Obama has been on a Spending Binge

Rex Nutting of the financial website MarketWatch recently published a column titled, “Obama Spending Binge Never Happened.”  In it, Nutting analyzed the spending practices of presidential administrations going back to Dwight Eisenhower in the 1950s.  His findings indicate that Obama, who everyone believes is a reckless appropriator of federal funds, has actually presided over the smallest increase in federal spending since President Eisenhower ended the Korean War in the early 1950s.  Using George W. Bush’s last federal budget of $3.52 trillion as a baseline and projecting Obama’s fourth and final budget of his first term to be $3.58 trillion, Nutting figures that the annualized growth of federal spending under Obama will increase by 1.4 percent in his first term.  Compare that to Reagan ‘82-85 – 8.7 percent, Bush II ’02-05 – 7.3 percent, and Bush II ’06-09 – 8.1 percent and Obama looks like a frugal fellow.

And don’t think that Obama isn’t going to use the analysis to clear his name and further his reelection chances.  In fact, at a campaign stop last week the president boasted, “Since I’ve been president, federal spending has risen at the lowest pace in nearly 60 years. Think about that.”  Now that is an interesting comment.  Obama has never wanted to be known as a spendthrift, but he sure doesn’t want to be known as the Herbert Hoover of this financial crisis either.  The same Herbert Hoover who is much maligned by Paul Krugman and other Keynesians for not spending enough to prevent the Great Depression from happening.  Funny thing is that under Hoover real government spending rose by 12.3 percent per year and we still had the Great Depression.  According to Keynesian logic, with Obama’s paltry spending increase we should already be in another Great Depression.

The bottom line is that Obama can’t have it both ways.  He can’t claim his spending has kept us out of depression while at the same time claim that his spending has been meager by comparison to other administrations.

Obama is a big spender because, Nutting’s irrelevant analysis aside, he is still outspending his big spending predecessor.  Just because the rate of spending increase under Obama is small does not make him a responsible custodian of the federal purse strings.  Not only has he maintained Bush’s spending spree but he has slightly enlarged it.  So Keynesians can rest easy that Obama is one of them.

And of course they will claim that his fiscal policies have kept us from another depression.  I don’t disagree, but Obama has borrowed more than five trillion dollars from future generations of Americans in order to do it.  He essentially has traded a much needed economic correction for temporary serenity.  The economy is not improving.  Analysts have been warning about a double dip recession for years now.  In order to maintain the charade Obama must continue to spend lavishly or the economy will collapse.  At some point our current rate of spending will become unsustainable.  Given that we will be many more trillions in debt and have a lot more mal-investment in our economy, the next crisis will make the last look like a walk in the park.

Article first published as Obama Has Been on a Spending Binge. on Blogcritics.

Kenn Jacobine teaches internationally and maintains a summer residence in North Carolina

It’s Time to Cut Our Losses in Afghanistan

Last Sunday the Obama Administration and the Afghanistan government finalized an “agreement” that commits the U.S. taxpayer to financially support the Afghan people for 10 years after the withdraw of American troops from Afghan soil at the end of 2014.  According to U.S. and Afghan officials the pledge of U.S. support will be finalized when both Afghan president Karzai and President Obama sign the document.

Naturally both sides claim the agreement is in the best interests of the U.S. and Afghanistan.  The Afghani’s will get about $2.7 billion a year to build infrastructure, train their security forces, and maintain democratic institutions.  The U.S. will get a stable nation in an unstable neighborhood and a reliable friend in the fight against international terrorism.  At least that is what the party line is from both sides.  Of course one doesn’t have to look to hard at historical examples where our foreign aid actually had the opposite effect on a situation.

Now, in the first place this “agreement” is indicative of how far we have moved away from being a constitutional republic.  In essence, the Obama Administration has negotiated a treaty with Afghanistan.  Dictionary.com defines a treaty as “a formal agreement between two or more states in reference to peace, alliance, commerce, or other international relations.  Granted this is an open-ended definition, but I would lump what this agreement does with Afghanistan into the alliance category (against terrorists) and into other international relations (foreign aid).  Thus, why is the Senate not required to ratify this treaty as specified by Article 2 Section 2 of the U.S. Constitution?

