OPINION:
Americans “do big things,” said President Obama during the uplifting finale to his State of the Union address. So does 16-year-old Amy Chyao of Richardson, Texas, who devised a way to use light energy to activate a drug that kills cancer cells. So does Brandon Fisher of Berlin, Pa., founder of a drill-bit manufacturer, who helped rescue the trapped Chilean coal miners last year.
And so does Uncle Sam, of Washington, who has run up a $14 trillion national debt.
Sorry, my mistake. Mr. Obama did not mention Uncle Sam. Although he did refer to the nation’s “mountain of debt,” he failed to mention the actual size of the obligation. But the monetary mountain of fiscal prodigality loomed in the background as the president made the case for a new set of spending initiatives.
The president proposed a slew of “investments” in areas that he contends will help create new jobs, such as funding green-energy technologies, upgrading the education system, building broadband Internet access and expanding high-speed rail. It’s good news to hear the president talking about productivity, innovation and competitiveness for a change, instead of enlarging the entitlement state. That is progress of a sort.
But Mr. Obama gave remarkably little attention in his speech to the most compelling issue of our time: the rapidly deteriorating financial condition of the U.S. government. He was three-fifths of the way through the address before he got around to framing the issue: “Now that the worst of the recession is over, we have to confront the fact that our government spends more than it takes in,” he said in a classic understatement. “That is not sustainable. Every day, families sacrifice to live within their means. They deserve a government that does the same.”
Mr. Obama then proposed freezing annual domestic spending for five years, starting this year. “This would reduce the deficit by more than $400 billion over the next decade,” he said, “and will bring discretionary spending to the lowest share of our economy since Dwight Eisenhower was president.”
(Please note: $400 billion over a decade averages out to $40 billion a year, and the number undoubtedly includes interest not paid. More to the point, it would not be actual savings, but spending increases not enacted.)
The president also mentioned a few other modest deficit-cutting reforms, such as deleting tax subsidies for oil companies, reining in frivolous malpractice lawsuits and reorganizing the federal government. But he provided no dollar figures - according to the New York Times, the oil subsidies amount to a mere $4 billion a year - which suggests that the budget savings for everything but the Pentagon cuts, which are meaningful, are too embarrassingly meager to mention.
Mr. Obama made a nearly identical promise in last year’s State of the Union: to freeze discretionary domestic spending beginning in fiscal year 2011. His only change - in light of ever-increasing deficits - would be maintaining the freeze for five years instead of the three he proposed last year. But the freeze would lock into place a bloc of spending that had soared from $437 billion in 2009 to $544 billion this year - a 24 percent increase.
Cut through the lofty rhetoric, and it’s clear that far from reducing the size and scope of government, Mr. Obama is determined to defend it. In the context of House Republicans calling for budget cuts ranging from $100 billion a year to $175 billion - in a $3.7 trillion budget - Mr. Obama isn’t holding the line on spending increases, he’s holding the line on spending cuts.
Never in his public utterances has Mr. Obama alluded to the fact that continued deficits at the rate of $1 trillion a year (give or take a few hundred billion, depending whether the economy is booming or busting), will inexorably lead to a financial crisis. Never does he suggest, as Rep. Paul D. Ryan, Wisconsin Republican, did in his rebuttal, that the United States is only a few years behind the likes of Greece, Ireland and other European nations now enacting austerity budgets.
The president noted in his speech that he has proposed cuts to things that he deeply cares about, like “community action programs.” If we continue down Mr. Obama’s path, rising interest rates on an ever-bloating national debt could easily swell interest payments on the debt from less than $200 billion this year to more than $1 trillion in 2020. That $800 billion in added interest payments will crowd out a lot more spending than community action programs.
James A. Bacon is author of the book “Boomergeddon” (Oaklea Press, 2010) and publisher of the blog by the same name.
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