      “If money is spent on domestic programs, tax money is put back into the American economy.”

      Nemo, defense spending, like it or not, also puts money back into the American economy. Last time I checked, we don’t buy missiles from the Chinese. I also assume your arguments about getting involved in foreign wars apply to President Obama, as well. Additionally, domestic government programs are generally nothing but a form of wealth transfer from one constituency to another. Much of Obama’s stimulus merely substituted state and local debt with federal debt. It staved off disaster, but did little to stimulate a more robust recovery.

      This is the problem with both Democrats and Republicans. They repeat their talking points without thinking for themselves. $38 billion is rounding error and at some point the United States will have to pay the piper. The bottom line is the government needs to stop growing. Then it can start cutting the absolute size of the budget.

    • “By the way, total debt, including private and corporate, also is growing, nearing 400% of GDP.”

      Wow. Very scary…

      • Scott Erb says:

        I scare students in my classes with all this (telling them “my generation had a thirty year party, we had fun, but I hope you don’t mind we’re leaving you the bill.”) It’s mind boggling too, to think that this is pretty common throughout the industrialized world. When every one is so in debt, how can the world economy keep functioning? How long before a painful rebalancing? What will be the spark forcing a change — a dollar collapse, another energy crisis, a prolonged recession?

      • The last time we had a similar crisis, it took a World War to get us out. Yuck.

  3. nemo235 says:

    that makes since. It Just pisses me off that the politicians on both sides let the corporations have free riegn, because they own stock in those corporations. The american people have been sold out to greedy business men, who steal, cheat or even start wars in order to gain profit. Forgive my last comment, I kinda of read you wrong.
    I am kind of weary of republicans mainly because of those crazy teaparty republicans.
    I have no faith in politics anyway.

    • Nemo,

      No worries. I agree that lobbyists on both sides are a major problem. Corporations and unions have a disproportionate impact on our government. Additionally, Democrats and Republicans are catering to their extremist wings, which are anything but rational.

  4. Scott Erb says:

    And the problem with world war (besides the death and destruction) is that it only got us out because we managed to be immune from most of the costs associated with the war. Our territory was not bombed, our factories ran at full capacity, and it was Europe and Japan that got destroyed. For Europe and Japan, war didn’t pull them out of the crisis but drove them further into it. The US and the free trade regime created after the war pulled them out. I’m not sure we’d be so “lucky” next time!

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