Easing Into Darkness

The Arab spring has turned to a brutal fall, the president can’t quite decide if the Egyptian government that he helped bring into power is a friend or foe, and there seems to be a similar question in the president’s mind about Israel as it readies for a war with Iran. The folks down at the stock market are happy, though, because the economy’s so lousy that the Federal Reserve has decided to hand it a whole lot of newly-printed money.

Citing all the familiar economic doom and gloom, a statement from the Fed on Thursday announced that it will buy $40 billion of mortgage-backed securities every month for an indefinite period of time as part of a third round of “quantitative easing” that will wind up increasing the money supply by more than $3 trillion. Given that the Fed also signaled its intention to keep interest rates at their current historical lows for the foreseeable future, making bonds and other fixed-income investments a mug’s game, much of that money will quickly make its way to Wall Street.

This made for a big rally on the big boards, naturally enough, but it’s hard to see how it will do much for a real economic recovery on less fashionable roads. The first two rounds of quantitative easing clearly didn’t work, or there wouldn’t be any need for a third one, and there is no convincing theory to explain why this effort will be any more successful. There’s an old adage that the third time’s a charm, but we can find no scientific basis for this notion, and our thrice-married friends assure us that it’s bunk.

What’s troubling the economy is not a lack of pieces of paper printed with green pictures of federal buildings and former officials, as these are already in greater abundance than ever, but rather a lack of incentives for people to start moving them around. Until the tax codes, regulations, and prevailing political climate all signal that Americans can expect to keep most of what they earn, the Fed can roll out the dollars at a Weimar-era rate and the smart money will still be seeking a safe haven far offshore.

The Fed’s actions entail considerable risks, too. One of the reasons that people are sitting on their money is a reasonable expectation that the government’s about to go broke, and although Fed Chairman Ben Bernanke said in a Thursday news conference that his plan won’t affect the budget it is unlikely that it will induce any non-Tea Party politicians to cut back on their spending. Should the plan actually stimulate the economy, whatever goods and services are created will be chasing so much money that a ‘70s-style inflation rate might prove a best-case scenario. More dollars mean a weaker dollar, as well, and could even threaten the reserve currency status.

None of the negative effects will be immediately apparent, however, unless you’re a retiree who was suckered into bonds and other traditional retiree-age investments, and by the time the worst of it hits the election will be long past. Any short-term benefits that might occur will be more immediate, on the other hand, but surely it would be paranoid to think that politics had anything to do with it.

— Bud Norman

Budgetary Baloney

Sometimes the muse fails a writer. Some outrages are so outrageous, some absurdities so absurd, some lies so utterly false, that the precise analogy, the proper metaphor, or even the accurate words remain elusive. So it is with President Barack Obama’s boast last week that he’s a fiscal skinflint who has been heroically dealing with massive debts caused entirely by Republicans.

“This other side, I don’t how they’ve been bamboozling folks into thinking that they are the responsible, fiscally-disciplined party,” Obama said Wednesday during yet another fund-raiser, this time in Denver’s Hyatt Regency Hotel. “They run up these wild debts and then when we take over, we’ve got to clean it up.”

What word could one employ to describe such balderdash, such bushwa, such malarkey, such claptrap, such hooey? If not for our strict standards of decorum we could toss in a few choicer synonyms from the barnyard vernacular, but even those would not quite be le mot juste for this sort of mendacious nonsense. What can one possibly liken to such a rant, when even the most far-fetched analogy falls short of its extraordinary dishonesty, and even the most damning metaphor fails to express its utter mendacity, and even the most pointed joke cannot match its knee-slapping hilarity?

Obama’s bizarre claim apparently originated with an article at the Wall Street Journal’s MarketWatch site, where staff writer Rex Nutting asserted that the “Obama spending binge never happened,” and that government spending has risen during Obama’s administration at the slowest pace since the 1950s. The Obama campaign has been widely disseminating the article, the candidate himself smirkingly cited “real liberal outlets like The Wall Street Journal” as his corroborating evidence, and there is nowhere else on earth that the idea could have possibly been contrived.

