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Obama Has Been on a Spending Binge

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Rex Nutting, of the financial website MarketWatch, recently published a column titled, “Obama Spending Binge Never Happened.” In it, Nutting analyzed the spending practices of presidential administrations going back to Dwight Eisenhower in the 1950s. His findings indicate that Obama, whom everyone believes is a reckless appropriator of federal funds, has actually presided over the smallest increase in federal spending since President Eisenhower ended the Korean War in the early 1950s. Using George W. Bush’s last federal budget of $3.52 trillion as a baseline and projecting Obama’s fourth and final budget of his first term to be $3.58 trillion, Nutting figures that the annualized growth of federal spending under Obama will increase by 1.4 percent in his first term. Compare that to Reagan ‘82-85 – 8.7 percent, Bush II ’02-05 – 7.3 percent, and Bush II ’06-09 – 8.1 percent and Obama looks like a frugal fellow.

And don’t think that Obama isn’t going to use the analysis to clear his name and further his reelection chances. In fact, at a campaign stop last week, the president boasted, “Since I’ve been president, federal spending has risen at the lowest pace in nearly 60 years. Think about that.” Now that is an interesting comment. Obama has never wanted to be known as a spendthrift, but he sure doesn’t want to be known as the Herbert Hoover of this financial crisis either. The same Herbert Hoover who is much maligned by Paul Krugman and other Keynesians for not spending enough to prevent the Great Depression from happening. Funny thing is that under Hoover real government spending rose by 12.3 percent per year and we still had the Great Depression. According to Keynesian logic, with Obama’s paltry spending increase we should already be in another Great Depression.

The bottom line is that Obama can’t have it both ways. He can’t claim his spending has kept us out of depression while at the same time claim that his spending has been meager by comparison to other administrations.

Obama is a big spender because, Nutting’s irrelevant analysis aside, he is still outspending his big-spending predecessor. Just because the increase in the rate of spending under Obama is small does not make him a responsible custodian of the federal purse strings. Not only has he maintained Bush’s spending spree, but he has slightly enlarged it. So Keynesians can rest easy that Obama is one of them.

And of course they will claim that his fiscal policies have kept us from another depression. I don’t disagree, but Obama has borrowed more than five trillion dollars from future generations of Americans in order to do it. He essentially has traded a much needed economic correction for temporary serenity. The economy is not improving. Analysts have been warning about a double dip recession for years now. In order to maintain the charade Obama must continue to spend lavishly or the economy will collapse. At some point our current rate of spending will become unsustainable. Given that we will be many more trillions in debt and have a lot more mal-investment in our economy, the next crisis will make the last look like a walk in the park.

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About Kenn Jacobine

  • Mel Blank

    I like how the author doesn’t bother with any sources for his statements. He just makes them and apparently we readers are supposed to trust he’s correct. His history class must be a breeze to pass.

  • http://www.squidoo.com/lensmasters/IanMayfield Dr Dreadful

    “He can’t claim his spending has kept us out of depression while at the same time claim that his spending has been meager by comparison to other administrations.”

    He can if he can show that his spending was both more prudent than Hoover’s and directed more wisely.

    You seem to live in this strange magical economic universe where the only options are either blindly throwing money at a problem (bad) or blindly taking it away (good). Like if you confiscate the government-subsidized word processors from your infinite collection of monkeys they will somehow figure out how to fashion quill pens from the pigeons that frequent their cage and still come up with the works of Shakespeare.

    Likewise, Obamanomics isn’t the equivalent of hurling a few cans of paint up a wall and expecting to produce the Mona Lisa.

  • Kenn Jacobine

    Doc,

    How is that Solyndra investment working out for you? How about all those “shovel ready” projects? Then we have cash for clunkers which did nothing but produce a shortage of used cars for the lower classes. Obama has hurled paint. In fact, any government spending is just hurling paint because government can’t just decide what the market requires – consumers do that and then producers provide it to make a profit. It is not a magical economic universe but the basic laws of Economics 101.

  • Baronius

    Kenn – You fell into Nutting’s trap. President Obama is responsible for much of the FY2009 spending increase, due to the stimulus measures during his first months. It’s not simply a matter of Bush’s budgets being large; Obama made FY2009 larger on his own.

  • Igor

    Solyndra? That leftover from the Bush administration?

    Solyndra was only a $500million loss, which is small compared to loss subsidies paid to oil companies every year, for a business that makes huge profits without paying federal corp taxes.

