E. Thomas McClanahan: Inside the White House parallel universe

01/16/2013 5:11 PM

01/16/2013 5:11 PM

Most Americans, even those who pay little attention to politics and Washington’s squabbling, understand that the government has a huge debt and deficit problem. The phrase “trillion-dollar deficits” is a leitmotif of the Obama years.

Revenues cratered when the recession arrived, but most people understand that the major reason for these deficits is the spending explosion that came soon after. The spending was amped up by a gargantuan stimulus package and has continued.

But guess what? We’re silly to worry about the deficit because federal spending is no big deal.

At least, that’s what President Obama says.

In an interview last week with the Wall Street Journal, House Speaker John Boehner, R-Ohio, described one of the most astonishing moments during his fiscal-cliff talks with the White House.

“At one point several weeks ago,” Boehner recalled, “the president said to me, ‘We don’t have a spending problem.’”

That would be news to the Congressional Budget Office, which has declared that federal spending is on an “unsustainable long-term fiscal path,” or Obama’s own debt commission, which concluded that, “Even after the economy recovers, federal spending is projected to increase faster than revenues.”

Obama told Boehner that instead of a spending problem, we have a “health care problem,” meaning the rising costs of Medicare and Medicaid.

Boehner said, well, sure, we have a health care problem, but we also have a big spending problem, to which Obama replied, “I’m getting tired of hearing you say that.”

It makes you wonder what parallel universe the White House occupies. It seems to be a place where Medicare and Medicaid don’t spend money.

What’s surprising about this is how little comment Obama’s remark has generated, perhaps because when it comes to the budget, what this president says is no longer surprising.

But it’s still baffling, given that in other times and places he will admit the obvious.

In a 2009 town hall appearance, Obama declared, “Medicare and Medicaid are the single biggest drivers of the federal deficit and the federal debt by a huge margin.” If nothing is done, he continued, they “will consume all of the federal budget.”

In other words, he understands that what’s happening with these programs can be safely described as spending.

In a recent paper, Daniel Thornton of the St. Louis Federal Reserve Bank wrote that chronic spending in excess of revenues – outside wartime – is a federal habit that goes back at least 40 years.

The bulging deficits that piled up in that period can’t be blamed on the Pentagon. Defense spending has risen in recent years, but as a percent of gross domestic product the trend is decidedly down since the late 1960s. The big increases came from Medicare, Medicaid and “other payments to individuals” – including jobless benefits, food stamps, disability, low-income tax credits and family support.

Since 1970, these categories “account for essentially all of the increase in government spending that has given rise to the deficit/debt problem,” Thornton wrote.

Obama knows this full well. Everyone in Washington knows it. Yet Obama fights every attempt to cut nondefense spending and reform entitlements. He’s offered nothing substantial. If this doesn’t change, we’ll look back on the Obama years as a time not only of economic stagnation but a period when our worst problems were simply allowed to fester.

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