Obama must say ‘no’ to federal spending

January 26, 2011

obamaSOTU2011President Barack Obama’s conciliatory tone in his State of the Union Address was exactly what the country needs at this moment. And once again, Obama showed he is the best political orator since Ronald Reagan.

On tone and feeling – which matter a great deal in politics – the president deserves high marks. So too do members of Congress who for once behaved in a bipartisan manner, not like squabbling children.

Substance? That’s another matter.

In the address there was a lot of talk about jobs and innovation, both obviously important: but issues that no president controls. There was talk of better access to high-speed Internet and of regulatory and tax-loophole reform: not one single person opposes either. There was dream-world talk of high-speed rail and energy in the year 2035. But there were precious few specifics regarding what will be done right now to address runaway federal debt. And runaway federal debt, which suggests the U.S. future may be less bright, is a major issue holding the economy back.

The president proposed a five-year freeze in discretionary federal spending, which he acknowledged is a mere 12 percent of the federal budget. A freeze in 12 percent of future spending – that’s all you got?

The president vaguely mentioned cuts in “community action,” giving no details. Obama endorsed the military budget cuts proposed by Defense Secretary Robert Gates, and those cuts are well-advised. But note the wording: “The Secretary of Defense has also agreed to cut tens of billions of dollars in spending that he and his generals believe our military can do without.” Gates has the right idea, but no Secretary of Defense can “agree” to “cut” even a dollar from Pentagon spending – Congress controls the military budget. Obama created the impression that cuts have already happened, leaving open the door for Congress to reinstate spending.

No other specific spending reduction was proposed.

Last year in the State of the Union Address, Obama said, “We’ve already identified $20 billion in savings for next year.” Now it’s next year – what about that $20 billion in savings? Unmentioned.

In June 2001, Obama said, “Next year, when I start presenting some very difficult choices to the country, I hope some of these folks who are hollering about deficits and debt step up, because I’m calling their bluff.” Now it’s next year. Where were the difficult choices? Unmentioned. No bluff was called.

Even in the course of speaking about stopping increases in discretionary spending, Obama said he’d exempt spending for “innovation and education,”  information technology, research “and especially clean energy technology.”

These are important. But if you declare a blanket freeze and then start making exceptions in the same speech, nobody will take the freeze seriously. Lobbyists will say that ethanol subsidies are “innovation” and thus exempt them from cuts. Lobbyists will say the same about corporate handouts, and about every other kind of boondoggle. Make one exception, and it will open the door for many exceptions. Which the president has already done.

And what about the deficit commission report? The president misrepresented it, saying, “Their conclusion is that the only way to tackle our deficit is to cut excessive spending wherever we find it – in domestic spending, defense spending, health care spending, and spending through tax breaks and loopholes.” Notice what’s missing – the deficit commission recommendations to increase the Social Security retirement age and cut Social Security benefits to the rich.

Cutting the Social Security retirement age – everyone knows longevity has increased since the Social Security system began in 1935 – and eliminating Social Security transfer payments to the rich are the most promising ideas to reduce runaway growth in the federal debt. The president not only didn’t endorse these ideas, he pretended they did not exist. On this point Obama seemed more concerned with being reelected – seniors vote, the young don’t – than acting responsibly in his stewardship of the nation.

Obama’s vague language about spending restraint in the future – which boiled down to, “I’ll quit smoking next year” — must be weighed against last month’s $900 billion decision not only to extend existing tax cuts but add new ones. The White House backed a $800 billion stimulus bill in 2009, then the $900 billion tax-cut decision in 2010 – that’s an additional $1.7 trillion added to the national debt, a breathtakingly lavish giveaway at the same time that the president talks in the most hesitant terms of minor cuts that might take place at unspecified future dates.


The Tea Party, which supported the new $900 billion tax cut, deserves its share of blame. After coming to office with a promise of fiscal crackdown, the Tea Party’s first act was to back a huge, undisciplined giveaway.

Both the Obama White House and the Tea Party types on the Hill said the latest tax cut was needed to revive the economy. But the economy fell into its current cold snap while big tax cuts were in effect. Most of the cuts extended in December were enacted in 2003. If having major tax cuts in place for seven years didn’t prevent the economic slowdown, why should we believe that more years of tax cuts will fix the slowdown? Here, I examine the argument that the parade of Washington special giveaways like this are a cause of the slow economy, not its palliative.

Bear in mind, the current bleak deficit picture is the picture before the health care reform bill causes federal medical spending to skyrocket. It may well prove that many aspects of Obama’s health care reform are justified – for millions of Americans, better health care coverage with less money stress will be a blessing. But the nation should be bracing for the invoice, which is likely to be substantial. Instead of saving to pay that invoice, we’re ordering another round of champagne.

Officially the health care reform bill will cut medical costs to taxpayers, but this is a fiction based on the bill’s assumption of fantastic savings from unspecified cuts in unspecified future years. Doug Elmendorf, director of the Congressional Budget Office, said in 2009 that ObamaCare will not bring down spending, rather “significantly expand federal responsibility for health care costs,” shifting the price from private payers to government.

