By Dan Calabrese ——Bio and Archives--August 29, 2016
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If I told you the deficit was soaring, economic growth was terrible and ObamaCare was collapsing, you'd assume that Obama's approval ratings would be in the tank and the Democrats would have no hope of electing someone who basically promises to continue his policies.
Well, I'm telling you. All this is happening. But these are not the major issues in the presidential campaign because one candidate is hopelessly corrupt and dishonest and the other one just really bothers people with his personal style. And while the media are fixated on these things, you're not hearing about the complete fiscal disaster Obama is getting ready to leave the country:That’s the story you haven’t read from the Congressional Budget Office’s latest fiscal and economic outlook released this week. For the 2016 fiscal year that ends next month, CBO now forecasts that revenues will rise by only $26 billion while outlays will increase by some $178 billion. The federal deficit will therefore rise from $438 billion to $590 billion, the biggest deficit since 2013. The revenue shortfall reflects the decline in corporate profits and slower economic growth; the second quarter was revised down to 1.1% Friday. Meanwhile, outlays will rise 5% thanks in large part to the automatic spending drivers of Social Security, Medicare and Medicaid (which has soared thanks to ObamaCare). Net interest outlays will rise 11% this fiscal year despite historically low interest rates as overall debt continues to increase. As a share of the national economy, debt held by the public—the kind the Treasury must repay—will increase to 76.6% this fiscal year. That’s the highest share of GDP since 1950 when the debt burden was winding down after World War II. It was 52.3% in President Obama’s first year in office, and it usually is flat or falls during an economic expansion. No such debt reduction is on the horizon now. Thanks to ObamaCare and his refusal to reform entitlements, Mr. Obama has set the federal fisc on an even uglier path long after he’s left for a tour of the world’s great golf courses. CBO says spending will keep rising and so will debt as a share of GDP—to 77.2% in 2017, 79.3% in 2021 and 85.5% in 2026. (See the nearby chart.) All of this assumes no change in current policy and no economic recession. The odds of the latter are close to zero.
One intriguing question is whether Mr. Obama has planned it this way. One of his abiding goals has been to reorient federal spending away from defense toward more income redistribution and social spending. He has achieved that to some extent during his eight years in office, but his spending wedge will grow even more pronounced as the years go on. Budget room for defense will shrink as the entitlement state expands. He is Europeanizing the U.S. military budget. All of this also means that his successor will have less running room for fiscal expansion. These columns put a higher priority on promoting economic growth than on deficit reduction, and we’d support a pro-growth tax cut to restore a 3% growth path. But even a reserve currency nation like the U.S. has to worry when its debt to GDP ratio heads above 80%, especially if economic growth continues to be as slow as it has been during the Obama era.This all ties together. As the excerpt points out, ObamaCare has caused an explosion in Medicaid expenditures, which plays a major role in driving the overall growth in the deficit. Meanwhile, Obama's growth-unfriendly policies have GDP growth trending around the putrid level of 1 percent on a quarter-by-quarter basis, so the Treasury is not hitting its revenue projections, which are based on the assumption that growth will be much greater. The next time a liberal tells you supply-side economics doesn't work, tell them Obama's own track record is proof of the opposite. He's tried with higher tax rates to bring more money into the Treasury, and exactly the opposite has happened. The depression of growth has cost the government far more revenue that any difference the higher rates could ever make.
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Dan Calabrese’s column is distributed by HermanCain.com, which can be found at HermanCain
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