Translating Obamaspeak: “Paying for” Something Means “Raising Taxes”

As during the presidential election campaign in 2008 and during his presidency, Barack Obama has been arguing that United States President George W. Bush and the Congress “spent money” on tax cuts, adding a prescription drug entitlement to Medicaid and two wars without “paying for” them, which he falsely blames for the recession. 

           What Obama means is not that the money was borrowed and not paid for with offsetting spending cuts, as he wants people to think, but simply that taxes were not raised to offset them.  His phrasing is another example of allowing the listener to read into the statement what he wants.  See also my June of 2010 post, The Clintonian Cynicism and Deception of Obama and His Supporters, http://williamcinfici.blogspot.com/2010/06/clintonian-cynicism-and-deception-of.html.  Obama wants his “paying for” phrase to be interpreted as “paying the bill,” which makes him seem fiscally responsible.  But what he really means by “paying for” something is raising taxes.  No other federal spending is “paid for,” either, except for those entitlements supported by payroll taxes.

First of all, a tax cut is not an expenditure (i.e. an outlay of money from the Treasury).  Therefore, it does not need to be “paid for.”  Second, the Bush income tax cuts increased revenue, like all other tax cuts (the income tax cuts of Presidents Warren Harding-Calvin Coolidge, John Kennedy-Lyndon Johnson and Ronald Reagan and the capital gains tax cut of Bill Clinton).   Reducing taxes not only allows people to keep more money to spend, but to work or invest more.  If a tax cut resulted in less revenue, then a less misleading expression would be that it is necessary that they be “made up for,” instead of “paid for.”  Nevertheless, tax cuts do not result in less revenue.

Regardless, Bush fulfilled his promise, just as Al Gore and the Congressional Democrats had made, to return the $200 billion surplus to the taxpayers.  Eliminating a surplus balances a budget as much as eliminating a deficit does.  Indeed, large surpluses are harmful to the economy because they result from overtaxation.  Obama retained all of Bush’s income tax cuts and has proposed to continue the middle class tax cuts.  Thus, he is blaming the deficit on tax cuts for wealthy and small businesses alone, despite the prosperity during the 2000s (which he wants everyone to forget).

It is important to note that although the annual budget was in surplus, the debt that had accumulated since the 1830s was over $5 trillion when Bush took office.  After entitlements, the interest on the debt is one of the greatest expenses of the federal government.  The surpluses were projected to be only temporary.  The deficit increased because of the following: Clinton’s cuts of defense and intelligence that Bush had to make up, the increase in federal spending on education and the prescription drug program, and the Democratic takeover of Congress in 2006, of which Obama was a member.  Indeed, Bush never enjoyed a supermajority of Republicans before then.  Nevertheless, the deficit as a percentage of the gross domestic product was declining because of economic growth.           

Moreover, if deficit spending is as good for the economy, as Obama and his liberal Democratic allies insist, then Bush must have been one of the best presidents for the economy.  If they are being consistent with their long-held Keynesian economic theory, they should credit Bush’s spending for the prosperity of 2003-2008, but they will not because they do not want to even acknowledge that period of economic expansion, lest it draw attention to the benefit of Bush’s tax cuts, which they intend to rescind, in part.  Instead, Obama and his allies blame Bush’s tax cuts for the Panic of 2008, as if they were not followed by several years of prosperity, despite September 11, but then suddenly stopped working.  Therefore, the liberal Democrats now blame deficits for the recession, arguing that deficits cause higher interest rates.  But interest rates reached record low levels under Bush, where they have remained.

As for the Medicare prescription drug program, the Democrats had proposed a prescription drug program that would have cost hundreds of billion dollars more – without any tax increase.  Because drugs are often less expensive than surgery, it is difficult to assess accurately the cost of the current program, which has been less costly than originally projected.  As for the wars, which many of the liberal Democrats supported, The War on Terrorism was beneficial for the economy by preventing another September 11-type attack.  As with the Medicare expansion, they only count one side of the ledger, as they also ignore the stimulative effect of war and post-war reconstruction, as well as the end of the oil embargoes on Iraq and Libya.  Obama singled out the wars for blame for the deficits and recession only because they are unpopular.