President Barack Obama is a budgetary Don Quixote, with Office of Management and Budget Director Peter Orszag his enabling sidekick Sancho Panza.
Obama has donned his armor and picked up his lance to wage a thoroughly imaginary battle for fiscal restraint. He betrays not the slightest sign that his self-styled brave, tightfisted responsibility slaying wasteful programs and freezing spending all around him is all a dream.
"We simply cannot continue to spend as if deficits don't have consequences," Obama said in unveiling a budget with a record $1.6 trillion deficit this year that will be the highest as a share of GDP since World War II. He warned against treating taxpayer dollars as "monopoly money," even as he proposes a budget of $3.8 trillion, and against ignoring the challenge of the debt "for another generation," even with a $1 trillion deficit projected at the decade's end.
In his "question time" exchange with Republican House members, Obama proved for anyone who might have forgotten that he's whip-smart, unflappable and glib; it's the facts that are his undoing.
Anyone listening to him describe his budget would stock extra foodstuffs in the pantry for the lean times ahead and would be shocked to learn that Obama was speaking of the most extravagant budget in American history. It's a Keynesian blowout wrapped in an Eisenhower-era sensible Republican cloth coat.
National debt will exceed GDP in 2012, a staggering fact. Internationally, we will share that distinction with such fine fiscal company as Iceland, Greece and Italy. Even Brazil, Pakistan and Malawi have a lower debt as a percentage of GDP.
The $4.5 trillion in debt Obama has accumulated in the first two years and eight months of his administration will nearly match the $4.9 trillion of George W. Bush's eight years as president. That's not fair as a straight comparison, because Bush inherited a surplus whereas Obama inherited an ongoing fiscal meltdown. But that doesn't justify making it worse.
Obama is not the first president to take office amid a deteriorating budgetary picture. So did Bill Clinton in 1992. He responded by jettisoning the $200 billion "investment" program he promised in the campaign and adopting a deficit-reduction program in its stead. He caterwauled privately about losing his political soul, and his left-wing supporters predicted economic gloom. A decade of rollicking good times ensued.
Obama has taken the opposite tack: spending even more than he promised in the campaign as he inherited spiraling, recession-fueled deficits. The fruit of all the stimulus spending is hard to detect, with unemployment projected to stay above 8 percent into 2012. The robust GDP growth of the fourth quarter had more to do with businesses replenishing their inventories. But Obama still wants another $100 billion in deficit spending on yet another stimulus program. Whether he's profligate or austere, Obama is always spending more.
One of his favorite riffs is that he is going through the budget "line by line" for savings. This purportedly adds up to $20 billion in savings next year, which is about one-fifth of the cost of the new stimulus program and one-fifth of the average monthly deficit last year.
It's not that Obama is utterly incapable of finding savings and revenues. To fund his nearly $1 trillion health-care reform, he's endorsed extensive Medicare cuts and tax increases, both of which are supposed to be relatively painless and beneficial to the overall health-care system. Why wouldn't he use them, then, to take a ready bite out of the deficit rather than devote them to a new, fiscally unsustainable entitlement program?
Ah, but don't disturb Obama during his epic budgetary quest in his own mind. Margaret Thatcher said the problem with socialism is that you eventually run out of other people's money. Obama may run out of ours while maintaining all the while he's cutting the budget down to size.