The Revenge of Ross Perot

Obama's policies are making Americans worry about the national debt

Steve Chapman | September 17, 2009

For years, I've been wishing for another Ross Perot—a leader who would awaken the American people to the dangers of living beyond our national means through huge federal budget deficits. Now, at last, we have that leader. His name is Barack Obama.

Perot ran for president in 1992 as a third-party candidate, and an unlikely Pied Piper he was—a short, crew-cut scold with a thick twang and a cranky manner who proposed to raise taxes. But his complaints about Washington's chronic overspending struck a chord with the public. A few months before the election, he was leading both incumbent George H.W. Bush and challenger Bill Clinton in the polls.

Only his bizarre decision to withdraw (because, he claimed, the Bush campaign had a sinister plot to sabotage his daughter's wedding) popped the balloon. But after re-entering the race, brandishing charts and graphs in wonky half-hour infomercials, Perot managed to win 19 percent of the popular vote, one of the best showings ever by a third-party candidate.

His candidacy was not for nothing. It created a new awareness of a risky fiscal policy that, in Perot's words, was "robbing future generations." It caused Americans to consider whether fiscal indiscipline was defensible on either economic or moral terms. And it sowed the legitimate fear that deficits would be fatal to prosperity.

In the following years, Republicans and Democrats were forced to attack the deficit—so much so that by the late 1990s, the government was running surpluses that no one had ever imagined. In January 2001, the month George W. Bush was sworn in, the Congressional Budget Office projected that over the next decade, the government would pile up $5.6 trillion in surpluses.

Alas, it didn't work out that way. A 2001 recession, two unforeseen wars, and tax cuts put the federal government deep in the red. Politicians suddenly found plenty of excuses to abandon fiscal responsibility.

Both parties tacitly agreed to ignore the deficit in favor of their own priorities, which involved spending far more money than they were willing to ask taxpayers to provide. Instead of surpluses, we got deficits totaling more than $2 trillion between 2002 and 2008.

Those years now look like a model of budgetary restraint. In the 2009 fiscal year, the gap soared to an estimated $1.6 trillion—the biggest deficit, as a share of the economy, since America was saving the world from Hitler. And the Perotistas of 1992 have given way to the tea partiers of 2009.

Most of the federal budget shortfall was the result of events that happened and policies that were implemented under the last president. Obama didn't triple the deficit; Bush did. But the anger and fear have been directed at his successor.

Obama's expensive ambitions have brought the issue back to center stage. He vows to cut the deficit in half. But under his budget blueprint, the government would accumulate some $7 trillion in new debt over the next decade.

Already, he is paying a political price for that stance. In March, most Americans approved of how he was handling the deficit. Today, most disapprove. His overall popularity has fallen as well.

Obama's fateful choice was the $787 billion stimulus package. Enacted in the depths of a recession in a desperate attempt to revive the economy, it soon spawned buyer's remorse. Coming after the 2008 stimulus package, bank rescue program and automaker bailout—steps toward "socialism" taken by a Republican president—it created the specter of the government as Incredible Hulk, rampaging out of control.

Maybe it's unfair for Obama to get the blame for that calamity. But by blithely adding to the problem, he validated the darkest predictions of his critics.

He also impeded his own fondest hope—health care reform. Obama has long insisted that his plans were essential to getting control of spending. But given the ever-rising cost of Medicare and Medicaid, the claim sounds inherently bogus.

Maya MacGuineas, head of the Committee for a Responsible Federal Budget, notes another cause for dismay. After promising that health care reform would reduce the deficit, Obama now says only that it will not increase it. If it won't do any budgetary harm, it also won't do any good.

At this point, not making the problem worse may not appease a public worried that he and Congress are waltzing toward national bankruptcy. Obama, unlike Perot, didn't intend to make Americans care about the federal deficit. But now he may find it hard to get them to think about anything else.

COPYRIGHT 2009 CREATORS.COM

Comments

ed|9.17.09 @ 7:21AM|#

he validated the darkest predictions of his critics

Rac-!

Never mind.

James Stockdale|9.17.09 @ 8:27AM|#

Remember me?

Tomcat1066|9.17.09 @ 8:30AM|#

James Stockdale | September 17, 2009, 8:27am | #

Remember me?

Who are you? Why are you here?

James Stockdale |9.17.09 @ 8:35AM|#

I mean, my sensitivities are completely different.

|9.17.09 @ 8:39AM|#

Most of the federal budget shortfall was the result of events that happened and policies that were implemented under the last president. Obama didn't triple the deficit; Bush did. But the anger and fear have been directed at his successor.


