Obama the Spender Goes to Washington

March 5, 2009 — -- How lucky we are to have Barack Obama as president. He's already come up with a revolutionary idea that escaped his predecessors: He's going to scour the budget for ... "waste and inefficiency" "... go line by line through the federal budget in order to eliminate wasteful and ineffective programs."

It's astonishing that no one has thought of this before. Who knew programs could actually be eliminated just because they don't work and waste taxpayers' money?

And he's making progress.

"[W]e have already identified $2 trillion in savings over the next decade."

How will he do it? Here's an example: "Agriculture Secretary [Tom] Vilsack is saving nearly $20 million with reforms to modernize programs and streamline bureaucracy."

Amazing! "Modernize and streamline." It is indeed a new day.

Though he says he wants better not bigger government, Obama plans to spend a lot more money -- on medical reform, education, energy, etc. He also promises to halve the deficit by the end of his term. (Presumptuously he says, "first term.")

This is dangerous nonsense. Obama's budget numbers are laden with politically driven assumptions about a rosy future in which robust economic growth pays for record-breaking government.

Unfortunately, Obama is simultaneously working hard to delay recovery by imposing new taxes on the rich, toadying up to unions and trial lawyers, being ambiguous about trade and threatening all sorts of "activist" government that makes the future even more unpredictable. The new taxes are not just the direct assault on wealthy taxpayers, but indirect punishments, like his cap-and-trade plan for carbon emissions. His gifts to unions go beyond the outrageous "card-check" rule to the requirement that stimulus spending go to union workers who must be paid artificially high Davis-Bacon wages. All this will frighten off private capital and suffocate economic recovery.

Obama's budget also creates a $634 billion "reserve fund" for medical reform -- but only $318 billion is to come from higher taxes. Where will the rest come from? Where else? Savings squeezed out of Medicare, Medicaid and other medical programs.

Give me a break.

It is hard to take seriously his claim that he will cut old spending to make way for new spending and a lower deficit. As The Wall Street Journal points out, "[T]he 2009 budget deficit is estimated to be an eye-popping 12.7 percent of GDP, which once again dwarfs anything we've seen in the postwar era. The White House blueprint predicts that this will fall back down to 3.5 percent as soon as 2012, but this is based on assumptions about Washington that aren't going to happen."

One of the most absurd assumptions is that the new stimulus spending will be temporary.

Higher stimulus spending in the current budget becomes the new baseline for future budgets. Any cuts below that line will be condemned as heartless.

Every president promises to save money by eliminating waste and fraud. But the savings never materialize.

In Washington, one person's waste is another person's pork. Every dime spent by the federal government has well-connected advocates who swear the money is vital to the national interest. They line up to testify. Even if they didn't grease the palms of lobbyists and congressmen, their cries would be hard to resist. "This program will keep this poor woman, your constituent, alive! Would you be so cold as to deny her that?"

Congress appropriates the money, and then the permanent bureaucracy fights forever to preserve it. After all, its very life depends on it.

It's not that people in government aren't as good or competent as those in the private sector (though that may be true). The difference lies in the incentives and feedback they face. Bureaucracies have little check on what they do, no bottom line, no market prices for their "output." What they do have is an incentive to spend all the money budgeted or risk getting less next year.

As Milton Friedman used to say, no one spends other people's money as carefully as he spends his own. It is absurd to think the humongous constellation of federal bureaucracies is going to identify and root out "waste" in any significant way. It's just not in the nature of the beast.