In
his inaugural address, Obama promised “not only to create new jobs,
but to lay a new foundation for growth.” He promised to “build the roads and
bridges, the electric grids, and digital lines that feed our commerce and bind
us together.” He promised to “restore science to its rightful place and wield technology’s
wonders to raise health care’s quality and lower its cost.” And he promised to
“transform our schools and colleges and universities to meet the demands of a
new age.” Unfortunately the president’s scorecard on every single one of those
bold pledges is pitiful.
In
an unguarded moment earlier this year, the president commented that the private
sector of the economy was “doing fine.” Certainly, the stock market is well up
(by 74 percent) relative to the close on Inauguration Day 2009. But the total
number of private-sector jobs is still 4.3 million below the January 2008 peak.
Meanwhile, since 2008, a staggering 3.6 million Americans have been added to
Social Security’s disability insurance program. This is one of many ways
unemployment is being concealed.
In his fiscal year 2010 budget—the first he
presented—the president envisaged growth of 3.2 percent in 2010, 4.0 percent in
2011, 4.6 percent in 2012. The actual numbers were 2.4 percent in 2010 and 1.8
percent in 2011; few forecasters now expect it to be much above 2.3 percent
this year.
Unemployment was supposed to be 6 percent
by now. It has averaged 8.2 percent this year so far. Meanwhile real median
annual household income has dropped more than 5 percent since June 2009. Nearly
110 million individuals received a welfare benefit in 2011, mostly Medicaid or
food stamps.
Welcome to Obama’s America: nearly half the
population is not represented on a taxable return—almost exactly the same
proportion that lives in a household where at least one member receives some
type of government benefit. We are becoming the 50–50 nation—half of us paying
the taxes, the other half receiving the benefits
And
all this despite a far bigger hike in the federal debt than we were promised.
According to the 2010 budget, the debt in public hands was supposed to fall in
relation to GDP from 67 percent in 2010 to less than 66 percent this year. If
only. By the end of this year, according to the Congressional Budget Office
(CBO), it will reach 70 percent of GDP. These figures significantly understate
the debt problem, however. The ratio that matters is debt to revenue. That
number has leapt upward from 165 percent in 2008 to 262 percent this year,
according to figures from the International Monetary Fund. Among developed economies,
only Ireland and Spain have seen a bigger deterioration.
Not only did the initial fiscal stimulus
fade after the sugar rush of 2009, but the president has done absolutely
nothing to close the long-term gap between spending and revenue.
His much-vaunted health-care reform will
not prevent spending on health programs growing from more than 5 percent of GDP
today to almost 10 percent in 2037. Add the projected increase in the costs of
Social Security and you are looking at a total bill of 16 percent of GDP 25
years from now. That is only slightly less than the average cost of all federal
programs and activities, apart from net interest payments, over the past 40
years. Under this president’s policies, the debt is on course to approach 200
percent of GDP in 2037—a mountain of debt that is bound to reduce growth even
further.
Author: Niall Ferguson