    Among other things, the stimulus, ARRA, paid $50million for a shovel-ready program to dredge out Alameda slough in the Oakland harbor so that the largest cargo ship in the world could enter. ARRA did a similar project for Long Beach and Charleston and some others.

    Remember, harbors are built and maintained by the federal government for the benefit of American business. There’s never been a harbor project that was privately financed.

    All the major transportation systems in the USA were built by the Federal government and are maintained and improved by the feds.

    If we had depended on private enterprise to build transportation systems we’d be driving tin lizzies around on rutted roads and our goods would be delivered from China aboard tall sail Clipper ships.

  • Kenn Jacobine

    Private enterprise does build the roads, bridges, etc… Do you think the federal government owns construction companies? Of course you don’t. Without those companies the federal government can’t build anything. It is the free enterprise system that has provided those companies and made us rich enough to afford to build the infrastructure we have. Listening to you one would think the feds have done it all.

  • Kenn Jacobine

    I actually do not have a problem with local and state governments building roads. Under the Tenth Amendment that is their jurisdiction. Instead of sending our tax dollars to DC the states should keep more of it to provide for state needs including roads.

  • http://www.squidoo.com/lensmasters/IanMayfield Dr Dreadful

    Kenn (@ #3): You’re cherry-picking – and pretty small cherries at that.

    A number of studies have been done on the effectiveness of the stimulus, with a variety of conclusions, but depending on who’s doing the analyzing the following have been successful in aiding economic recovery:
    – aid to low-income families
    – infrastructure spending
    – increased Medicaid funding
    – tax relief
    – aid to states
    – investment in science and tech

    Last time I looked, the text of ARRA did not read: “Just throw a bunch of money out there and hope for the best”. It’s a very lengthy statute filled with very specific stuff.

  • roger nowosielski

    @6

    The Third Reich built the best autobahn system in anticipation of the war effort — still rarely if ever in need of repair. The German state didn’t leave it up to the private enterprise system to cut the corners and use cheap materials. It was in charge of the construction from start to finish.

  • Glenn Contrarian

    Kenn –

    You might not have a problem with the government building roads, but you’re missing Igor’s point – he’s quite rightly pointing out that if it were left up to private enterprise alone, all those roads and bridges and seaports, etc., would never get built. There are things that simply cannot happen without the government as a driving force.

    And that’s why “being a businessman” should never be some kind of a requirement to be a politician, for while it is really nice if the politician understands business, what’s most important is if that politician knows how to govern.

    Left to itself, business would never build the nationwide infrastructure needed for businesses to thrive on a national level. Left to itself, the much-ballyhooed privately-owned rocket would never have made it to the space station…for while it was privately-funded, it still could never have happened without the contribution of all the taxpayer-funded astronauts and engineers and bureaucrats all the way back to Wernher von Braun.

  • Glenn Contrarian

    And Kenn –

    Obama is a big spender because, Nutting’s irrelevant analysis aside, he is still outspending his big-spending predecessor. Just because the increase in the rate of spending under Obama is small does not make him a responsible custodian of the federal purse strings. Not only has he maintained Bush’s spending spree, but he has slightly enlarged it.

    Nice twisting of words there, Kenn. You’re trying SO hard to make irrelevant the fact that the degree to which Obama enlarged the budget was lower than that of any president since Eisenhower. ALL Republican presidents since then enlarged the budget by a greater degree.

    That, and if you’ll look at the little chart on the right side of Nutting’s study, you’ll find that after 1980, guess who came in second when it came to frugality in government? BILL CLINTON! Reagan, Bush 41, AND Bush 43 grew government at faster paces than either Clinton or Obama!

    So…Kenn – are you going to wake up and realize that contrary to conservative doctrine, the Democrats ARE more responsible about government spending than Republicans? Or are you reaching really quickly for another glass of conservative Kool-Aid?

  • http://www.squidoo.com/lensmasters/IanMayfield Dr Dreadful

    It gets worse, Glenn. What Kenn actually said was that he doesn’t have a problem with state governments building infrastructure.

    So what if, for example, the state of Tennessee wanted to build a bridge over the Mississippi but the state of Arkansas didn’t? This set of bridges might never have been built; and even as they were built, they have quirks, such as that there’s pedestrian access from the Tennessee side but not from the Arkansas side.

  • Glenn Contrarian

    Roger –

    The Third Reich built the best autobahn system in anticipation of the war effort — still rarely if ever in need of repair. The German state didn’t leave it up to the private enterprise system to cut the corners and use cheap materials. It was in charge of the construction from start to finish.

