Give Me Fiscal Discipline, But Not Yet

In February 2009, President Barack Obama gave the members of the National Governors Association a lecture on fiscal responsibility, saying, "Contrary to the prevailing wisdom in Washington these past few years, we cannot simply spend as we please and defer the consequences to the next budget, the next administration, or the next generation.”

Just one year later, President Obama presented Congress with a $3.8 trillion budget proposal while simultaneously reiterating his commitment to fiscal discipline. Again, according to the President, “We simply cannot continue to spend as if deficits don't have consequences, as if waste doesn't matter." Nevertheless, spending as if deficits don’t have consequences and as if waste doesn’t matter continues to be the norm in Washington, and the latest budget is no exception.

The budget - heralded as “A New Era of Responsibility” by its White House authors and paid cheerleaders in the Office of Management and Budget - lays out the President’s plan to shatter his Republican predecessor’s record spending spree and institutionalize deficit spending for the entire planning period. According to the White House’s own overly optimistic projections, annual deficits will never fall below 3.6% of GDP. By the end of the budget’s planning horizon in 2020, the deficit will be 4.2% and the debt-to-GDP ratio will have risen to 77.2%.

And in related news, the President recently signed a bill raising the government’s debt ceiling to $14.3 trillion. This makes perfect sense, of course. Any financial planner will tell you that when you’re up to your eyeballs in debt, the prudent course of action is to take out additional credit cards and loans so you can spend more money you don’t have. As long as you don’t cut spending, you should be just fine, right?

Obama’s ability to preach fiscal discipline while spending recklessly brings to mind the words of St. Augustine, who famously prayed for God to give him chastity and continence, but not yet. Obama has added his own unique twist, with the updated version reading, “Give me fiscal discipline, but not yet.”

And we should keep in mind that $3.8 trillion is just the opening bid. The actual spending, deficits, and debt will no doubt be much higher than the paltry sums outlined in the proposal, particularly when one considers that the White House is basing its projections on higher average growth rates than anyone else is predicting.

Obama is not the first President to overpromise and underdeliver, nor will he be the last. I remember when President Bush submitted his $2.7 trillion budget for 2007. That was enough to convince me that the Republicans were nuts - but then again, that was back when $2.7 trillion was considered a lot of money. It’s all part of the Keynesian package, I suppose. Hayekian economic theory may rule reality, but Keynesianism rules Washington. How could it be otherwise? As Hans Sennholz wrote in The Freeman back in 1991,

“Federal legislators and administrators apparently cannot free themselves from
the spell of Keynesianism. It has such a compelling attraction because it
elevates to good economics the thing they like to do most—spend other people’s
money. Keynesianism permits administrators to yield to any and all spending
pressures by Congress, and encourages them to take the lead in new spending
initiatives. It confers respectability on political profligacy.

Unfortunately, government spending does not sustain, stimulate, or invigorate an economy. On the contrary, it diverts economic resources to many unproductive uses and thereby aggravates a recession. Boosts in spending allocate more resources to the ever-growing bureaucracy and the favorite recipients of Federal largess. This is why the Federal budgets may actually deepen and prolong the present recession.”

So there is nothing new or groundbreaking in President Obama’s $3.8 trillion disaster. With it, he treads the same familiar Keynesian territory that his predecessors have treaded for the better part of a century. If the latest budget proposal is at all noteworthy, it is only due to its magnitude, not its underlying philosophy.

The Office of Management and Budget’s website displays another recent quote from President Obama on fiscal discipline. As the man says, “Rather than fight the same tired battles that have dominated Washington for decades, it’s time to try something new. Let’s invest in our people without leaving them a mountain of debt. Let’s meet our responsibility to the citizens who sent us here. Let’s try common sense.”

He forgot to add, “…but not yet.”