Obama’s Mouthpiece for Unsustainability

By Mr. Curmudgeon

First, a little background:

“In the short run, especially when the economy has substantial unemployment and unused factories, offices, and equipment, federal budget deficits—and thus additional debt—generally boost demand, thereby increasing output and employment relative to what would occur with a balanced budget,” insisted the Congressional Budget Office (CBO) in its 2011 analysis of projected federal spending, debt and its effects on the U.S. economy. In short, it’s the standard Keynesian argument that government spending is what fuels economic growth.
But then the CBO did something odd. It undercut its own argument in the very next sentence. “However, the effects of that greater demand are temporary because stabilizing forces in the economy (such as the responses of prices and interest rates and actions by the Federal Reserve) tend to move output back toward its long-run potential level—that is, toward the amount of goods and services that the economy can produce with a high rate of use of its capital and labor resources.”

In other words, government intervention creates a short-term illusion of economic recovery while the growing federal debt “would be unsustainable, and therefore major policy changes to stabilize the budget would be required at some point,” said the CBO.

This became clear when President Obama began touring the nation to launch what was to be the “Summer of Recovery.”

Back in June 2010, Transportation Secretary Ray LaHood sang the praises of Obama’s stimulus spending in his White House blog. “This summer, we’re really heating things up. As President Obama said today in Columbus, ‘If we’re going to rebuild America’s economy, then we’ve got to rebuild America, period.

“So, just as it was designed to do, the Recovery Act continues to pay dividends for American infrastructure and American workers … That is who this DOT (Department of Transportation) kicks off the Summer of Recovery.”

The phony “recovery” melted away like an ice cube on a sweltering August day. Stimulus spending had run its course, with temporary government-sponsored jobs evaporating. And the expired first-time-homebuyer tax-credit sent home prices on a downward trajectory. And unemployment remained above 8 percent. Like the CBO said, it’s all temporary, which is amazing considering Obama and the Democratically-controlled Congress spent nearly $1 trillion.

Undeterred by his first stimulus failure, last September President Obama spoke before a joint session of Congress to advance another winning idea: a request they pass his “American Jobs Act” at a more modest cost of $477 billion. “You should pass this bill right away,” demanded Obama. But a large Tea Party crowd swept into the House nine months prior and Obama’s plan died quickly – with an assist from the Democratically-controlled Senate.

Recently, Obama heralded the news that America’s unemployment rate dropped from 8.6 to 8.5 percent. “We have made real progress – now is not the time to stop,” said the president. By stop, Obama meant government spending. But most economists say the one one-hundredth-of-one-percent drop in unemployment was due to seasonal Christmas hiring. And it’s a new year with a continuing European debt crisis threatening to undo all the microscopic “real progress.”

And now, the buried lead:

So, it comes as something of a shock that president Obama named his White House Office of Management and Budget (OMB) director Jack Lew as the new chief of staff to replace the departing William Daley. Daley will help the Obama re-election effort in Chicago by, no doubt, running an aggressive get-out-the-vote effort aimed at the city’s dearly departed. As Chicago’s long-time machine mayor, he certainly knows where all the bodies are buried.

Last November, Lew released an OMB report admitting that when Washington’s Democrats ruled Congress, these wise stewards of the public purse spent $116 billion in “improper federal payments.” That’s pointy-headed economist speak for, “Nancy Pelosi and her goons flagrantly engaged in government waste and fraud.”

“At a time when our most critical programs – economic programs, social safety net programs – are experiencing tighter and tighter budgets,” wrote Lew, “it’s particularly imperative that we not tolerate such errors.”

Danny Werfel, a Federal Controller at OMB, told CNN, “If you look at the data, particularly if you look at 2007, 2008 and 2009, you’ll see the error rates increasing and apexing in 2009 at 5.4 percent.”

Gee, what was going on in 2009? Oh yeah, stimulus.

When it looked like the government was heading for a budget lockdown last December, Lew admonished Tea Party Republicans for attempting to attach cost-cutting “riders” to the spending appropriation that would reduce “improper federal payments.” “I don’t think it’s in the interest of the country to have an unnecessary crisis but it’s also not in the interest of the country to allow an appropriations bill to become a vehicle for doing things that are harmful to the country and which don’t belong on an appropriations bill,” said Lew.

Excuse me, but haven’t federal appropriation bills become the chief “vehicle for doing things that are harmful to the country”?