Obama Administration

The Democrats' Flawed and Contradictory Approach to Spending

Democrats don't quite know what sort of spending problem we have. But they're sure it's one that doesn't require cutting anything.

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Credit: Talk Radio News Service / Foter.com / CC BY-NC-SA

It has been grimly amusing over the last few weeks to watch senior Democrats try to decide what kind of spending problem, if any, we actually have—as well as what, if anything, they might be willing to do about it. 

At the beginning of the year, President Obama reportedly told GOP House Speaker John Boehner that we don't have a spending problem. Instead, he said, we have a health care spending problem. Last week, Democratic House Minority Leader Nancy Pelosi was even more dismissive.  "It is almost a false argument to say that we have a spending problem," she said. "We have a budget deficit problem."

A day later, White House press secretary Jay Carney offered a sort of clarification, or at least an update: "Of course, the president believes that we have a spending problem," he said at a White House briefing. And that problem, Carney said, is "specifically driven by" health care spending. "The fact of the matter," Carney continued, "is we need to reduce our healthcare costs. Funnily enough, recognizing that fact, the president took action to do just that through the Affordable Care Act, which has been scored by the CBO to significantly reduce our health care costs going forward."

Each of these professional Democrats is working from the same talking point playbook. But they're not all telling quite the same story.

Let's take these statements one at a time. Assuming the original reporting is correct, Obama's argument to Boehner was essentially that today's spending levels, and, presumably, the deficits that accompany them, are not really a problem. Instead, he said, the real worry is the long-term growth of federal spending on health care. There's some truth here. In the long term, the growth of federal spending on health care, driven by a combination of factors that include aging and health costs, is the biggest single driver of the federal debt.

You might think, then, that Obama's focus would be on finding ways to cut back on federal health care spending. But the most recent news from the Obama White House is that he won't cut Medicaid, the second health care program financed by the federal government, at all—even Medicaid reductions he might have considered in the past. And while he's suggested that he might consider some sort of technocratic reforms to Medicare's delivery system—as long as they don't cut benefits—Obama is now no longer willing to consider raising Medicare's eligibility age.  

On the other hand, Nancy Pelosi's statement was almost the inverse of what Obama said. Pelosi dismissed the idea that we have a spending problem, saying instead that it was a "budget deficit problem." The budget deficit is the annual gap between federal spending and revenues, so this is very much a short term focus, which might be of interest to President Obama, who seems to think the only problem of note is long-term federal health spending.

Pelosi's statement came as part of a recent Democratic push to avoid the automatic spending reduction scheduled to go into effect March 1 as part of sequestration. Democrats have proposed replacing the sequestration cuts with a package that includes tax hikes. At this point, though, it's hard to accept the argument that tax revenues are too low: The fiscal cliff deal at the beginning of the year allowed tax rates to rise for high earners with no spending cuts. And over the next two years, revenues are set to rise by 25 percent, according to the CBO, reaching 19.1 percent of gross domestic product (GDP). Revenues won't just be higher than they are now; they'll be noticeably higher than the 17.9 percent average of the last four decades. The real problem is spending, which is projected to begin rising again as a percentage of the economy in 2017, hit 23 percent of GDP in 2023, and continue on an "upward trajectory."

Finally, there's Jay Carney, who, in slight contrast to what the president was reported to have said, declared that "of course" Obama believes we have a spending problem. I say slight contrast because there's not too much daylight between Carney and Obama: Both indicated that what really matters is the long term problem of federal health spending.

Carney's innovation, however, was to suggest that President Obama had already done something to fix this problem by passing Obamacare. And it's true that in recent years, the growth of health care costs, public and private, has slowed. But some of the slowdown is probably due to the recession. And, more to the point, the slowdown seems to have started years before Obamacare. We don't have a good sense of whether the slowdown is permanent, but even if it is, that won't be nearly enough. The budget situation remains unsustainable.

So is the problem short term deficits or long term health spending? Is it lack of tax revenue or is it the structure of our health care delivery system? Does it matter? Democrats can't agree exactly what the problem is. But whatever it might be, they're sure they're not willing to cut anything in order to fix it. 

