Bending Spending

Last spring, MarketWatch released a chart purporting that contrary to popular belief, federal expenditures under Barack Obama have actually risen at a historically low rate, rather than historically high. Predictably, the left-wing statists in the media (as opposed to the right-wing statists on competing networks) condescendingly sneered at the ignorant masses for ignorantly lynching their beloved Barack for crimes of which he was apparently innocent. As if these same media personalities (professional overly opinionated jackasses) and pundits (second-rate intellectuals who could not cut it in academia) have not been zealously defending the merits of Obama's professed belief in government expenditures as a tool of Keynesian counter-cyclical fiscal policy. As usual, the supposed free press is rank with hypocrisy and corruption, willing to spin any bit of news to advance its political agenda. The grand finale, however, came from Obama himself, who, ever eager to congratulate himself on something, remarked that, "Since I’ve been president, federal spending has risen at the lowest pace in nearly 60 years."

Despite all the hoopla, the MarketWatch chart is fraudulent, and should be dispensed with immediately. As the above graphic illustrates, the claim that federal expenditures under Obama have only risen 1.4% is disingenuous at best. That statistic is determined from comparing expenditures from Obama's first full year in power (2010) with expenditures from his latest year (2012), but ignores the fact that in 2009, in the final months of George W. Bush's rule, expenditures ballooned from $2.9 trillion to $3.5 trillion, an increase of 17.3%. Since this explosive spending surge, Obama has fought fiercely to preserve federal expenditures at Bush's historically unprecedented level.

This soaring rate of increase was primarily the result of the "Troubled Asset Relief Program" (TARP), the bipartisan bailout in which the federal government simply deposited taxpayer loot into Wall-Street treasuries. During the housing crash (an utterly predictable Austrian boom-bust cycle resulting from Fed-generated credit expansions) Wall Street had created hysteria over the prospect of a financial meltdown without immediate federal intervention to bail out distressed banks. Our federal overlords, if nothing else, know on which side their biscuit is buttered, and so promptly obliged; in return for its complicity in the federal government's plans to reinflate the housing bubble, Wall Street was granted its bailout. The implementation of TARP consisted mainly of the U.S. Treasury simply depositing sums of money into Wall-Street treasuries, in addition to the Federal Reserve's unconstitutional bailouts of other bankrupt financial institutions. As a U.S. Senator from Illinois, Obama supported this brazen act of corporatism, exhorting fellow politicians to "step up to the plate," because "the time to act is now." Truly inspiring, cliche-free words.

The MarketWatch chart simply takes the TARP-based 2009 spending surge as given, and then measures Obama's three other years in power against each other to determine the rate at which federal expenditures have grown during his rule - a seemingly paltry 1.4%. Yet, even if Obama is innocent of the 17.3% surge (the majority of which he defended from the Senate), he is undeniably guilty of maintaining federal expenditures at that historically high level. Holding all else constant, after TARP expired, federal expenditures should have reverted to already-excessive 2008 levels. Obama interfered, however, enacting new expenditures into law (such as the multi-trillion stimulus package and ObamaCare, to name a few), to keep expenditures inflated. Bush deserves a large portion of the blame for dramatically escalating federal expenditures, but while in power Obama has consolidated rather than reversed Bush's fiscal profligacy. Incidentally, in consolidating Bush's bloated budgets, Obama has signed $5 trillion onto the on-budget national debt (to say nothing of the federal government's off-budget entitlement liabilities), more than any other president in U.S. history.

Obama's massive expenditures will negatively impact the economy. As president, Obama has spent a tremendous amount of money, some of which was confiscated under threat of imprisonment and asset seizure (i.e. "taxed"), but a large percentage of which was monetized by the Federal Reserve or borrowed. Deficit spending, in addition to diverting resources away from productive utilization elsewhere in the economy, also represents future taxation for the principal plus interest. The looming threat of future taxation reduces the present value of an individual's expected income, and thus lowers his time preference, meaning the extent to which he prefers consumption over saving/investing falls. Lowered time preference alters the structure of production so that it produces more goods in the present but fewer goods over the long term, leading to reallocation of the factors of production (i.e. unemployment), a scarcer supply of goods/services, higher prices, and a decreased standard of living. To the extent that beneficiaries of federal expenditures prosper, they do so at the expense of the victim whose property was confiscated in the legalized systematization of plunder that is taxation. So far, this is what Obama has contributed to the recovery.

None of this is to imply that the Republicans are superior to the Democrats in any way. Both parties, Republicans and Democrats, are united on statist principles - in essence, that the government should intervene in economic, social, and foreign affairs for the greater good - and differ only in degree ("what percentage of your property should the government confiscate?") and marketing (akin to the difference in competing brands of toilet paper), but not in any substantial way. After all, the House of Representatives, which has been under both Republican and Democrat control during Obama's presidency, is constitutionally charged with the "power of the purse," and is thus equally responsible for the excessive expenditures of the past three years. Paul Ryan, the supposedly conservative addition to the sinking ship of Mitt Romney's presidential campaign, is just another wolf in sheep's clothing, salivating to feast upon the property of the people.