    Which dovetails quite nicely with the opinion of nearly ANY Navy man who’s had the opportunity to be stationed on ships drydocked at both government and civilian shipyards. To a man, every single sailor on board dreaded going to civilian-run Todd Shipyards in Seattle. Why? Because we knew that Todd would pay their workers as little as they could get away with (which had the side effect of encouraging thievery by the shipyard workers) and would cut corners on their work as much as possible (which made Todd a much less safe place to work), all in the name of making a profit.

    But at Puget Sound Naval Shipyard, the workers were (and are) paid well, they’re given all the tools and equipment and resources they need to get the job done right the first time. PSNS is a MUCH safer place to work, and because the workers (most of whom are unionized just like the Todd workers) are NOT driven by the profit motive, they really do care about doing the very best job they can for the sailors on board.

    The funny thing is, as much as all that goes against profit-uber-alles conservative doctrine, most of the PSNS workers are quite Republican. Go figure.

  • Igor

    ALL of the great American transportation systems were financed by the government through General Obligation bonds. Private enterprise never puts up a cent.

    The government HIRES private construction companies under very good contracts that pay-as-you-go to the private subcontractors. The companies never have to venture a penny.

    Transportation projects are managed from end-to-end by government managers and engineers to assure safety, utility and performance.

    Private construction companies don’t venture money. And they only have management control over their narrow projects, as subcontracted from the government, subject to performance requirements of their contracts.

    One must be very inexperienced and incurious to not know how these things work.

  • Kenn Jacobine

    Where does the money come from to buy the bonds? How do people afford to buy the bonds? Only a national socialist would ignore that part of your statement.

  • Kenn Jacobine

    Glenn, the point of my article is that it is a ridiculous analysis to conclude tbat Obama is not a big spender because compared to other presidents his rate of increase in spending is lower. He started out with a budget that was already over spent. He should have cut spending to bring on a correction so we can put it behind us and move on with a growth economy. The next downturn will be a doozy.

  • Glenn Contrarian

    Kenn –

    Look again at the graph on the Nutting article, at how the next-most-frugal president was Bill Clinton. Remember how towards the end of the Clinton era we began getting budget surpluses? That’s because not only was Clinton not increasing the federal budget like a drunken sailor (as the Republican presidents certainly did), but our taxes were higher.

    In this instance, it’s just like any household – cutting costs is one thing, but sooner or later the cost-cutting does more harm than good. Any responsible head of a household should not be looking at just ways to cut costs, but also to make more money…which is what happened under Clinton, largely enabled under “No New Taxes” Bush 41 who showed the courage to raise taxes when it was needed. Never mind that today’s conservatives would have labeled him a socialist and run him out of the Republican party on a rail.

    But any head of a household who cuts household costs but refuses to look at ways to increase household income…is not a good person to have in charge of the household.

    So it goes with the government – any politician who cuts costs willy-nilly without due regard to the harm those cuts cause, but refuses to consider even a modest increase in the tax revenue to alleviate the pain of those cuts…is not someone who should be in government.

  • Baronius

    Again, let me say that the Nutting article cheats by counting the ARRA and other spending under President Obama as part of the Bush FY2009 budget.

  • Kenn Jacobine

    But Glenn, the difference between a household and the government is that the household has something the market needs labor and/or entrepreneurship. In order for the government to get more income it has to extract it from taxpayers through taxes or extract it from them through inflation. Government has no resources to sell like households. It only consumes the fruits of the labor of its citizens to survive.

  • http://www.lunch.com/JSMaresca-Reviews-1-1.html Dr. Joseph S. Maresca

    “Since I’ve been president, federal spending has risen at the lowest pace in nearly 60 years. Think about that.”
    I agree. Basically, the exits from the Iraq and Afghani wars will reduce the deficit which was aggravated
    greatly by fighting two wars concurrently. In addition, the real estate inventory glut should clear out by 2013
    as stated by Warren Buffet. The population in the USA has increased from 300MM people to 313MM and
    growing. Sooner rather than later, people will need housing and then home sales should spurt due to the
    winding down of the current inventory coupled with the natural growth of the population in the USA.
    In addition, we need to address infrastructure to accommodate more people.

  • http://www.squidoo.com/lensmasters/IanMayfield Dr Dreadful

    Glenn, I suspect that if Romney wins the election and subsequently gets into an economic pickle that can’t be alleviated by spending cuts and tax breaks, it will be remarkable how many Republicans are suddenly fine with raising taxes.