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35 responses to “The Democrats' Flawed and Contradictory Approach to Spending

  1. No spending problem here. Please move along comrades.

    1. as Alan responded I’m stunned that a stay at home mom can profit $7217 in a few weeks on the internet. did you see this webpage… http://www.Ace60.com

  2. All this price inflation that is hitting the poor disproportionately? We can thank our spending problem and the coming expense of the medical mandate for that.

    Again, the Left are total regressives. They have no legitimate claim to call themselves in favor of “economic progress” beyond their self-serving, groundless rhetoric. All their policies exacerbate poverty while boosting the level of corporatism and barriers to entry and competition through the roof.

    1. In the name of the poor, in the interest of pull.

  3. In 1936–at the height of the fucking Depression–federal spending to GDP was 11%. Today, it’s 24%. But for some reason, Team Blue retards (and not an insignficant number of Team Red ones) want us to believe we’re not spending enough.

    1. Duh, only spending 11% of GDP was the reason we were at the height of the Depression. Clearly, had they spent 30% of GDP on well-paid hole-diggers and hole-fillers, the economy would have recovered faster.

      1. Not only that, but they’ll argue we’re spending LESS than historical levels during the great depression and WWII. I don’t know how I don’t have high blood pressure.

      2. Funny, before the depression federal government spending was less than 3% of GDP; thus, the 11% was quite a rise in spending.

        This is just more evidence that increased government spending makes us poorer. After all, the more government spends, the more it takes from you. It’s that simple. But apparently it’s too complicated for Democrats.

        1. I stand corrected, apparently as a percent of GDP, Government spending did exceed 50% of GDP. I had thought it topped out at 21% of GDP, but that was only the beginning of the war. Nevertheless, WWII aside, the charts show a consistent upward trend of government as a % of GDP..

    2. Why is the height of the Depression (that is the height of human misery in the 20th century) anything to look to as a comparison?

      1. Why is the height of the Depression (that is the height of human misery in the 20th century) anything to look to as a comparison?

        I think what he was going for was the height of “New Deal” spending prior ramping up for WW2.

        1. I would give Tony that it would be better to discuss the ethics of government taking and effectiveness of individual capital acquisition and spending instead of benchmarking against other times in government spending history. The real question for me would be, how little can government take and still perform essential functions (I know, I’m a raging Statists)? This is the question that leads to prosperity, increased civil liberties, and reduced poverty.

  4. What if George Bush said we don’t have a spending problem?

    1. “Unfunded mandates! Wars off the budget! Irresponsible expansion of debt!”

  5. “You might think, then, that Obama’s focus would be on finding ways to cut back on federal health care spending.”

    haw haw haw

  6. It should be obvious that the government needs to invest more in innovative programs like universal pre-skool if it is to overcome its spending programs.

  7. Just once, I’d love to hear one of the white house press corps call him out for being a smug, lying little prick.

    -jcr

    1. All WH press secretaries are flacks for POTUS to a large extent. But Carney seems to bring his own well developed sense of smug arrogance to the job.

      The journos won’t challenge him – he’s one of their own. He was with Time from 1989 to 2008 and for the last 5 years was its Washington bureau chief. His wife is a reporter for ABC news.

  8. “Funnily enough, recognizing that fact, the president took action to do just that through the Affordable Care Act, which has been scored by the CBO to significantly reduce our health care costs going forward.”

    Did that lying sack of shit manage to say that without choking?

    1. “It’s amazing what you can do when you lack a sense of conscience or a gag reflex.” – Jay Carney

      1. I remember the good old of ‘spin’; they don’t even bother to establish a false premise or some other more sophisticated technique – now they just lie.

        What depresses me more than the liars are the believers.

  9. There is no doubt that the national debt will shortly be increased by 2 trillion dollars. Some of that money should be in 500 buck rewards for SS recipients, they deserve it for years of hard work.

