The Obama Watch

The Budget Battle: How President Obama Is Trapped

He promised a "net spending cut." It's up to House Republicans to help him keep that promise.

By 1.12.11

Send to Kindle

The mistake that most commentators are making on the budget is the idea that a bill has to be passed to cut spending. For much of the 2012 budget, which Congress is now debating, that is not true. In many cases, the absence of legislation can cut spending. With Republicans thoroughly in control of one house of Congress, that legislative reality leaves them with great power to cut spending.

Moreover, today's new political realities, as evidenced by the historic 2010 election, sharply constrain the budget positions President Obama and Democrats in Congress can take. Many of these Democrats, including the President, got elected on the pretense that they would control spending better than the Republicans. In a nationally televised debate in 2008, President Obama pledged to the nation that his plan for the budget would involve a "net spending cut." The federal budget then was $2.982 trillion. President Obama's budget last year projected spending for the current fiscal year, 2011, to be $3.882 trillion. Speaker Boehner should ask for a personal meeting with the President, to which he would bring a dictionary to go over the meaning of the word "net."

The political reality is that President Obama and his left/liberal Democrats must be careful not to be exposed in this budget debate as the big spenders they are. That is another big advantage that the Republicans need to be aware of, and exploit.

Finally, where they can't cut spending because Obama and the Democrats stand in the way, House Republicans should frame the debate for 2012 by passing budget cutting legislation that would be popular in the current political climate and show what Republicans would do with an even more sweeping victory in 2012.

The Ryan Budget

The last, Democrat-controlled Congress never got around to passing an actual budget. The failure of the omnibus spending bill in the lame duck session means that not even all the appropriations bills for the current fiscal year, over one-fourth of which has now passed, have even been enacted. The government is operating today under a continuing resolution, which expires in early March. This means that much of federal spending even for the current fiscal year can be cut just by not passing appropriations bills authorizing increased spending. (No, I am not saying the Republicans should not pass regular appropriations bills.)

Soon, House Budget Committee Chairman Paul Ryan will reveal his budget, the sooner the better. In fact, he should seize the moment and release the Republican House budget even before President Obama's dilatory administration gets around to releasing theirs. Because no budget or appropriations bills were passed by the last Congress for this fiscal year, the Ryan budget can effectively be a year and a half budget.

That budget must include a sharp cut in federal spending sufficient to inspire wildly enthusiastic, grassroots, Tea Party support. The touchstone of that budget should be to reduce all federal spending items except Social Security, Medicare, Medicaid, and federal debt interest at least to their levels in 2008. That alone would save $345 billion in the very first year, by my rough calculations, based on Obama's published budget from last year. Even better would be to take it back to the 2007 budget spending levels. That would save roughly $527 billion in year one alone. Two thousand seven was just four years ago, and America survived fine with those levels of federal spending. That would provide for a much better defense budget as well than Obama's unilateral disarmament of America defense budget.

Such a budget strategy would inherently involve terminating all unspent funding from the abusive, intellectually indefensible, utterly failed 2009 Obama stimulus. It would also inherently involve ending all further TARP spending, though formal legislation to terminate any further TARP authority may be worthwhile as well.

Some other items should also be zeroed out in the Republican budget. That would include federal funding for National Public Radio (NPR) and public television broadcasting. There is no reason why these operations, to the extent they are worthy, can't find private sector financing. We can't be borrowing still more money from the Chinese, and adding still further to our national debt, to fund such unnecessary federal projects. And that should be the test for every line item. Should we borrow money from the Chinese and add still further to the national debt, to finance this?

The House should then swiftly pass that Ryan budget. That budget then becomes the governing document for all House committees, regardless of what the Senate or President Obama have to say about it. That budget does not have to pass the Senate to become effective for the House. Congressional budget resolutions do not even go to the President for his signature or veto.

House Speaker Boehner should then send that budget to President Obama and Senate Majority Leader Harry Reid, fresh from his stolen election in Nevada in my opinion, with a cover letter saying simply, "This is the House budget and we are sticking to it."

Regardless of what President Obama or the Democrat-controlled Senate want, if the House doesn't pass an appropriations bill spending any particular dollar on any particular program, it doesn't get spent. No need to negotiate with Obama or Reid on any of this.