Ummm, really? I think folks were pretty fed up with the compassionate conservative government (crony capitalism) and made that known on election day. Also, I believe the dear leader campaigned on promises of fiscal restraint and change in the status quo. Well, we are still bailing out folks left and right. The government will be getting into the business of running health care balls deep (lest the lessons of Fan/Fred be lost) and we all KNOW how that story will end.
Also, please don't forget to throw just a wee bit of blame on those drunken sailors who walk the halls of Congress. It's NOT just Obama or Bush, but those corrupt lifers that won't get out of their chairs unless someone greases their palms.
Finally, until those douchebags actually account for assets and liabilities like folks in the private sector, do not EVER say that the govt ran a budget surplus.

Any of N|9.17.09 @ 8:40AM|#

That giant sucking sound you hear...

... is Obama's latest speech supporting his love of deficit spending.

Oops. Make that "sucky sound".

|9.17.09 @ 8:44AM|#

The worry preceeded and never subsided after Perot.

The other JSH|9.17.09 @ 9:12AM|#

"Also, please don't forget to throw just a wee bit of blame on those drunken sailors who walk the halls of Congress."

We'd be better off with drunken sailors. They only spend their own money.

Former Republican|9.17.09 @ 9:12AM|#

The 2 major parties have lost there way. When in Washington spend spend spend. Term limits are the answer the need to eliminate professional politicians is profound and amen to this article.

|9.17.09 @ 9:15AM|#

Maybe it's unfair for Obama to get the blame for that calamity. But by blithely adding to the problem, he validated the darkest predictions of his critics.

Stop blaming Bush for Obama's fiscal irresponsibility. Just fucking stop parroting the Democratic lies already, Steve.

Obama could have vetoed everything in sight, and we wouldn't have trillion dollar deficits. Instead, he voted in favor of all of Congress' spending as a Senator, then doubled and tripled down on it when he got in office, and is now pushing hard for a massive permanent expansion of healthcare spending.

It's Obama's fault. He's responsible.

|9.17.09 @ 9:35AM|#

HOw I wish that Perot would have won. That batshit insane lunatic would have shaken things up. Of course maybe that might have meant global thermonuclear war, but things would have been interesting.

Jay|9.17.09 @ 10:10AM|#

Good point highlighting Perot. It is a good angle and I had not considered it.

I take issue with blaming Bush. He certainly had his share of blame in this mess, as do the Democrats. And you are right to point this out, and emphasize it even, as far too many have absolved the Republicans of their responsibility. You should have specifically mentioned that the worst of it was Medicare D.

But, it is intellectually dishonest to claim that Obama is being blamed for Bush's spending. Tarp 2 is all Obama and the Democrats. The auto bailouts are all Obama and the Democrats, and worse, and the proximate effect of their union pandering for decades. The FMs crashed because Democrats resisted Republican reforms, citing affordable housing. And looking forward, Obamacare will usher in eternal deficits more than 5x greater than anything Bush ever proposed, and this without any emergencies or foreign threats; it is simply domestic consumption on debt.

The Democrats and Obama plan to usher in decades of debts that dwarf anything we have ever seen before. This is why the tea parties are forming, and Ross Perot's revenge is realized; and it is owned by the Democrats.

Ross Perot|9.17.09 @ 10:11AM|#

stop parroting echoing the Democratic lies

Please quit making fun of my name.

Duncan|9.17.09 @ 10:32AM|#

Revenue Matters! Tax revenue in April fell 34% over a year earlier! (http://www.aier.org/research/commentaries/1488-tax-revenue-plummets) It's deeply dishonest to discuss the increase in the deficit without discussing the massive drop in Federal revenue which is driven by the declining economic fortunes.
The basic problem is that cutting spending in such an environment would be counter to all conventional economic wisdom. Ideally, we should be running a surplus in good times so that there would be room in the balance sheet to run deficits in times like now.

|9.17.09 @ 10:33AM|#

"Ummm, really? I think folks were pretty fed up with the compassionate conservative government (crony capitalism) and made that known on election day."

So they decided to punish them by electing the guy who was sure to make it worse? Brillaint strategy. With geniuses like this voting, who needs politicians?

Duncan|9.17.09 @ 10:36AM|#

The auto bailouts were not all the Democrats--only the second one that required GM and Chrysler to enter bankruptcy. The first bailout was when Bush punted the issue to Obama by giving the automakers money without the same strings attached.

|9.17.09 @ 10:36AM|#

"The auto bailouts are all Obama and the Democrats, and worse, and the proximate effect of their union pandering for decades."

"On December 19, 2008, President Bush used his executive authority to declare that TARP funds may be spent on any program he personally deems necessary to avert the financial crisis, and declared Section 102 to be nonbinding. This has allowed President Bush to extend the use of TARP funds to support the auto industry, a move supported by the United Auto Workers."

http://en.wikipedia.org/wiki/TARP

|9.17.09 @ 10:59AM|#

"A 2001 recession, two unforeseen wars, and tax cuts put the federal government deep in the red."

