During a Monday press conference, President Barack Obama was unusually grilled with some hard-hitting questions on the upcoming debt ceiling.
CBS News reporter Major Garrett asked the president an excellent, well-researched question. Garrett pointed out how previous presidents from Reagan to Bush to Clinton at least tried to reduce the deficit by addressing spending reform as well as tax reform, and Obama reinforced his belief that no spending reform is needed today.
Here's what Garrett asked: “As you well know, sir, finding votes for the debt ceiling can sometimes be complicated. You yourself as a member of the Senate voted against a debt ceiling increase. And in previous aspects of American history, President Reagan in 1985, President George Herbert Walker Bush in 1990, President Clinton in 1997 ... all signed deficit reduction deals that were contingent upon or in the context of raising the debt ceiling. You yourself four times have done that; three times those were related to deficit reduction or budget maneuvers.
“What [NBC's Chuck Todd] and I think many people are curious about is this new adamant desire on your part not to negotiate when that seems to conflict with the entire history in the modern era of American presidents in the debt ceiling and your own history on the debt ceiling. And doesn’t that suggest that we are going to go into a default situation, because no one is talking to each other about how to resolve this?”
President Obama responded: “But what you’ve never seen is the notion that has been presented so far at least by the Republicans that deficit reduction will only count spending cuts, that we will raise the deficit ... or the debt ceiling dollar-for-dollar on spending cuts. There are a whole set of rules that have been established that are impossible to meet without doing severe damage to the economy. And so what we’re not going to do is put ourselves in a position where in order to pay for spending that we’ve already incurred, that our two options are; we’re either going to profoundly hurt the economy, and hurt middle-class families, and hurt seniors, and hurt kids who are trying to go to college, or alternatively we’re going to blow up the economy. We’re not going to do that.
“If we want to have a conversation about how to reduce our deficit, let’s have that. We’ve been having that for the last two years. We just had an entire campaign about it. And by the way, the American people agreed with me, that we should reduce our deficits in a balanced way, that also takes into account the need for us to grow this economy, and put people back to work.”
When Presidents Ronald Reagan and George H.W. Bush increased taxes in return for spending cuts – cuts that never ultimately came – they did so at promised ratios of $3 in spending cuts for every $1 in tax hikes and $2 in spending cuts for every $1 in tax hikes, respectively.
When Clinton was in office (genuinely) negotiating with a Republican Congress, his tax hikes were balanced by cutting spending from 23% to 18% of GDP, enacting welfare reform, and cutting the capital gains tax rate in half to incentivize investment. These reforms marked the first significant reduction of spending in decades and, coincidentally, helped balance the budget for the first time in 30 years – following up on a promise to deliver a government “that lives within its means.”
In the fiscal cliff deal that was reached earlier this month, lawmakers “balanced” $620 billion in new taxes with merely $15 billion in spending cuts – or only $1 in spending cuts for every $41 in tax hikes. In addition, because there was no meaningful spending reform attached to the bill, the fiscal cliff deal adds another $4 trillion in debt, even with any additional revenue, according to the non-partisan CBO.
Yet President Obama still believes that, “We don’t have a spending problem.”
As you can see in his back-and-forth with Garrett, he’s trying to equate any talk of spending cuts with “hurting” the poor, seniors, middle class families, and the like, and also claiming that reducing spending will lead to “blowing up the economy.” While he claims to be all for a “balanced approach” to deficit reduction, behind closed doors he’s demanding a blank check – including higher tax rates from income to capital gains, more spending/ “stimulus,” an infinite debt ceiling and no entitlement reforms.
Since the 2008 recession, spending has skyrocketed as a percentage of our GDP.
These out of control spending levels have led to four consecutive years of trillion dollar deficits (despite record high revenues) and record high debt in the shortest amount of time that has now eclipsed out entire GDP.
And what do we have to show for it? A stubbornly high unemployment rate, a record low number of working age people (18-64) in the workforce, record high welfare recipients from Medicaid to food stamps to disability claims, weak economic growth, weak consumer spending, rising consumer costs, lower household net worth, and a credit rating downgrade.
So much for the Democrats’ near trillion-dollar leap of faith in the Keynesian “multiplier” effect of government spending. It’s the same approach that didn’t work in the 1930s, didn’t work in the 1970s, and didn’t work again in 2009-2010.
In other words, trillion dollar deficit spending has clearly not led to the economic growth and job creation that the president claims to be protecting, nor is he willing to acknowledge it.
Real economic recovery comes from private sector spending, and this administration has done anything but incentive the private sector to spend the capital it’s sitting on. With the capital gains tax being raised to 20%, new taxes now being collected for Obamacare and an onslaught of new regulations coming from Washington (of which Obama waited until after the election to announce), investment, hiring and consumer spending looks to remain sluggish and low – keeping economic growth weak in 2013.