The Voice of Young Conservatives Blog

“Rather than fight the same tired battles that have dominated Washington for decades, it’s time to try something new. Let’s invest in our people without leaving them a mountain of debt. Let’s meet our responsibility to the citizens who sent us here. Let’s try common sense.”

–         President Barack Obama

Borrowing 41 cents of every dollar to fund government spending seems far from common sense. In fact quite the opposite it seems like a mountain of debt. The President’s “something new” is just more of the same – borrow from tomorrow to finance some shiny new objects today. Well Mr. President, I’m here to tell you we cannot afford them.

A new report released by the Office of Management and Budget shows that the budget deficit will reach a record $1.47 trillion this year. Far from getting better, 2011 is predicted to have a $1.42 trillion deficit, $150 billion more than expected. Perhaps all could be forgiven if all of this government spending was going to translate into the jobs the President has long promised us. Quite the contrary, the OMB report shows that the unemployment rate will remain at over 8% through 2012.

Senate Minority Leader Mitch McConnell responded to the report by saying, “It’s time for a new approach, one that listens to the American people rather than forcing Washington-based mandates.”

Far from listening to Americans, Obama must be doing his best to tune them out. A recent poll by Resurgent Republic found that:

“Widespread opposition to tax increases is grounded in the perception that the federal deficit is driven by too much spending rather than too little revenue.”

The public gets it on government spending. Spending today generally burdens tomorrow. This is especially true in Washington today where Democrats spend more time debating whether they can get another stimulus passed than how they are going to pay off the first one.

If Obama is loath to listen to the rabblerousing of know-nothing American voters then perhaps some economists could appeal to his academic tendencies. Even here, Obama’s deep deficits run into opposition.

The argument for stimulus is that idle unemployed labor would be added to the workforce, which would then increase consumption, justifying the need for more output. This is the so called “multiplier effect” in which every dollar of government spending leads to more than of GDP being generated. Sounds great in theory. And it may even be true in the short term. Nevertheless, we don’t live in a short term world – the future must be taken into account. When this is done we see that there is also a “negative multiplier” that exists on the other side of the ledger. For every dollar spent by the government, a potential dollar is taken away from the private sector, meaning fewer jobs and less investment. Moreover, in the long run, government stimulus spending and debt can have serious disruptive consequences for the fiscal health. As the CBO explains:

Unless revenues increase just as rapidly, the rise in spending will produce growing budget deficits. Large budget deficits would reduce national saving, leading to more borrowing from abroad and less domestic investment, which in turn would depress economic growth in the United States.

The distortionary effects of stimulus have led to a wide range of disagreement on the actual multiplier effect of government stimulus. For instance, Harvard researcher Robert Barro found a multiplier of only 0.8. But that figure was in a period of relative economic stability (as compared to today), when businesses, banks, and consumers were not primarily concerned to use new income to pay down debt or save to protect against income loss. Today, there is so much instability and uncertainty of the economy, and the “multiplier effect” risks being much smaller.

So President Obama, we ask you to please stop fighting the same tired battles and try something new. Lay out a plan to excavate our nation from beneath this huge mountain of debt you have buried us under. Do not hide behind the ghost of a failed stimulus bill. Let’s move on by coming up with concrete ideas for how to pay down the debt so that businesses can start hiring again. I guess what I’m trying to say is, “let’s try common sense.”

by Brandon Greife, Political Director