    Some of them many not even impose the proviso that the new revenue can be spent only on the following:
    1. Defense;
    2. Preventing gays from getting married;
    3. Media/publicity campaigns blaming the poor for everything.

  • Igor

    Glenn is absolutely right when he says:

    “But any head of a household who cuts household costs but refuses to look at ways to increase household income…is not a good person to have in charge of the household.”

    Everybody in business knows that. The good executive cuts programs and lays off workers to appease The Board, not to reduce budget. Cuts “blood” the executive: it proves he has the courage to cut and fire. That gives him the credibility to advance his expansion program on The Board. And every executive that goes to the Board with a layoff and cut program MUST have an expansion program in his pocket. The Board doesn’t want to go out of business, it wants to re-arm to create a new business or take away somebody else’s business. If the Executive doesn’t have an expansion plan they’ll resort to the default business plan: liquidate and distribute the proceeds to the shareholders (or, get a new Exec!).

    A cuts-only policy is a going-out-of-business strategy. Do you want the USA to go out of business?

  • Kenn Jacobine

    Only 69,000 new jobs in May, the stock market sinking like a rock – get ready for QE3. More proof that Obama’s spending and Bernanke’s inflating have not worked, but more is on the way. Between Romney and Obama I prefer Obama – he has been great for my gold investment!

  • http://www.squidoo.com/lensmasters/IanMayfield Dr Dreadful

    I saw that headline a couple of hours ago and was wondering how long it would take Kenn or someone else to spin it as Doom.

    While most of us know that both the unemployment rate and the stock market have this habit of going up and down rather than following a smooth curve, Kenn lives in a simpler universe.

    His #23 rather reminds me of the denialist view of global warming.

  • Glenn Contrarian

    Kenn –

    Only 69,000 new jobs in May, the stock market sinking like a rock – get ready for QE3.

    OH NO!!! We had ONE month of bad unemployment reports – that means the sky is falling and the world is coming to an end! Run away! Run away!

  • Igor

    Better to gain 69,000 jobs than to lose them, as we were under the previous administration.

  • Kenn Jacobine

    Hey guys be happy I said I hoped Obama beats Romney! My gold fund is up 4 percent today! Go Team Obama.

  • Kenn Jacobine

    Igor, why do you always have to go back to the previous administration? Obama has been in office 3 years and we are no better off. Bush was a bum – we all know that. Let’s focus on the future and not get caught up in silly distractions. This is Obama’s economy now so live with it.

  • Glenn Contrarian

    We’re no better of today than three years ago? Boy, talk about a short attention span!

    Three years ago we were in both Iraq and Afghanistan, we were losing a half million jobs a month, the economy was in free fall…and we’re no better off now? Even with the Dow up over 30% since then and GM’s making record profits? What’s really sad is that you BELIEVE it!

    This is a wonderful example of how many people will believe a false accusation simply because it’s against a person they don’t like.

  • Clav

    We ha d ONE month of bad unemployment reports

    ONE MONTH??? What rock have you been living under?

    The effin’ unemployment rate has NEVER been under 8% since Obama moved into the WH!!! And that’s with them using the phony U3 number which doesn’t count the millions of discouraged workers who gave up, and who ARE counted in the U4, 5, and 6 rates. The current U6 rate, which counts ALL workers and is therefore far more realistic than the U3 8.2% number, is above 14%!

  • Glenn Contrarian

    What’s important, Clavos, is not what the rate’s presently at – it’s where it’s going.

    The chart I linked to shows private job growth numbers from ’08 to ’12…and you must agree those numbers don’t look bad at all – but they’d look worse if the losses in the public sector were added in…

    …but then, public job losses are a GOOD thing in conservative eyes, remember.

    Clavos, Bush took eight years to screw up the economy, and the Republicans in congress made it their sworn duty to stop anything and every thing that Obama tried to do to fix it. He got some things done, but thanks to your boys on Capitol Hill, he wasn’t able to bring America back to full speed…which was precisely what they wanted to avoid, because if they allowed Obama to do what he wanted to do and America’s economy got back on track, what would happen? Enormous long-term damage to the Republican party.

    If you were truly as cynical as you believe yourself to be, you’d know that already.

  • troll

    …it’s always encouraging to see the size of a country’s workforce organized by capitalists shrink

    be the change

  • Clav

    Damn, you’re right, Glenn.

