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LAMBRO: Crying ‘wolf’ over sequestration
The real threat is the Social Security and Medicare crunch
Remember when President Obama was flying around the country warning everyone that the budget-cutting sequestration would destroy life as we know it America?
The president was hyperbolic about it, preaching doom and gloom across the land if we didn’t turn away from the disastrous path Congress put us on. Mr. Obama did, too, by signing the bill that would send us over the sequestration cliff if a new budget wasn’t approved.
The Pentagon wouldn’t be able to pay its bills, he said. Federal food assistance would be denied to 600,000 low-income women and children. Teachers would be laid off.
The cuts came, but the sky didn’t fall. The sun came up the next day, the government didn’t shut down, the stock market soared, and the deficit even declined.
The Washington Post acknowledged what happened in a front-page story last week under the headline that read: “Budget cuts, but no chaos,” followed by a secondary headline that declared, “Sequester milder than forecast.”
We know now that Mr. Obama was peddling fear, a game he’s good at and that he successfully parlayed in his 2012 re-election campaign. He thought it would work again this year, but fear-mongering isn’t a policy, and the American people know a shell game when they see one.
The Post’s story about Mr. Obama’s false and — let’s face it — downright dishonest scare tactics, didn’t mince words.
After checking into the president’s gloomiest predictions, the paper found that “none of these things happened.”
“Sequestration did hit, on March 1. And since then, the $85 billion budget cut has caused real reductions in many federal programs that people depend on. But it has not produced what the Obama administration predicted: widespread breakdowns in crucial government services.”
There are good reasons why Mr. Obama’s preposterous claims were not going to happen. Federal spending under Mr. Obama is approaching nearly $4 trillion a year, and $85 billion in cuts — a tiny fraction of that — spread across the vast expanse of the government wasn’t going to seriously reduce what the feds spend each year.
Before sequestration took effect, Congress passed and Mr. Obama signed a bill that gave departments more wiggle room to shift funds from low-priority programs to higher-priority ones.
Let’s not ignore the government’s insatiable ability to increase its revenue through higher taxation. There was the 2 percentage point increase in the payroll tax and the president’s new 40 percent tax rate on wealthy Americans and on capital-gains income that Mr. Obama demanded as part of the deal.
Then there’s the growth of the economy, as weak as that is, which increased the government’s income. I don’t think Mr. Obama’s impotent economic policies added much to any revenue growth, but corporate incomes have risen as businesses have cut costs and boosted their net earnings, which has resulted in higher tax revenues.
The result, according to the nonpartisan Congressional Budget Office, is that this year’s federal budget deficit will fall below $650 billion, after four years of deficits of well over $1 trillion ($1.4 trillion in 2009, $1.3 trillion in 2010, $1.3 trillion in 2011, and $1.2 trillion in 2012.)
The Congressional Budget Office’s lower deficit forecast struck budget-watchers as wildly exaggerated at the time, and this week the Obama administration said it expects the 2013 deficit to be around $759 billion — still about three-quarters of $1 trillion that will be added to a $16 trillion debt.
These deficits are expected to mushroom after 2015 when millions of baby boomers begin applying for Social Security and Medicare. This will push debt levels higher than at any time in our history except for World War II — above 70 percent of the economy, the CBO says.
Mr. Obama blithely ignores the looming fiscal catastrophe that awaits us in the coming decade, and the Democrats in Congress continue to insist that Social Security and Medicare are doing just fine and that we needn’t worry about how to pay for them in the years to come.
However, we’d better start worrying about them before it’s too late. Both entitlements need to be reformed to ensure that they offer cost-effective, market-oriented options for future retirees. We are never going to be able to address either the government’s looming budget deficits or entitlement costs until we get America’s economy growing at a faster pace, creating more businesses that will drive unemployment rates down to normal levels.
Mr. Obama ignored the economy’s poor performance in his re-election campaign and has continued to ignore it in the first six months of his second term, hoping it will heal itself. It hasn’t, and it won’t.
Some in the long-compliant news media are starting to criticize his economic truancy more forcefully than at any other time in his presidency. Last month, New York Times economic columnist Paul Krugman, one of the president’s earliest supporters, said, “We’re still very much living through what amounts to a low-grade depression.”
This week, The Post’s chief political reporter, Dan Balz, bluntly observed that Friday’s employment report saying the economy created 195,000 jobs in June — much-ballyhooed by the White House — was “the latest example of a nation with lowered economic expectations.”
In a scathing indictment of the Obama economy, Mr. Balz bemoaned that “332,000 more people” were working part time because they couldn’t find full-time employment; that 4.3 million, out of 11.8 million jobless people, have been out of work for 27 weeks or more; and economic growth slowed to a crawl (1.8 percent) in the first quarter.
He was critical of “wage stagnation” and the declining labor force rate, as discouraged job seekers stopped looking for work, ruefully pointing out that “the economy isn’t employing nearly as large a share of the potential workforce as it once did.” Mr. Obama still gives lip service to the middle class, but as Mr. Balz rightly notes, “they have not been his principal focus.”
As economic analyst Neil Irwin, Mr. Balz’s colleague at the paper, pointed out last week in his midterm report card on the economy, “We [still] aren’t living up to our potential.”
Far from it. Economists say at our current job-creation rates, it will take at least five years before we return to prerecession unemployment levels of 4.7 percent. Maybe the president should stop trying to scare us about things that won’t happen and begin focusing on the things that continue to plague our country: persistently high unemployment, stagnant middle-class incomes and a chronically weak economy.
Donald Lambro is a syndicated columnist and contributor to The Washington Times.
© Copyright 2014 The Washington Times, LLC. Click here for reprint permission.
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