Nutting’s article is pure accounting legerdemain, of course, as numerous commentators quickly noted. The smarter bloggers at Pajamas Media noticed it, as did the conservative think tankers at the Heritage Foundation, and even the president’s usually reliable allies at The Washington Post took time out from investigating Mitt Romney’s high school cruelties to give Obama’s Nutting-based claims three “Pinocchios” in a fact-checking column. More detailed explanations are clearly given in the linked articles, but the gist of it is that Nutting took a whole lot of spending that originated with Obama and moved it back to the Bush years, then used that record-setting baseline to measure the supposedly modest increases of Obama’s ensuing big spending years.

The Bush era was regrettably profligate, with an astounding $4 trillion in debt accrued during the eight years, but just three years of Obama have added another $5 trillion, government spending as a share of the national economy has risen to levels not seen since World War II, and in every budget the president has submitted he has asked for so much more spending that none one single member of Congress would vote for the proposal. Although congressional Republicans have too often been guilty of overspending, a situation now being slowly rectified by the party’s fed-up base in primary after primary, it should also be noted the biggest deficits of the Bush era occurred during his last two years, when anti-war sentiment and general Bush fatigue had caused a Democratic takeover of congress, and that Democratic control of both the legislative and executive branches resulted in new records.

Obama’s claim to fiscal probity is so wildly implausible, then, that many people might take it to be true. The ploy is a perfect example of how you can indeed fool some of the people some of the time, but it seems unlikely to fool enough of them for long enough to do Obama much good. Even the most sycophantic newspapers and broadcasters seem unwilling to go along with the ruse, and Obama likely won’t be able to resist getting back to his previous lines about how the stimulus saved the world, his many investments will pay off some in the future, and how he’s cut a sufficient number of government checks to be owed the loyalty of an electoral majority.

For Obama to continue to criticize his predecessor’s spendthrift ways is like, well, once again there seems to be no analogy at hand. At least the next time some politician makes a suitably outrageous claim, we’ll be able to say “That’s like Barack Obama claiming he’s a budget hawk.”

— Bud Norman

Running Up the Score on the Budget

There’s something strangely fascinating about the big blow-out scores that occasionally appear in the sports pages. We don’t mean the 30-point differences that frequently occur in basketball games or the 50-point margins that are a regular feature of the football schedule, but rather those cringe-inducing triple-digit shut-out drubbings that only happen once a season or so. Seeing such humiliating scores always cause us to wonder how they came about, and whether it was the winner’s exceptional skill or the loser’s extraordinary ineptitude that led to such a lopsided result.

No such speculation is necessary after Wednesday’s big blow-out at the Capitol, where President Barack Obama’s budget proposal went down to ignominious defeat by the staggering score of 0-99. That follows a 0-414 defeat in the House of Representatives last month, for a congressional season total of 0-513, and there’s no point wondering why. It can’t be the high quality of the competition, because no other budget plan has found congressional approval for the past three years, so the rather convincing score can only be attributed to the low quality of the president’s plan.

Obama’s most stubborn defenders will no doubt downplay the significance of vote, saying that the president only proposed a budget because of some archaic legal requirement and never really intended that it be enacted. As The New York Times helpfully explained when Obama introduced the budget proposal last February, it “amounts to an election-year bet that a plan for higher taxes on the rich and more spending on popular programs like infrastructure and manufacturing will trump concerns over the deficit,” and the true Obama believers will no doubt see nothing wrong with such political maneuvering. Still, they can’t possibly unembarrassed when even the likes of Al Franken, Barbara Boxer, Maxine Waters, and Bernie Sanders can’t be persuaded to cast a vote for the staggering debt that the Obama budget envisions.