Yes, this doesn't apply to entitlement programs like Social Security and Medicare, which are on automatic pilot. Further entitlement reforms will have to be enacted by legislation to balance the federal budget over the long term. More on that below. And, of course, it doesn't apply to federal debt interest, which must be paid in any event. But that still leaves plenty of room to cut. In fact, if they maintain strict limits on all discretionary spending growth for long enough, providing for any essential defense increases by cutting other spending even further, I believe they could even balance the budget for a time within the 10-year budget window, though, again, permanent, long-term balance would require entitlement reforms.

This is where the political reality kicks in for Obama and the Democrats. In the current political climate, President Obama cannot rally the nation against the Republican budget because it does not spend enough! That would just tear off the fiscal conservatism mask that Obama and much of the remaining Democrats used to trick the public into electing them in the first place. (This same political dynamic applies to any old bull Republicans that may want to resist the Ryan budget internally. Ryan should recognize this and aggressively bypass any such internal Republican opposition.)

True, Obama and the Democrats can shut down the government by refusing to go along with the House Republican appropriations bills implementing their budget. But in the current political climate, that would be political death for them. Because they would be shutting down the government on the grounds that the Republicans don't want to spend enough! They would be shutting down the government on the grounds that they want to run bigger deficits and add still more to the national debt. Or on the grounds that the Republicans won't go along with some tax increase, killing the recovery to which the economy is struggling to give birth in the face of President Obama's continued regulatory efforts to further delay it. I get down on my knees every night and pray that Obama and the Democrats will be honest enough to do that, so we can have an honest debate in 2012.

Going back to the fiscal 2007 budget levels would frame this issue the best, because it would effectively go back to the last Republican budget, which was for that year, effectively repealing the Pelosi Democrat Congress, as well as Obamanomics. That fiscal 2007 budget sported a deficit of $161 billion, compared to current deficits close to 10 times that much. If Republicans did this, they would generate wildly enthusiastic grassroots and Tea Party support.

Even conservative commentators today too easily accept the liberal media narrative as to the Gingrich/Clinton budget, government shutdown battle. Gingrich won the substance of that battle. That is why federal spending as a percent of GDP was cut in those years. Indeed, total federal spending relative to GDP declined from 1995 to 2000 by an astounding 12.5%, a reduction in the Federal government relative to the economy of about one-eighth in just 5 short years.

Total Federal discretionary spending, as well as the subcategory of non-defense discretionary spending, actually declined from 1995 to 1996 in nominal dollars. In constant dollars, adjusted for inflation, the decline was 5.4%. By 2000, total Federal discretionary spending was still about the same as it was in 1995 in constant dollars, a huge cut from previous growth trends. As a percent of GDP, Federal discretionary spending was slashed by 17.5% in just 4 years, from 1995 to 1999.

This is where the shocking, huge budget surpluses in the late 1990s came from. When the Republicans took control of Congress in 1995, they were greeted by President Clinton's 1995 budget proposals that still projected Federal deficits of $200 billion per year indefinitely into the future, despite a record tax increase in 1993 that greatly contributed to the sweeping Republican victories in 1994. It was the combination of cutting taxes to produce booming economic growth, while restraining Federal spending in the face of that growth, that produced the Federal surplus climbing as high as a record $236 billion in 2000. These are the policies that we need to adopt again.

Clinton won the public relations battle over that government shutdown because he had no effective Republican opponent in the 1996 election. In the current political climate, if Republicans frame the issue as above, Obama and the Democrats would lose that PR fight fatally for their party. In the 2012 elections, Obama may be facing Gingrich himself. That would be a transformative, mid-life crisis, learning experience for him. For he will not be able to outtalk Gingrich. To the contrary, Gingrich would school him but good.

The Legislative Agenda

House Republicans should follow up after swiftly passing the Ryan budget to pass popular legislative proposals that will frame the issues for 2012. That is why it is so right for them to vote first to repeal Obamacare. They should emphasize in that debate that they are repealing in the process draconian future cuts in Medicare payments to doctors and hospitals that would leave America's seniors without the essential health care that they will need when they are most sick. The 2010 Financial Statement of the United States Government, released by the Treasury Department in December, documents, in fact, an incredible $15 trillion in such future cuts. The document even brags about how this improves the future financing of Medicare. It is these outrageous, irresponsible, and ultimately unworkable cuts that provide the foundation for the CBO score that repealing Obamacare and its adoption or expansion of three entitlement programs would somehow increase the deficit.

