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Stuck on Spend: Amidst Ghastly Debt Projections, Democrats Propose New Stimulus

Blithely forging ahead with their spendthrift agenda as if the national debt weren't poised to overtake GDP within the decade, and as if the 2010 election was some sort of practical joke, Congressional Democrats still have an acute case of stimulus fever:


Efforts in Washington to head off a debt default faced a new hurdle on Wednesday as Democratic leaders called for additional spending to boost the sluggish economy. Democrats' demand for new stimulus spending is at odds with the work of negotiators, led by Vice President Joe Biden, who are trying to find trillions of dollars in savings as part of a deal that would allow Congress to sign off on new government borrowing before the U.S. runs out of money to pay its bills.

Those talks, which resumed on Wednesday, have largely focused on spending cuts over the next 10 years. Senate Democrats want the deal to include more money for highway construction, a payroll tax cut and clean-energy subsidies to bring down the 9.1 percent unemployment rate.  "Get the recovery right before you get in this deficit-cutting mode," Assistant Senate Democratic Leader Dick Durbin told reporters. "Get people back to work. Let's start moving in that direction."

The truth is, with Democrats, it never seems to be a good time to cut federal spending.  The Reuters piece also includes one of my journalistic pet peeves:

The group is trying to find a way to reduce stubborn budget deficits by $4 trillion over the next 10 years to give lawmakers the political cover to raise the $14.3 trillion debt ceiling by a large enough increment to cover borrowing needs through the 2012 elections.


Budgetary anthropomorphism!  Reporters sometimes write about deficits as if they're self-perpetuating, independent beasts -- over which policymakers exert no control.  That, of course, is hogwash.  Our deficits have spiraled upward and fed our national debt because members of both parties have allowed it to.  Over the last four years or so, Democrats have controlled the purse strings, and the debt has soared by nearly $6 Trillion.  Now, that very same party wants to hike the debt ceiling with few, if any, strings attached, and embark on another "stimulus" misadventure -- a task they squandered in 2009.  This proposal would be insane even if it weren't being floated on the same day that the non-partisan Congressional Budget Office issued its stunningly grim economic forecast.  As you read this, bear in mind that Greece's national debt floats in the vicinity of 160 percent of GDP, resulting in harsh austerity measures and street riots:

The national debt will exceed the size of the entire U.S. economy by 2021 — and balloon to nearly 200 percent of GDP within 25 years — without dramatic cuts to federal health and retirement programs or steep tax increases, congressional budget analysts said Wednesday.

The dire outlook from the nonpartisan Congressional Budget Office comes as the White House and congressional leaders are locked in negotiations aimed at cutting spending and stabilizing future borrowing. The CBO report highlights the enormity of that task and the immense difficulty of paying off the debt, given an aging population and soaring health-care costs.

Over the long term, the CBO said, a projected explosion in government spending outside interest on the debt is “attributable entirely” to the ballooning cost of “Social Security, Medicare, Medicaid, and (to a lesser extent) insurance subsidies” intended to help finance coverage for the uninsured under President Obama’s new health-care law.  “The health care programs are the main drivers of that growth,” the CBO said, responsible for 80 percent of the projected rise in spending on those programs over the next 25 years.


Democrats' solution, naturally, is to continue spending like mad while allowing the Bush tax cuts to expire.  Under that plan, household tax burdens would increase substantially for tens of millions of middle-class Americans -- not just "the rich."  Small businesses would be crushed.  Investment would drop.  Democrats may suggest that higher taxes won't strike a devastating blow to economic growth (an obvious key to extricating ourselves from our fiscal hole), but most Americans instinctually know that's not the case, as evidenced in a new Bloomberg poll:

A majority of Americans say job growth would best be revived with prescriptions favored by the [Republican] party: cuts in government spending and taxes, the Bloomberg Poll shows. Even 40 percent of Democrats share that view… Though Americans rate unemployment and the economy as a greater concern than the deficit and government spending, the issues are now closely connected. Sixty-five percent of respondents say they believe the size of the federal deficit is a major reason the jobless rate hasn’t dropped significantly… Even with their concerns about the deficit, Americans aren’t ready to pay more in taxes: More than 6 of 10 say they are unwilling to do so.


Bottom line: The public favors cutting federal spending and holding the line on taxes.  This should not surprise anyone who was even half awake last November.  Today's alarming CBO numbers place Senate Democrats' demands for higher spending and taxes in stark relief.  Over to you, Paul Ryan:

Each day Washington fails to act, policymakers increase the risk of a sudden crisis. Advocates of more deficit spending, and those who counsel delay in the face of mounting debt, point to low yields on U.S. bonds as evidence that the market isn’t worried about our long-term budget problems. But credit-rating agencies and major bond buyers have expressed growing concerns about our fiscal trajectory, with Standard & Poor’s issuing another warning just this week. Moreover, as the latest news from Europe shows, such doubts can intensify quickly, causing investor sentiment to turn — and interest rates to spike — almost overnight. Our government’s troubling reliance on foreign creditors has left us especially vulnerable to an abrupt loss of confidence.

Read the whole thing.

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