President Obama Has Political Strategy, Little Else, in Debt Talks

By James Wigderson
Special Guest Perspective for MacIver Institute

Does the president have a strategy beyond the political? On Monday, President Barack Obama reiterated his demand that Republicans agree to a trillion-dollar tax increase as part of a debt-reduction deal. Actually, it’s a debt-increasing deal, as the debates over spending cuts and “revenue growth” are part of the debate over an agreement to raise the ceiling on the national debt.

White House Photo, Pete Souza, 7/11/11

To put it in terms too many of us understand, the nation’s credit card is maxed out at $14 trillion. As the late Slim Pickens once said, “Shoot, a fella’ could have a pretty good weekend in Vegas with all that.”

Now the Republicans in the House of Representatives and the president are debating under what conditions should we seek an increase in the credit limit. Ideally, we’d stop raising the limit. Otherwise, what’s the point of having a limit? But bills are coming due on August 4th that we’re using the credit card to pay.

Added to our problems is the continuing problem of high unemployment. On Friday, new job numbers came out and they were not pretty. Unemployment climbed up back to 9.2%. The economy only created 18,000 new jobs in June. We also learned Friday that the May numbers were more dismal than previously reported. We only created 50,000 jobs in May.

These were unemployment numbers that we were not supposed to see when President Obama and a Democratic-controlled Congress spent a trillion dollars. The most unemployment we were supposed to see was 8% because of all the money Washington shoved into government spending.

Let’s return to Obama’s favorite food item to use in analogies, the Slurpee, in honor of the 7-11 chain giving away free Slurpees on Monday. Obama accused Republicans of sucking on Slurpees while Obama drove the economy out of the ditch.

A better analogy would be to compare the economy Obama inherited to a lazy child. The reality is Obama tried giving it a trillion-dollar Slurpee, hoping that the sugar content would cause the economy to become a star athlete before anyone discovered there is no nutritional content in Slurpees.

In case anyone hasn’t noticed, the economy is going the wrong way: anemic growth with a possibility of a return to recession, coupled with high unemployment and even higher under-employment. One of the problems Washington D.C. has is that the economy is not growing enough to generate the revenue necessary to cover all of President Obama’s new spending. Obama’s Stimulus Slurpee has sent the economy into a diabetic coma.

Federal government spending is now over 25% of GDP. The last time the government was this big was during World War II. You know: rationing, meatless Tuesdays, existential threat to our country.

What’s the war on now? Apparently air travel. Not long after Obama took office he campaigned against businessmen flying to Las Vegas. Now he’s complaining about a tax code that encourages private airplane purchases and his administration is opposed to Boeing being able to build airplanes cost effectively. Heck, Obama is even opposed to you using an ATM at the airport to replace the toothpaste that just got confiscated.

Having tried pumping a trillion dollars of government spending into the economy to make it grow, now Obama wants to suck a trillion dollars out of the private economy through higher taxes. Inflating government spending all out of proportion wasn’t enough. Now he wants to drive the economy into the ground to pay for it.

For a number of years, Wisconsin tried doing the same thing. In boom years, state spending grew. When the economy slowed down, state spending still grew. Finally, in a futile bid to pay for all of the spending, Governor Jim Doyle and the Democrats raised taxes – “grew revenue” in Obamaspeak – by over $2 billion in Doyle’s last budget.

Under Governor Scott Walker, the state has reversed course, focusing on growing the economy while containing the growth of government. The recently passed state budget includes dramatic cuts to local school aid but does not merely shift taxes to the local level. The state has imposed an actual freeze on local property taxes.

To make this work, Walker and the legislature curtailed some collective bargaining privileges for public employees when it comes to benefits and work rules. The result in those school districts that were able to take advantage of the changes was that the districts were able to handle the cuts in state aid.

Wisconsin was able to bring its labor costs under control, actually pay some outstanding debt, and eradicate the state budget structural deficit. Wisconsin did it without raising taxes.

New Jersey, Ohio and Indiana are also taking on state employee unions to bring state spending under control. Even New York under Governor Andrew Cuomo negotiated an agreement with the state’s largest government employee union that included an unprecedented pay freeze and increased contributions by employees to their health insurance.

States like Wisconsin are embracing tough cuts in spending because they must. The federal government is at that point, too, if only Obama is willing to see it. But the demand on Monday by Obama for a trillion-dollar tax increase shows he isn’t learning the lessons being taught by states that are taking the steps necessary for long-term economic growth.