Recently, the G-20 met in Toronto to discuss the economy and when they’d finished, they announced an agreement to cut deficits in half by 2013.
It was encouraging to see the European welfare states recognizing the perils of massive debt and arguing for belt-tightening. But, disturbingly, the spendthrift U.S. president and the American news media still don’t get it. You’d think previously committed socialist nations changing directions might be a clue that the U.S. is going the wrong way.
Even as those European nations argued for austerity Obama called for more spending. But with the U.S. facing a $1.6 trillion deficit, it is certainly time for a change. Good luck getting Washington to reverse course though. Politicians in this city love spending other people’s money more than Americans like a Fourth of July picnic and fireworks.
The news media supported the spending spree too. ABC’s Dan Harris told viewers “most economists agree [with a stimulus], we have no choice.” NBC’s Scott Cohn reported from a struggling Indiana town saying, “Economic stimulus isn’t just a political debate around here. It could be a matter of survival.”
The broadcast networks practically campaigned for the $787 billion bill by refusing to ask how it would be paid for, and including supporters more than twice and much as critics. The networks also ignored at least 250 economists who opposed the stimulus package.
For the most part, the media backed government spending to stimulate the economy and ignored warnings from people like Arthur Laffer. In 2008, Laffer explained the reason economics stimulus doesn’t work:
“You can’t bail someone out of trouble without putting someone else into trouble and the federal government doesn’t have a tooth fairy,” Laffer said on CNBC’s Jan. 5, 2008, “Fast Money.”
“And every dollar of tax rebate or stimulus, whatever you want to call it has to come from the taxpayer sooner or later. And that’s going to hurt the economy.”
Taxpayers saw this coming and thousands rallied around the country at tea parties in 2009 to protest bailouts and spending.
Now Obama claims he’s serious about slashing the budget deficit and even warned skeptics:
I’m doing it because I said I was going to do it. People should learn that lesson about me, because next year, when I start presenting some very difficult choices to the country, I hope some of these folks who are hollering about deficits and debt step up, because I’m calling their bluff.
Conservative tax experts say those “difficult choices” will be massive tax increases, so it’s fortunate for Obama and Congress that the deficit commission will make its recommendations in December, following the 2010 mid-term elections. The 2013 deadline is also after the next presidential election.
Perhaps someone should be calling Obama’s bluff. Just look at the numbers. Half of a $1.6 trillion deficit is $800 billion. That’s almost what his entire stimulus package cost taxpayers. It’s also nearly $150 billion more than the entire proposed defense budget for 2010. It is, to say the least, unrealistic to believe Obama and Congress will be able to slice off that large a chunk of government spending.
And you can’t expect the American people to support enormous tax hikes either, especially when 42 percent of them opposed the costly stimulus measures in February 2009. By January 2010, opposition to the stimulus program had climbed to 56 percent.
The Congressional Budget Office announced June 30 that only “sharply” cutting federal spending, raising taxes, or both could reverse the unsustainable course the U.S. is on. By sharply they meant a 25 percent increase in taxes or a 20 percent reduction in spending.
Meeting the deficit-cutting goal would take a miracle according to CNN business correspondent Christine Romans:
There were some people who were watching all of this saying all of these people around the table, those 20 people around the table are all hoping for a miracle of growth that’s gonna let them have all of these promises.
With all the bad economic news including 125,000 more jobs lost in June, lower consumer confidence and troubling news from the housing sector it looks like Obama needs a series of miracles.
Julia A. Seymour is the Assistant Editor for the Media Research Center’s Business & Media Institute.