Supposedly, health care cost restraint will be the task of a new Independent Payment Advisory Board. But the board’s first proposals are not due till 2014. This reflects the ritual of talking big about cost discipline, then postponing any action into the future while giving every interest group a bag of candy today. This analysis from the Centers for Medicare and Medicaid Services, which administers most federal health care spending, says the promised dramatic future cuts in health care costs are “extremely unlikely to occur.” If that reality were reflected in deficit estimates – all of which assume the magic-bullet of future health care cuts – the national debt meter would sink further into the red.

Consider that one month after the health care reform bill passed last spring, Congress, with White House backing, cancelled a scheduled cut in Medicare payments to physicians. The cut was first scheduled in 2003, and has been cancelled on an annual basis since. If even a minor, halting step in the direction of Medicare cost control was cancelled last year during a deficit crunch, it becomes “extremely unlikely” that very deep cuts will occur beginning in 2014. Yet instead of saving to prepare for that day, we’re spending like there is no tomorrow.

Prediction: Tomorrow will come.

The easy way out in politics is to talk vaguely about fiscal discipline, promising dramatic future action while giving away money hand over fist today. Nothing’s easier than to give away borrowed money. George W. Bush did this like mad in this final three years in office, and now Barack Obama is doing it in his first three.

Leadership means the ability to say the word “no.” From 2006 on, Bush never said the word “no.” Barack Obama, beginning his third year, has yet to pronounce the word “no” regarding any spending request.

Consider this quote: “Raising America’s debt limit is a sign of leadership failure. Leadership means that ‘the buck stops here.’ Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better. I therefore oppose the effort to increase America’s debt.”

Whose said this? Barack Obama, in 2006, opposing the first George W. Bush borrowing-based giveaway. If only the Obama of 2006, not the Obama of 2011, had presented tonight’s State of the Union Address.

Photos, Top: President Obama at the State of the Union in 2011. REUTERS/Kevin Lamarque
President Obama at the State of the Union in 2011. REUTERS/Jim Young


We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/

The President of the United States is the LEADER of the free world. His state of the union address represented his desire to see the American people succeed across a broad spectrum of issues we face. His speach had to strike a balance of what he wants to do and what he can do within our political system. That being said, I give our President an A. He is firing on all cylinders and so CAN the American People if we just listen and HEAR what he is saying

Posted by hkhoder | Report as abusive

All of this makes logical sense and is being repeated by most commentators everywhere: the Federal Government spends too much, social security and medicare will mean the government has to spend more, and we will eventually suffer from this excess.

What is the suffering? Will all American businesses stop employing people? Will there be food riots? Will the elderly be put to sleep because they cannot afford medical care? I read sonic boom, which speculated about a lot, but didn’t speculate as to what would happen if we never cut spending and just kept moving forward as we are. Could we have a post that resembled the chapter in Sonic Boom on global warming? Just what might happen if the federal government did not stop spending? What might America look like in 2035?

Posted by Jack_Gladney | Report as abusive

Canada had to big to function debt/government, cut spending dramatically and now they’re sitting pretty! Many more examples too! Any expansion of government now is a big mistake-the stimulus is not cost effective anymore!!

Posted by DrJJJJ | Report as abusive

In reference to the tax cuts, the author states “…Tea Party’s first act was to back a huge, undisciplined giveaway”. Since when is allowing people to keep more of their money a giveaway? Lower taxes and gov’t spending discipline are two sides of the same coin. Mr. Easterbrook is breaking new ground: that of the tax-and-don’t-spend liberal.

Posted by mheld45 | Report as abusive

The truth will set us free-cut spending and balance budget asap! Time for change!

Posted by DrJJJJ | Report as abusive

it doesn’t take a genius to solve this problem.
just the will.
watch the movie dave for the scene with the
cabinet, a number two pencil and a legal pad.
unfortunately, will, especially political will,
is in short supply inside the beltway.
how about a call by president obama that he
agrees to work for $1 a year, until the economy
is righted.
and a challenge to all in government who can afford it,
to do the same.
that, would indeed be change we could believe in.

Posted by kitramsey | Report as abusive

Our National debt is now 100% of GDP and represents 25% of TOTAL world debt! Doesn’t include trillions we owe in unfunded entitlements, state & pension problems, realestate, etc etc ! Anyone else think the crisis has arrived?

Posted by DrJJJJ | Report as abusive

Our nation is on the brink of financial Armageddon and we must have a president who will lead. We need more than just tone, we need a president who will drive the sense of urgency that is missing in Washington. The hour is late and the consequences for us all are cataclysmic….be urgent Mr. President, be bold and lead!

Posted by actnow | Report as abusive

[…] that much of the reaction to the State of the Union address has argued either that Obama said too much about government solutions to America’s problems and not enough about deficit reduction, or that Obama said too much about deficit reduction and not […]

Posted by State of the Union: this is the future, for now « Rav Casley Gera | Report as abusive