    I keep forgetting about those evil Republicans; they’re much worse for the country than Obama’s ineptitude!

  • Glenn Contrarian

    Clavos –

    You’ve developed a tendency to answer not with an opposing argument, but with sarcasm. I know how intelligent you are (and you know that’s not sarcasm on my part), so that makes me wonder – is that the response you really think is best and most effective in disproving my statements? Or is that all you have? Personally, I think it’s a mixture of both.

    C’mon, Clavos – do you REALLY think the Republican leadership would have wanted Obama to be successful in getting the economy back on track? Do you? Where is your vaunted cynicism?

  • Kenn Jacobine

    69,000 new jobs in May when most analysts predicted upwards of 150,000. That is 80,000 fewer jobs than expected. The stock market is much higher under Obama because that is where bankers have been placing all those new dollars created under Bernanke. In other words it is one of the next bubbles. The current stock market is anything but a good indicator of the economy’s health. But don’t worry, Helicopter Ben will drop new money on the situation to help Obama’s election chances. That means my gold holdings will go up, up, up.

  • Clav

    …do you REALLY think the Republican leadership would have wanted Obama to be successful in getting the economy back on track? Do you?

    No, I don’t Glenn.

    Where is your vaunted cynicism?

    Right where it’s always been, Glenn; between me and the world.

  • Glenn Contrarian

    Kenn –

    How was the jobs situation when Obama took over?

  • Glenn Contrarian

    Clavos –

    Okay, I’ll back off and cool down.

  • Kenn Jacobine

    Glenn,

    Yes, Bush destroyed the economy. Obama has reinflated the bubble because it was not politically expedient to do what should have been done – liquidate the mal-investment. You don’t understand the difference between real wealth and fake bubbles. We have a fake bubble economy that is going to blow soon. By the way unemployment is still higher now then when B.O. took office.

  • Glenn Contrarian

    Kenn –

    I hear the same thing year after year from libertarians who are sure that the economy’s “about to blow” soon, and and I hear the same thing from Republicans whenever a Democrat’s in the White House.

    If you wait around long enough, something bad will happen and you will finally be able to say, “I told you so!”. But what’s important, Kenn, are the decades or generations in between, just like the seventy years of a (usually) good economy between the Depression and the Great Recession, only the last three decades of which were under Reaganomics.

    You’re a lot like my older brother, who swears up and down that if Obama’s reelected, the economy will crash and burn by 2017. And you know what? When the economy does NOT “crash and burn” by then and I go back to point that out to him, you know what he’ll say? “Well, it’s going to next year for sure!”

    And as to your point that unemployment was lower when Obama took office, that’s true – but you’re DELIBERATELY neglecting the fact that our economy was in free fall and losing over a half million jobs per month at the time. But I get it – what’s important isn’t what really happened. The only important thing is that you get a chance to say something bad about the guy in office.

  • Kenn Jacobine

    If Romney gets elected the economy will crash as well and he is not “the guy in office”. See Glenn I blame both Republicans and Democrats for the mess we are in and you continue to try to paint me as a conservative Republican. The difference between me and a conservative on economics is that they are a one trick pony – cut taxes. I like to focus on the monetary end of it because when you have the power to control the price of money ypu have the power to destroy. We are in dire straits because of our monetary policy. The gap is widening between rich and poor because of our monetary policy. There will be another bust because of our monetary policy. Price fixing did not work in the Great Depression. It didn’t work under Nixon and it has never worked under the Fed to prevent boom and busts.

  • Igor

    Yes, over-dependence on manipulating monetary policy is a loser. Eventually the piper must be paid, when the consequences of bad fiscal policy can no longer be held back.

    Eventually there is an end to the amount of influence that a small amount of money administered to interest rates can be leveraged against budget balance sheets. Suddenly the dam bursts, and the leverage reverses and there’s a calamity.

    It’s all a question of who survives and who drowns.

    Previously, we’ve whacked the lower middle class and middle class: they seem to be less politically aware and easier to fool.

    But the ones who are always and ever protected from the flood are the powerful, the top of class society.

  • http://www.squidoo.com/lensmasters/IanMayfield Dr Dreadful

    But the ones who are always and ever protected from the flood are the powerful, the top of class society.

    Unless we break out the barricades and knitting needles?

  • Igor

    We’ll have to rent the barricades and knitting needles from the Top Dogs.

    The dream of equality is not dead, it’s owned by the Rothschilds, etc. But we can rent it for a day for a happy happy parade and picnic.