Actually, the tax cuts caused tax revenues to grow to record levels. The cuts were not a part of the deficit problem: uncontrolled spending on domestic progams was the single largest cause of the deficit. (In fact, the increased tax revenues of 2001 - 2008 could have paid for twenty Wars On Terrorism, had spending on domestic programs remained at 2001 levels.)

But let's not allow the facts to intrude upon the narrative.

|9.17.09 @ 11:04AM|#

"Ideally, we should be running a surplus in good times so that there would be room in the balance sheet to run deficits in times like now."

...except that it would be illegal, because our government is not a corporation. Federal government agencies are specifically forbidden to make a profit, by law.

Ideally, government outlays should be 100% matched by tax revenues, each and every year. No more, no less.

Duncan|9.17.09 @ 11:09AM|#

Kim,
Why would running a surplus be illegal? I'm a little unclear on that. We ran a fairly large surplus in 1999 and 2000. The volatility in tax revenues (see 44% drop in income tax revenues) and related cyclical expenses (unemployment, medicare, food stamps) that rise during bad times would make it increadibly hard to have taxes=expenses every single year.

Duncan|9.17.09 @ 11:17AM|#

Kim,
"Actually, the tax cuts caused tax revenues to grow to record levels." You're mixing up two different things here. Tax revenues rose to record levels because the ecnomy grew (GDP tends to always grow in the long-run). However, to say that tax cuts caused that growth is, at best, debatable. The rate of economic growth and job creation in the 1990s was far better with higher marginal tax rates and tax revenue rose at a very fast pace. So did the tax increases of the early 1990s cause the economy and tax revenue to grow then?

Sean W. Malone|9.17.09 @ 11:20AM|#

Running a surplus and profits are not precisely the same thing - a non-profit organization can have a surplus and certainly government outlays could conceivably include provision for an "emergency" fund such that each year we make sure that the government has say 4-5% of total revenue going into a cash reserve for the future. Of course, it would be much, much better if we simply got rid of the Federal Reserve's monetary tampering, let people keep vastly more of their money and enjoy a sustainable economy as a (slowly) deflationary system encourages savings.... But hey, why would we do that when it's so much easier to fund endless wars and trillion dollar welfare programs with printed money.

|9.17.09 @ 11:23AM|#

Kim, running surpluses was considered the norm until early in the twentieth century.

When the government runs a surplus it simply uses that money to retire debt.

This is what sould have happenened in 99-00 except for the fact that much of the "surplus' came from increased FICA collections. So while privately held debt decreased, government held debt increased more than enogh to offset any gains.

So, we ended up with the paradox of having revenues exceed outlays but still being further in debt.

|9.17.09 @ 11:48AM|#

Two unforeseen wars...that's rich. As though they were acts of God.

|9.17.09 @ 11:55AM|#

I'm not sure how many of you have seen this, but watch the Jan Henfeld video on youtube of him interviewing Rep. Pete Starne (I think that's his name). You'll soon learn that, according to Starne, debt is the indicator of wealth!

|9.17.09 @ 12:13PM|#

I am a huge fan of Reason and concur with

most of the common sense, reasoned articles I

have read. However, this article seems like it

could have been syndicated from MSNBC.

There was absolutely nothing about Obama

that indicated any fiscal responsibility.

Furthermore, Congress is ultimately

responsible for budgets and spending. Obama

came from the Senate, remember? He voted

'yes' to the TARP heist. The NY Fed bailed out

AIG/ robbed Americans. Bush schlepped the

auto nightmare off on Obama, but Obama

owns it. There is plenty of animus for Bush, but

Obama is a nightmare. Electing Obama with

our current Congress was a collective act of

utter voter stupidity. It was sheer uninformed,

misinformed, sycophantic voter irresponsibility

fueled by a media assisted hatred for Bush.

Hope and change - what a joke. If you wanted

to vote against the status quo, to have seen

some meaningful change, and some honesty,

people should have voted for Ron Paul. Of

course, he isn't 'hip and cool' enough for a

celebrity-worshipping electorate. I sure wish I

would have paid a little more attention to Mr.

Paul. Who knows what kind of nightmare

McCain would have been, but therein lies the

inherent problem - choices in a two-party,

special interests dominated, manipulated

election. Steve, maybe Obama will come to his

senses when he's exiting the White House in

2013 - some real hope and change worth

believing in!

Craig|9.17.09 @ 1:38PM|#

Only his bizarre decision to withdraw (because, he claimed, the Bush campaign had a sinister plot to sabotage his daughter's wedding)...

And as we all know now, the Republicans would never resort to dirty tricks to win an election!