  10. It is something like government itself confused, they are constantly changing their statements. Whatever the situation is they need to clearly mention what is exact situation presently.
    Certified Financial Advisor

  11. Funnily is a word? I’ve never seen or heard that before

  12. As I know, gogoalshop.com is doing a promotion, only 19.9 US for one jersey, you can log in to have a look.

  13. uptil I saw the bank draft which had said $4886, I did not believe that my mom in-law realy taking home money in there spare time on their apple labtop.. there neighbour started doing this for less than seventeen months and by now repaid the debts on their place and purchased a great new Saab 99 Turbo. I went here, http://WWW.FLY38.COM

  14. Each side of the aisle has their own spending problem, yet neither care because they’re still going to get their hand outs from their supporters and keep on keepin’ on. It will be my generation (gen Y) that has to deal with the toxic waste of this Congress and how are we supposed to pay for it? Is the government going to give us some cushy jobs? Hell no. If I was offered to look into a crystal ball and see 20 years into the future, I don’t know if I’d want to look for fear of what I’d see (I do know it wouldn’t include a Cubs world series championship, that’s for damn sure).

  15. til I saw the check which said $7346, I have faith …that…my best friend was like actually bringing in money parttime on-line.. there sisters roommate haz done this 4 less than 13 months and a short time ago repayed the mortgage on their apartment and got a top of the range Citro?n 2CV. we looked here, http://www.wOw92.cOM

  16. We have the fifth lowest non-defense spending in the OECD, paired with the third lowest taxes and second highest defense spending (all vs GDP). We also spend an outrageous amount on health care, both public and private, and depending on what we assume about long-term extrapolations of health care spending growth, this could become an overwhelming problem.

    The solutions are simple

    1: Flip a coin. Heads, VA for All. Tails, Medicare for All.

    2: Raise taxes, a lot, on everyone. Including you. And me. Think taxes like those in Germany. A small fraction of these new taxes should be directed to Social Security to ensure its sustainability.

    3: Cut DoD spending by 25%, still leaving us well above the OECD norm. Re-invest that ~1% of GDP in infrastructure, bringing us UP towards the OECD norm.

    Ok, we are done. The budget is balanced indefinitely. We can all go home now. See how easy that was?

    Or, we can do the Tea Party alternative, which is to cut our spending so low that we spend less than any OECD nation, even bottom-of-the-barrel Mexico, while trying to maintain the second highest defense spending.

    1. 1. Lower the quality and choice in healthcare. Death Panel.

      2. Steal, a lot. Including for other people we don’t know. Want to make sure we include people that make good choices, work hard, save, and build capital, and then invest in things that grow the economy and jobs. Redistribute.

      3. Cut dramatically the most important government function. Take that money and spend it on cronies, you know, like Solydra and General Electric.

      Okay, we’re done, you are now all slaves to the State. No applause, just throw your money before I send someone to your house with a gun to take it.

      Yours Truly, Chad Brick Interpreted

  17. Connor. if you think Edward`s stori is something, on monday I bought a gorgeous Chrysler after having made $4163 this – five weeks past and just a little over ten grand this past month. it’s by-far my favourite-job I have ever had. I began this five months/ago and pretty much straight away was earning minimum $82.. per-hr. I follow the details here, http://WWW.FLY38.COM

  18. “is we need to reduce our healthcare costs. Funnily enough, recognizing that fact, the president took action to do just that through the Affordable Care Act, which has been scored by the CBO to significantly reduce our health care costs going forward”

    This is a flat out lie. The CBO did say Obamacare reduced the deficit (Under some rather fantastical assumptions) but they also said very clearly that Obamacare increases health care costs. The only reason it arguably reduced the deficit is because the tax increases were theoretically larger than the spending increases.

    1. Stop being so factual.

  19. “Last week, Democratic House Minority Leader Nancy Pelosi was even more dismissive. “It is almost a false argument to say that we have a spending problem,” she said. “We have a budget deficit problem.””

    This from the lush who would explain that she doesn’t have a drinking problem, the problem is the liquor bottles go empty too fast.

  20. All this price inflation that is hitting the poor disproportionately? We can thank our spending problem and the coming expense of the medical mandate for that.

    ???? ?????? ????? ???????
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    Again, the Left are total regressives. They have no legitimate claim to call themselves in favor of “economic progress” beyond their self-serving, groundless rhetoric. All their policies exacerbate poverty while boosting the level of corporatism and barriers to entry and competition through the roof.

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