The $1.7 Trillion Misdirection
You’d think he is a Republican. During his weekly address to the nation today, President Obama bragged that he has cut taxes after already slashing spending by $1.7 trillion dollars.
He added that the fiscal cliff deal this week reduced the deficit another $734 billion. The spending problem is fixed, right? What is needed now is new spending to create jobs.
The President is going to make that claim the centerpiece of his next wedge position to win the upcoming debt ceiling debate.
President Obama’s claims have all the earmarks of political gerrymandering and, unfortunately, all the credibility of an unkept campaign promise.
What $1.7 Trillion in Cuts?
President Obama and fiscal responsibility are like oil and water. Stir them together and they will immediately separate.
The concept of Obama saving taxpayers money is so foreign that it begs the question, “What $1.7 trillion?”
By his words you’d never know since assuming office that he and Congress have raised the national debt by $5.8 trillion!!
By the time the debt ceiling debate is over in a few weeks Obama debt will hit $6 trillion, with another full term to go. Total debt was $10.6 trillion the day he took office.
The $1.7 trillion bragging rights comes from these two places:
- The Budget Control Act of 2011 ($1.5 trillion)
- Interest cost savings ($250 billion)
The Budget Control Act of 2011
Unless you were vacationing on Venus, you know that President Obama cat-fought against the Budget Control Act. That act was the divisive deal to raise the debt ceiling limit. The federal government credit rating got lowered over it.
The $1.5 trillion in cuts came about only because those pesky Republicans refused to play ball unless some semblance of fiscal responsibility was applied. They asked for $1.5 trillion in spending reductions to partially offset allowing the federal government $2.1 trillion more in spending authority.
President Obama wanted the debt ceiling limit raised without any strings attached… just like he will again this time around.
Obama tried but failed to get the debt ceiling limit abolished as part of the fiscal cliff deal.
The backup plan in 2011 was for $1.2 trillion in across-the-board discretionary spending cuts if the Congress could not decide on what to cut. Surprise! Surprise! Congress couldn’t decide.
Yes, the President reluctantly signed into law a bill to cut $1.5 trillion in spending. But, what we actually got was $1.2 trillion in cuts.
Those cuts were supposed to start 4 days ago, but got delayed two months. They are called sequestration.
The Interest Cost Double Standard
To get to an impressive $1.7 trillion in cuts the President added in $250 billion of interest costs savings. It is a favorite DC political trick to make spending cuts sound bigger than they are.
Here is how it works…
The OMB or CBO calculates the additional cost in interest payments on borrowed money if the spending cuts did NOT happen. That total is then added on top as if it is a real spending cut. That is what the President did to get to $1.7 trillion.
Here is the double standard…
When it comes to the federal budget, the interest cost to service the national debt is not included. It is NEVER a line item in the federal budget. It is ignored as if it doesn’t exist!
In 2011, interest paid on the national debt totaled $454 billion! You’d think someone might want to account for such an enormous sum when figuring a budget.
Not Washington DC politicians, though. That would mean budget shortfalls would be reported higher, and more accurately.
National debt interest is hidden inside federal spending to make it more politically palatable.
So far, not a single penny of Obama’s claimed $1.7 trillion dollars in spending cuts has actually come about. Cuts were supposed to start 4 days ago but got delayed two months.
It is not by coincidence that the next debt ceiling debate will have to be settled in two months to. Both issues are intimately intertwined.
The President and Congress will quietly fold sequestration into the next “grand bargain” they come up with and those real spending cuts will simply evaporate away. Its the old Washington DC two-step.
The $734 billion in spending cuts Obama bragged about from the fiscal cliff deal is an even bigger fairy tale than the $1.7 trillion. Guess where that came from? Yup, mostly from NOT undoing most of the Bush-era tax cuts and NOT letting the Alternative Minimum Tax go up.
What did come out of the fiscal cliff deal was $96 billion in shiny new REAL spending.
NASCAR, Puerto Rican rum dealers and green energy swindlers probably sent Congress thank you letters for their slabs of pork.