Craig|9.17.09 @ 1:40PM|#

For years, I've been wishing for... a leader who would awaken the American people to the dangers of living beyond our national means through huge federal budget deficits.

That's odd. I don't recall Chapman endorsing Ron Paul in the Republican primaries....

|9.17.09 @ 1:55PM|#

The Republicans and Clinton did not run "surpluses" in the late 1990s. By forcing spending caps, they managed one tiny surplus in 2000.

In every other year, the budget was balanced with debt and with money siphoned from the Social Security Trust Fund.

There's no law against a surplus, except the law of nature: If an elected official sees a dollar in the public treasury, he'll spend it, and more.

|9.17.09 @ 2:05PM|#

Ideally....

Actually, ideally, the government would spend what we allow them to spend. Term limits, tax reform (fair tax, consumption tax, flat tax, anything better than what we have now) and an ammendment to the Constitution restricting the percentage of our money that the government can spend and/or give away.

sean|9.17.09 @ 3:43PM|#

Those wonderful surpluses were the precurser to the recession at the end of the Clinton years. Its an accounting identity that the public sector surpuls is exactly equal to the private sector savings. The only way the federal gov't runs a surplus is by draining private sector savings. Every surplus has been follwed by a recession.
The federal gov't is not revenue constrained - it does not require taxes or bond sales to spend. Deficits may be inflationary if they lead to excess agregate demand but we can not "run out of money" at the federal level - the Treasury is the monoply supplier of the currency. You may not like what the money is being spent on but there is solvency issue.
Those arguning for a balaced budget are arguning for a lower standard of living and no growth.

seab|9.17.09 @ 4:01PM|#

sorry, meant to say the public sector surplus is eaxtly equal to the private sector deficit and the pubic sector deficit is equal to privtae sector savings. hvae you noticed the incrasde in the savings rate as the federal deficit increases....

Ducan|9.17.09 @ 4:33PM|#

Seab,
The basic problem with your accounting identity idea is that there is a fixed amount of money or savings. The amount of money is not fixed, hence both private and government savings can grow. The government normally runs surpluses during the peak of economic expansions, not during recessions. Since recessions normally follow expansions, it's not surprising that surpluses preceed recessions. The problem with your arguement is that it's a causal factor in your idea. Then, why did we enter into recessions when the government was running a deficit? Do both deficits and surpluses cause recessions?

sean|9.17.09 @ 5:00PM|#

I am arguing that the drain on private sector savings from the desire to run public sector surpluses contributed to the recession.
I am not arguing that there is a finite amount of money but when the monoply supplier of the currency desires to run a surplus it rdains private sector savings - that is a fact, not an opinion.
When the federal govt spends (send you a check for $1000) it debits the Treasury's account at the Fed and crdits a member bank (when you cash your check). Private sector savings are now incaresed by $1000 and the public sector is now in deficit by $1000. Bonds are issued to drain the excess reserves that resulted from the spending.
It is possible to have a recesson when you have a deficit as deficits on their own do not prevent recessions - i did not argue that - but alarger deficit would have reduced the severity of the recession as it would have helped resote private sector savings/income.
For domestic private sector and domestic govt savings to grow we would have to be running a trade surplus and would need a foreign public sector to be in deficit.

Duncan|9.17.09 @ 6:39PM|#

Public sector savings should increase the amount of available funds for investments. If there is a fixed amount of private sector savings, then government borrowing would crowd out some private sector investment/borrowing. Generally economists debated this idea in the 1990s and thought that it was possible this is how it worked. As to the trade deficit, there certainly is some evidence that increased net domestic saving, by both government and individuals, reduces the size of the trade deficit. Monetarists tend to think that trade deficits are somewhat of a function of excess saving in trade surplus countries.
"Bonds are issued to drain the excess reserves that resulted from the spending." I disagree with this. Bonds are issued b/c the Federal government can't just print or invent money--this is what happens in Zimbabwe and leads to runaway inflation. The Federal Reserve is still somewhat independent of the Treasury.

sean|9.17.09 @ 7:11PM|#

There is not a fixed amount of public sector dollars. The federal government does not need private sector savings to spend money with a non convertible fiat currency. That is the whole point - there is no such thing as crwoding out when the money that buys govt bonds comes from government spending.
Im sorry you disagree but that is a fact, not an opinion. The govt spends via debiting its account at the fed and crediting a members account. It does not drain private sector savings to spend, its adds to them via spending. You are operating under a fixed exchange rate gold standard paradigm.

sean|9.17.09 @ 7:21PM|#

Duncan, I would reccomend the following web page and article
http://neweconomicperspectives.blogspot.com/2009/08/teaching-fallacy-of-composition-federal.html

Also a book called Understanding Modern Money by L Randall Wray