Beyond the illegality of the agreement, it also just doesn’t make sense for our president to commit us financially or otherwise to Afghanistan.  On Sunday, U.S. ambassador, Ryan Crocker told Afghanistan’s national security council that the United States was pledged to helping Afghanistan as “a unified, democratic, stable and secure state”.  The question is when has Afghanistan ever been “a unified, democratic, stable and secure state”? After over a decade of American occupation She is still crippled by sectarianism, nepotism, instability, and corruption.  The agreement looks more like a scheme to prop up the Karzai government as the only long term option American policymakers have for Afghanistan.  This tactic has been repeated over and over again with American foreign aid all over the world.  It’s never worked effectively.   Why do we think it will be different this time?  Why do we think that our money won’t end up in the Swiss bank accounts of Afghani officials or even Karzai himself?

Entering into a long-term agreement with Afghanistan will simply bog us down in another no-win situation in that country.  It will no doubt contribute to more hostilities toward America and inflame the resolve of our current enemies.  Americans will be called upon to pay even more to prop up the frail Karzai regime or worse yet sacrifice their lives for this unworthy cause.

It is past the time for the United States to cut its losses in Afghanistan.  Financially, physically, and mentally we can no longer continue to support this historical lost cause.  What we couldn’t accomplish in the last decade with boots on the ground we will not be able to achieve with money after the boots have gone home.  That is a historical fact.  It’s time to turn off the lights and close the door on this part of our nation’s history.

Is Obama Attempting to Buy Votes from College Students?

It is an amazing thing how politicians believe that all you have to do is throw money at a problem and it will go away.  Or perhaps I give the scoundrels too much credit as their ultimate goal is to buy votes from an unsuspecting, naïve electorate.  Whatever the case, Barack Obama is at it again, this time proposing to spend more money to stave off the negative effects of high college tuition on America’s higher education students.

Late last week, the President unveiled a plan to give relief to Americans affected by high college costs while at the same time providing incentives to colleges and universities to contain tuition costs.  Key provisions of the plan include boosting federal spending on Perkin’s loans from $1 billion to $8 billion, keeping interest rates low for current student loan recipients, and doubling over the next five years the number of work-study jobs available to college students.  Further, the President’s plan would force institutions of higher learning to contain tuition costs or risk losing federal funding.

Now, this isn’t the first time since becoming president that Obama has upped the ante when it comes to spending on higher education.  His administration lost the support of online colleges, but championed the young electorate, when he attempted to crack down on for profit colleges.  In fact, he has more than doubled Pell Grant funding and spent billions more on college subsidies in his so-called “stimulus” act and Patient Protection and Affordable Care Act.

Given the fact that college tuitions continue to rise, you’d think that Mr. Obama would have learned that more money thrown at higher education doesn’t help college students.  The direct opposite happens.  Yes, college students take the money and go to school, but the end result is that many of them have debts they will never be able to get out from under.  In fact, student loan debt now exceeds credit card debt in America.  Additionally, since many high paying jobs have gone overseas, college graduates are finding it harder and harder to acquire positions that will give them any chance to pay down their debts.  Only about half of the jobs obtained by recent college graduates even require a college degree.

But more importantly, it is precisely because the government is spending billions every year to subsidize higher education that costs have gone through the roof.  Since 1980, congressional funding of college Pell grants has increased by 475 percent, after adjusting for inflation.  At the same time, the cost of tuition has skyrocketed by over 430 percent.  Economist Richard Vedder has pointed out that the same dynamic that causes health care costs to soar is also at work in higher education – third-party payments.  When someone else is footing the bill consumers are more willing to purchase the good or service provided.  The inhibition of cost is removed, demand increases, and tuition like medicine and medical care gets more costly.

What has been created by Washington’s policies is a financial bubble in higher education.  Like various bubbles in the stock market, dot.com industry, and housing before it, the federal government has pumped tons of cash into higher education, bidding up the price of the service.  We are at a point where the benefits of a college degree do not offset the high costs thereof.  At some point, when enough Americans realize it and stop being lured into the government’s financial trap, the demand for higher education will drop and with it the cost.  Of course, Uncle Sam will continue pumping even more money into the system to feverishly re-inflate the bubble.  That has been the track record of our government in the current financial bubble, there is no reason to believe it won’t do the same thing in higher education.

To solve the problem of high college costs, government must end its subsidization of the industry.  In the absence of the market determining interest rates, government should be raising rates for students not lowering them.  Government sponsored grants should be abolished altogether.  These two acts would decrease the demand for higher education causing its artificially high price to tumble back to reality.  Since there are few jobs requiring a college degree right now anyway, this seems like a good time to burst the bubble.

With thirty years of proof that government subsidization of higher education causes high tuition rates you’d think the last thing President Obama would propose is more spending on college education.  Or perhaps his ultimate goal is to buy votes from an unsuspecting, naïve electorate?

Article first published as Is Obama Attempting to Buy Votes from College Students?on Blogcritics.