Effectively denying seniors essential health care when they most need it, as these cuts would, is no way to address the long-term Medicare financing crisis. Ryan's Medicare reforms in his Roadmap provide far more careful and responsible reforms already scored as closing Medicare's financing gaps. The ultimate solution is to take a step beyond that and allow the Medicare payroll tax to be saved and invested in personal accounts for each worker, which would ultimately provide more resources for senior citizen health care in the future, as investment returns would accumulate geometrically over the lifetime of each worker.

The Democrat cover-up of the truth behind the CBO score can be sliced through by, besides highlighting the draconian, irresponsible Medicare cuts, explaining that CBO's own numbers show that repealing Obamacare would reduce federal spending on Obamacare's provisions by at least $1 trillion over 10 years.

A second, major Republican opportunity that goes to the heart of Obamacare is to vote on a later bill that would block-grant Medicaid back to the states. Newly elected Democrat governors as well as Republican governors are expressing strong interest in this. Obamacare puts ultimately 85 million Americans on Medicaid, transforming the Welfare State into the Welfare Empire. Boehner should lead a bipartisan negotiation over Medicaid block grants with these governors, who could muster some Democrat congressional support from their states as well, for what could be a huge legislative victory over Obama and his far left Democrat caucus. Possibly there could be a veto override majority in this.

Another huge legislative opportunity is to move legislation removing authority from EPA to regulate carbon dioxide (CO2) emissions. CO2 is not pollution, but a trace natural gas in the environment essential to all life on the planet. Indeed, humans and all breathing animals emit CO2 when they breathe out, and CO2 is essential to the survival of all plants. It is not random that we are referred to as carbon-based life forms.

EPA CO2 regulation by itself threatens to shut down the economy, kill millions of jobs, and throw the economy back into recession. A House Republican should join with Sen. Joe Manchin of West Virginia, who won election with an ad featuring him shooting a rifle into the cap and trade bill posted on a tree, to promote bipartisan legislation on this issue. EPA CO2 regulation is even worse than cap and trade in its economic effects, which is undisputed. There is even greater potential for a veto override on this issue than on Medicaid block grants, especially as the EPA moves forward, causing grassroots yelps from victims across the country.

Another opportunity for Republicans is to move legislation to make the Bush tax cuts permanent. This could be bipartisan legislation as well. If Obama wants to veto it, great, let the 2012 debate begin. Legislation or nullification under the Congressional Review Act of the FCC's illegal regulation of the Internet is another huge Republican opportunity.

The Republican budget should also zero out funding for all positions to which Obama has made recess appointments, bypassing Senate confirmation. That would include Dr. Doom Donald Berwick, who has publicly lusted for government health care rationing to cut off health care for the most sick and vulnerable, and Craig Becker on the National Labor Relations Board, who is working on enacting "card check" requirements, depriving working people of secret ballot elections for union certification.

President Obama does have the right under the Constitution to make recess appointments, as other Presidents have done in the past. But Congress also has the right under the Constitution to defund their positions. If their positions aren't important enough for Senate confirmation, then they aren't important enough to be funded with money borrowed from the Chinese.

Moving on to substance like this is the best way for conservatives to get past the ugliness of last weekend's events, including the nutty lamestream media response to it, though it is essential for top media figures like Rush Limbaugh, Sean Hannity and Glenn Beck to counter the senseless harangues from the intellectually dysfunctional, extremist Left. 

Like this Article

Print this Article

Print Article
About the Author
Peter Ferrara is Director of Entitlement and Budget Policy at the Heartland Institute, General Counsel of the American Civil Rights Union, Senior Fellow at the National Center for Policy Analysis, and Senior Policy Advisor on Entitlements and Budget Policy at the National Tax Limitation Foundation. He served in the White House Office of Policy Development under President Reagan, and as Associate Deputy Attorney General of the United States under President George H.W. Bush.