Although the budget proposal and the Republicans’ insistence on a vote were both mere political gimmicks, the outcome is nonetheless worth noting. When Obama takes to the campaign trail to tell voters that some Republican proposal or another cuts funding for some sacrosanct program or another by a certain percentage, he’s talking about how the Republican proposal compares to his own budget plan. The Republican proposals will inevitably seem stingy by comparison, and Obama is apparently calculating that by the time the Republicans explain the budgetary reality voters will too bored and confused to appreciate that the president is actually proposing to bankrupt the country at a rate even the congressional Democrats cannot condone.

The trick might just work, as many American voters are quite easily bored and confused, but being able to point to a scoreboard flashing 0-513 could help the Republican efforts. We’ve seen teams that have lost basketball games by 30 points or so wind up cutting down the nets at the end of a season, but the teams that suffer the triple-digit losses usually don’t fare so well.

— Bud Norman

Dueling Budgets

That Rep. Paul Ryan sure is an awful, horrible, low-down, mean person, at least to hear President Barack Obama tell it.

Speaking before an adoring audience of editors and reporters at an Associated Press luncheon on Tuesday, Obama said that the Wisconsin congressman’s recently proposed budget plan was “thinly veiled social Darwinism.” He further stated that the Ryan plan is “so far to the right that it makes the Contract with America look like the New Deal.”

The latter charge was presumably meant as a disparagement, although it is unclear which of the two programs is being disparaged. The New Deal failed to lower the unemployment rate below 14.6 percent until World War II, and burdened future generations with such fiscal calamities as Fannie Mae, Freddie Mac, and Social Security, while the Contract with America included a welfare reform bill that is widely regarded as one of the more successful laws of the past generation, as well as tax cuts for small businesses such as the president now claims to champion. It also had some rather unexceptional reforms that were never passed into law, such as term limits and an independent audit of Congress, and some ideas that weren’t passed, such as a balanced budget amendment, that might have saved us from a number of current problems. Few Americans will remember anything that was included in the Contract with America way back in 1994, much less be able to name anything extremely right-wing in it, but Obama seems hopeful that many will vaguely recall the bad press it got from his adoring audience of editors and reporters.

The “thinly veiled social Darwinism” line is a more unambiguous insult. While Darwinism as a biological theory is so fashionable that to question any aspect of it marks one as a hopeless rube, Darwinism as a social theory is universally despised. Obama elaborated on the charge by claiming that the Ryan budget would “end Medicare as we know it,” deny mothers and children healthy food, dirty the water and air, and generally impose widespread misery on the populace. Hearing Obama describe the plan, one can imagine Ryan twirling his moustache and cackling a maniacal laugh as he ties the poor mothers and children to the train tracks, his murderous scheme thwarted only because the Amtrak subsidies have been slashed and no train is coming.

The Medicare trustees concede that the program as we know it will end with insolvency in 2024 anyway, so Ryan’s plan to replace it with a voucher system doesn’t seem very socially Darwinian, but the other charges do sound quite dreadful. Looking at the actual Ryan proposal, however, reveals that it would actually increase government spending, doesn’t actually balance the ledgers for decades, and that by 2022 the government’s budget as a share of gross domestic product would actually be higher than in the last two years of President Bill Clinton’s administration. Those years were the good old days, according to Democratic legend, and even Clinton’s most bitters foes don’t recall them as an era of starving mothers and children, dirty air and water, widespread misery, and survival of the fittest.

Ryan’s plan is undeniably stingy when compared with Obama’s budget proposal, however. The Obama plan is to rack up another $6.4 trillion in debt between 2013 and 2022, or nearly $11 trillion under the more realistic “alternative fiscal scenario,” and hope that it all works out in the end. Just for yucks the House actually voted on the proposal, and it failed by a rather lopsided vote of 0-414. When even Nancy Pelosi can’t bring herself to vote for such a budget, it might be considered, well, so extreme that it makes the New Deal look like the Contract with America.

— Bud Norman