Wednesday, February 17, 2010
By Terence P. Jeffrey
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After he signed a law last week authorizing the U.S. Treasury to borrow an additional $1.9 trillion, President Barack Obama delivered a characteristically sanctimonious speech. It was about his deep commitment to frugality.
“After a decade of profligacy, the American people are tired of politicians who talk the talk but don’t walk the walk when it comes to fiscal responsibility,” he said. “It’s easy to get up in front of the cameras and rant against exploding deficits. What’s hard is actually getting deficits under control. But that’s what we must do. Like families across the country, we have to take responsibility for every dollar we spend.”
To put Obama’s Olympian hypocrisy in perspective, one need only examine the federal budget tables posted on the White House website by Obama’s own Office of Management and Budget.
They reveal these startling facts: When calculated by the average annual percentage of the Gross Domestic Product that he will spend during his presidency, Obama is on track to become the biggest-spending president since 1930, the earliest year reported on the OMB’s historical chart of spending as a percentage of GDP. When calculated by the average annual percentage of GDP he will borrow during his presidency, Obama is on track to become the greatest debter president since Franklin Roosevelt.
Obama will outspend and out-borrow the admittedly profligate George W. Bush, a man Obama and his lieutenants routinely malign for fiscal recklessness and who, when in office, was often hailed even by his allies as a Big Government Republican. Obama will even outspend—but not quite out-borrow—his fellow welfare-state liberal FDR, who had to contend with both the Depression and World War II.
In determining this was the case, I credited the presidents prior to Obama with the federal spending and borrowing that occurred during the fiscal years that started when they were in office. I credited Obama with the spending and borrowing that his own OMB estimates will occur during the fiscal years from 2010 to 2013, which are the four fiscal years starting during Obama’s four-year term. (Before fiscal 1977, fiscal years ran from July 1 to June 30. Since then, they have run from Oct. 1 to Sept. 30.)
FDR was inaugurated in March 1933 and died in April 1945. He is thus responsible for the 12 fiscal years from 1934 to 1945. During those years of depression and world war, according to OMB, federal spending averaged 19.35 percent of GDP. During Obama’s four fiscal years, OMB estimates spending will average 24.13 percent of GDP. That is about 25 percent more than under FDR.
In the first eight fiscal years of FDR’s presidency, before Japan attacked Pearl Harbor, federal spending as a percentage of GDP never exceeded 12 (despite the Depression). During those years, it averaged only 9.85 percent. Under Obama, annual spending as a percentage of GDP will average almost two-and-a-half times that much.
In fiscal 1942, when the U.S. started dramatically ramping up expenditures to fight World War II, federal spending equaled 24.3 percent of GDP. In 2010, the first full fiscal year of the Obama era, spending will reach 25.4 percent of GDP.
Under current estimates, Obama will not beat FDR’s overall record for borrowing, although he will nearly double FDR’s pre-World War II rate of borrowing. From 1934-41, FDR ran annual deficits that averaged 3.56 percent of GDP. Obama, according to OMB, will run average annual deficits of 7.05 percent GDP. When you include the war years of 1942-45, FDR ran average annual deficits of 9.76 percent of GDP. Even without a world war, Obama’s overall prospective borrowing is at least competitive with FDR’s.
And Obama and FDR share one historic debt-accumulating distinction. By OMB’s calculation, they are the only two presidents since 1930 to run up annual deficits that reached double figures as a percentage of GDP. Obama will run up a deficit this year of 10.6 percent of GDP. The last time the deficit hit double digits as a percentage of GDP was 1945 -- when Germany and Japan surrendered.
The U.S. won the Cold War without ever running a double-digit deficit. President Reagan’s highest deficit was 6 percent of GDP in 1983 -- and he bankrupted the Soviet Union not the United States.
So how does Obama compare with the much-maligned George W. Bush? In Bush’s eight fiscal years, annual federal spending averaged 20.43 percent of GDP, significantly less than Obama’s estimated 24.13 percent of GDP.
Bush ran annual deficits that averaged 3.4 percent of GDP—and that includes fiscal 2009, when the deficit soared to 9.9 percent of GDP and Obama signed a $787 billion stimulus bill (some of which was spent in fiscal 2009) after Bush left office. Obama, according to OMB, will run deficits that average 7.05 percent of GDP—or more than twice the average deficits under Bush.
The bottom line on Obama: He puts our money where his mouth is.