Obama Continues to Bury the Country in Spending

With these levels of spending and debt, the United States is well on the way to repeating the mistakes of Japan in the 1990s.

This article was originally published in US News

Friday marked the third anniversary of the American Recovery and Reinvestment Act, but the day went by without much attention. There is at least one reason people should remember the stimulus, however, because we are still paying for it today.

The stimulus contributed to a steady creep in government spending that continues to add to our debt, hold back the economic recovery, and will likely result in the United States facing higher interest rates for the foreseeable future. These interest rates will not only affect borrowing costs for the federal government, but everyone that pays interest on car loans, mortgages, student loans, and credit cards. Even taxing every penny from the rich does not solve the real problem, our current spending levels. We need to make real cuts, and the president‘s most recent budget does not achieve this.

Last week, the president recommended we raise the spending bar yet again from $3.7 trillion to $3.8 trillion, including spending  $350 billion on stimulus and $476 billion for transportation and infrastructure. Not only would we be spending more money next year, but every year for the next 10 years. And no, a $4 trillion dollar reduction in spending over 10 years is not a "cut." It's just that, a reduction in the rate of growth on how much more we are planning to spend. Clearly the federal government is in the first stage of grief, denial.

But why should you worry about this additional spending? Well if we add both the spending by state and local governments to that of the federal government, together they are consuming about 40 percent of economic activity. This does not leave enough of the economic pie for the private sector to create the growth necessary to stimulate job creation.

The president is trying to avoid the consequences of increased deficits and debt by raising taxes. Shifting the problem to taxpayers doesn't make the problem go away. It only delays facing the necessary reality that too much spending is the problem. Even if this spending were to be partially paid for by war savings (and that's unlikely given the recent history of Congress), this is just more of the same thinking from the past.

In February 2008 President Bush signed a $152 billion stimulus, and in 2009 President Obama followed suit with a $787 billion package that was supposed to be a quick injection to spur economic growth. But there was nothing quick about it. From the beginning of the recession, "temporary" stimulus dollars have become a permanent part of government spending inflating agency and departmental budgets. With budget increases of 177 percent for the Department of Labor, and 158 percent for the U.S. Army Corps of Engineers, it's no wonder federal spending is $1 trillion higher today than in 2007, a 40 percent increase.

Reasonable citizens might have expected about a $1 trillion reduction in spending in subsequent years, but instead we have spent that trillion again and again. Had it really been treated as temporary, the federal government would have returned to our 2007 spending levels immediately, and our current budget deficit could be closer to $100 billion rather than $1.3 trillion.

With these levels of spending and debt, the United States is well on the way to repeating the mistakes of Japan in the 1990s. This is commonly referred to as Japan's lost decade, when their economy stagnated at very low growth rates with permanent high levels of unemployment. If we don't tackle our spending habits today, we risk historians looking back at the start of the 21st century in the same fashion. Only this time, America will have lost two decades instead of Japan's one.

Photo Credit: Pete Souza/White House