Barack Obama used to get very upset about federal budget deficits. Denouncing an "orgy of spending and enormous deficits," he turned to John McCain during their presidential debates last fall and said, "We have had, over the last eight years, the biggest increases in deficit spending and national debt in our history...Now we have a half-trillion deficit annually...and Sen. McCain voted for four out of five of those George Bush budgets."
That was then. Now, President Obama is asking lawmakers to vote for a budget with a deficit three times the size of the one that so disturbed candidate Obama just a few months ago. And Obama foresees, for years to come, deficits that dwarf those he felt so passionately about way, way back in 2008.
Everywhere you go on Capitol Hill, you hear echoes of the last campaign's spending debate. So on Thursday morning, as the budget fight raged, I asked McCain about the president's seemingly forgotten concern about deficits. McCain doesn't like to rehash the campaign "The one thing Americans don't like is a sore loser," he told me but when I read him Obama's quote from the debate, he said, "Well, there are a number of statements that were made by then-candidate Obama which have not translated into his policies."
That's an understatement. The deficit issue could be one of the most, if not the most, consequential of Obama's unkept campaign promises. Just how consequential was made clear last week in a little-noticed conference call featuring Budget Director Peter Orszag. Orszag was trying to explain to reporters how the Obama administration calculated its rather rosy forecasts for economic growth. Near the end of the call, he was asked whether deficits along the lines of those predicted by the Congressional Budget Office are sustainable."
Orszag at first dodged the question, saying he was sure the final Obama budget will "reflect a fiscally sustainable path." But the questioner persisted: Are those deficits sustainable? Relenting, Orszag said such deficits, in the range of five percent of the Gross Domestic Product, "would lead to rising debt-to-GDP ratios in a manner that would ultimately not be sustainable."
The simple version of that is: If the Congressional Budget Office projections are correct, we're headed for hell in a handbasket.
I asked McCain what might happen if Obama and Orszag get their way. First, the U.S. could have to print a lot of new money, "running the huge risk of inflation and returning to the situation of the 1970s, only far worse," McCain said. The second option is to raise taxes.
Just this week, former Clinton budget director Alice Rivlin conceded that Obama's budget could present a "scary scenario" that would "raise deficits to unsustainable levels well after the economy recovers." The solution, she wrote, is higher taxes, and not just for the richest of the rich.
Of course, that's what McCain said during the campaign. And it's what the much-maligned Joe the Plumber said, too. Remember when he took so much flak for objecting to Obama's plan to raise taxes only on those Americans making more than $250,000 a year? Joe didn't make anything near that, the critics said, so why was he worrying?
The point was not that Joe made that much, or that anybody at McCain's rallies made that much the vast majority didn't. The point was that Obama was promising so many things that to pay for them he would eventually have to raise taxes on people making far less than $250,000. Look out, McCain warned someday he'll come after you.
And now that's where we appear to be headed. At some point, Obama will likely have to bow to those in his party who say he must raise taxes if he wants to pay for health care and other expensive initiatives.
Some skeptics believe that was the plan all along. McCain wouldn't go that far, but when I brought up the idea, he did sound a bit suspicious. "Well, you set up a situation that puts spending at an unprecedented amount of GDP, and then you turn around and say, 'Of course we're going to have to raise taxes to pay for this,'" McCain told me. "I'm not saying it was their plan, but it certainly was inevitable."