Obama’s Fiscal Fight This Summer

Barack Obama's inaugural celebration will be marked by an all day televised event, viewable across the internet. Its pomp will compete with last year's spectacle of the Olympics opening ceremony in Beijing. He should enjoy it while it lasts.

The outpouring of support for Obama may be short-lived. His election may have been more a rejection of the current administration than a ground-swell support for his policies. Trying to deliver on his campaign promises may unite Republicans against him more so than any tussle between President Bush and the Democrats.

Yet, it's not a battle of R vs. D. What's really shaping up, regardless of party affiliation, is who get control of the money. Initially, Barack Obama will be handed a blank check, courtesy of the Bush administration. Obama has already made a press announcement that he anticipates years of trillion dollar budget deficits. The dual emergencies of the war and the tanking economy mean that Congress will pass anything, rather than being accused of doing nothing.

His deficit proclamation conjures up a vivid image from the Bible. King David wanted the Ark of the Covenant to reside in a lavish temple instead of a battlefield tent. He drew up the plans and bought the supplies, but couldn't get it done. His son King Solomon took up the challenge. Like all ambitious government projects, the costs were underestimated.  But his son Roboam had no intention of easing up on the people, lest he was seen as weak.  His son and successor had to deliver the bad news (1 Kings 12:11 Douay-Rheims Bible) ” And now my father put a heavy yoke upon you, but I will add to your yoke: my father beat you with whips, but I will beat you with scorpions.”

Our “yoke” will be higher taxes, inflation, loss of personal freedoms and dollar devaluation against other currencies. This economy is our scorpion. At least we get to elect our kings.

Laughingly, Barack Obama appointed a government “performance” officer. I wish Nancy Kellefer all the best. We'll see if she shapes up to be another Dave Stockman. However, I don't think a balanced budget is even a remote fantasy in this administration of Change. It is this new president's naive belief that by adding more government, government will miraculously become more efficient, and therefore be able to pay for new spending. She can save on office expenses by sharing a desk with the Drug Czar or Car Czar.

For his first few months in office, Mr. Obama has the luxury of blaming George Bush for all that horrible deficit spending he has to do. Republicans, now in the minority in both houses, will have to choose if they will support the President's pet bills, or make symbolic attempts of casting dissenting votes, in attempt to curb runaway spending.

First 100 Days

Let's take a look at some of the initiatives the new President wants to do in his first 100 days (more or less).

Wars in Iraq and Afghanistan

Obama promised to end the war in Iraq. Even before Obama was a U.S. Senator, he called the war in Iraq a “dumb war”. He will probably end up redeploying most troops in Iraq to Afghanistan, where he believes the real war is. Currently there are about 140,000 in Iraq and about 30,000 in Afghanistan. He may find out that it will take longer than a year or two, depending on the conditions for peace. In addition to the healthy defense budget, these wars have cost about $200 billion per year off-budget, so why should this year be any different? The Washington Post estimates are closer to $3 Trillion total. At what point do we “win” this war? Recent controversy over Hillary Clinton's confirmation for Secretary of State could delay this policy and Obama's whole foreign policy agenda.

TARP Part 2: $350 Billion Bailout for Banks and whatever

It's a foregone conclusion that this money will be spent. Bank of American will get another $20 billion. Supposedly there will be more restrictions on this round of funds, so that banks can actually use it to make loans to home owners before they're foreclosed upon. But until Tim Geithner or someone else is confirmed for Secretary of Treasury, that money may be held up for a while.

Stimulus Package is now $825 Billion

This combination of spending initiatives and tax cuts are supposed to short-circuit the current recession. There is no way to measure if the stimulus package from last year had much of an effect. Consumers are struggling to pay down credit cards and make good on their mortgages. A $1000 check might make the difference of someone staying in their house for one more month. It might repair some roads. Billions will go to the states for projects in each Congressional district. Unfortunately, like the TARP and funding for the Wars in Iraq and Afghanistan, it's added onto the national debt.

Next 100 Days: FY2010 Budget

The real battle will begin this summer. Obama's campaign promises will cost the taxpayers hundreds of billions more. Here's a partial list of goodies from barackobama.com:

  • Universal Pre-Kindergarten
  • Lifelong Job Training
  • Healthcare Expansion
  • Green Fuel Research (at least $150 billion)
  • 5 Million “Green” Jobs
  • Education for the Disabled
  • K-12 School “Improvement”
  • College “affordability”
  • Fighting Poverty
  • Expand Veterans Benefits
  • Expand high-speed internet to rural communities
  • Reform the patent system
  • Social Security protection

You get idea. Nowhere does he pledge to shrink the government. He will look at the budget line-by-line for “wasteful spending” and obsolete programs. His reinstatement of PAYGO, pay as you go, means that there will be more taxes to cover these programs. He blames the irresponsible Bush tax cuts for current deficits. There is no mention of specific programs that will be eliminated.From his perspective, government isn't the problem. It just needs to be fine tuned a bit so it can be a better deliverer of services.

The Resistance

Republicans who are left in Congress no longer have to rally behind the President due to party loyalty. They can either choose to rubberstamp these out-of-control budgets, in the hope of getting something back to their districts; or they can say enough is enough, and vote against every unbalanced budget and new spending bill. For now, Obama has momentum on his side, even with the surviving Republicans.

It will take some brave Democrats, who supported Obama, yet continue to believe in the Pay As You Go deal worked out in the 1990s. They were willing to raise taxes to cover budget overruns. They realize that burdening future generations with the costs of their parents' needs is immoral.

The last line of resistance is the American people themselves. In a recent CNN poll 62% of Americans didn't want the second half of the TARP money spent without details provided on how it will be spent. 12% say don't spend it in at all.

It was Congress, in cahoots with the previous President, who got us into this current economic mess and brought us ever larger budget deficits. The voters punished some Republicans in the process. Although over 95% of Congress got reelected, it was enough of a change to move both the Senate (58.6%) and the House (59.0%) decidedly Democratic. By voting along party lines, the Republicans can make a case that all the blame for the next two years falls squarely on the Democrats.

Perhaps when the government is unable to borrow its way to prosperity, and we are hit with double-digit inflation as the dollar is devalued to cover these commitments, the people will wake up?


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