Tuesday, May 22, 2012

Democrats Biggest Problem: Math

You may have seen this article claiming the “Obama Spending Binge Never Happened” or the graph below today from the Democrats.

The graph is from the article. The only problem: the article is complete bunk. It’s interesting reading, but has some serious flaws, some of which I’ll detail.

Also, they retrieved their data from the OMB, and CBO. I have a problem with that, in that the CBO data doesn’t always agree with the Treasury department. I’m not sure why. But, since the Treasury is the last word on our fiscal situation, I’ll go with it for any historical analysis. I will use the latest CBO estimates for FY12-FY17, however.

Why am I going all the way out to 2017? Well, the author of the article wants to pretend that the major pieces of ObamaCare don’t go into effect next year. But they do. Since this is law that has already been passed and signed by President Barack Obama (D-USA), and it’s his signature legislation, it’s fair game to be included.

Now, for my graph, I go year-by-year, rather than look at 4 years at a time. Here’s my graph of percent change in outlays from year to year.

image

Now, there are some interesting things about this graph, to be sure. First, the only period where increases were consistently small was FY93-FY99. We never had a year in there above 4% increase. We on the right like to credit the Republican Revolution of ‘94 for the low deficits late in the decade, but the simple truth is that things were moving in the right direction even before President Clinton’s (D-USA) first budget (FY94). And remember, this has nothing to do with the dot com boom. This is outlays only, not receipts. Clinton and the GOP Congress should be commended for keeping outlays down through this period. Yes, they made lots of military cuts, and that’s one of the reasons things start climbing again after 2000, but the data is undeniable.

Now, notice that big spike for FY09. That represents an 18.2% increase in outlays from the previous year. It’s hard to see, but even FY08 had a 9.1% increase of FY07, so these were two bad years in a row. Of course, the reason for the increase in FY09 is the stimulus package, and TARP. The combined effect of these two on FY09 outlays is around $400 billion. Taking those out would cause FY09 increase to be a much more reasonable 4.8%.

Now, here’s the other problem with FY09. The article linked above notes that FY09 should fall under Bush's numbers, since he was President in September, 2008. September is the start of the next fiscal year. However, it does attach the stimulus money to Obama, since Obama signed that into law. Of course, the author, Rex Nutting, doesn’t mention that Bush never signed an FY09 budget. The Democrats refused to submit one until after the election.

(And you thought that Democrats avoiding submitting budgets was a new thing)

It was again Barack Obama who signed the omnibus spending bill funding discretionary spending for FY09. Of course, that’s only discretionary spending, not mandatory spending. Mandatory spending just increased at previously approved levels automatically. If this is giving you a headache, you’re not alone. I thought I’d write this post in about 15 minutes, but it’s taken much longer. So, who to give blame to for FY09? Bush should get blame for TARP, and Obama for stimulus and omnibus. But the rest? Typically, you’d assign it to the outgoing President. Is that right in this case? Maybe. I honestly don’t know.

Moving on to FY10, the year Nutting wants to start with for Obama, we see a 1.8% decrease in spending. Nutting tries to convince us that Obama’s a hero for this. But put it in perspective. From FY81-FY08, the average increase per year was 5.8%. So, to use some hard numbers, imagine that FY08’s budget was $1,000. Assuming average increases, FY09 would have been $1,058, and FY10 would have been $1,119. In reality, FY09 was $1,182, and FY10 was $1,160. In other words, the 1.8% decrease was a pittance. It should have been much larger. And FY11 should have had a decrease again. By now, there’s no TARP in the budget, and the stimulus money is almost all spent. And yet, our budgets are still much higher than FY08. But Nutting wants to convince you that we haven’t seen an increase in spending under Obama.

The CBO does project increases for Obama’s second term of 3%, 4.3%, 6.5%, and 4.1%. Three of the four years are below the historical average, though, and that doesn’t seem likely at this point.

If all of this is too much, let me sum up this way: FY87 was our first $1 trillion budget. FY02 was our first $2 trillion budget. FY10  was our first $3 trillion budget. FY16 is projected to be our first $4 trillion budget. If this sounds like Obama has reduced spending, then you’ve lost your mind.

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