Memo to Clueless Media: Obama’s $17 Bil in ‘Cuts’ Aren’t Real Spending Reductions
President Obama today announced $17 billion in “spending cuts” Thursday.
Here are the substantive early paragraphs of the the Associated Press’s coverage of what the President had to say:
Obama sent Congress a detailed budget Thursday proposing to eliminate or trim 121 programs and save $17 billion next year — not a trifle, for sure, but only about half of one percent of the $3.4 trillion in federal spending for the fiscal year begining in October.
The size of the savings clearly was a sore subject at the White House.
“It is important … for all of you, as you’re writing up these stories, to recognize that $17 billion taken out of our discretionary, non-defense budget, as well as portions of our defense budget, are significant,” Obama told reporters. “They mean something.”
Still, Obama’s hit list was smaller than the one President George W. Bush included in his budget last year targeting 151 programs for $34 billion in savings.
These alleged cuts mean almost nothing, according to the Heritage Foundation’s Brian Riedl, who cut through the misdirection earlier today at The Corner (bolds are mine):
….. Virtually every dollar “saved” would automatically go towards new spending instead of deficit reduction.
Here’s why: The president already proposed a specific discretionary spending level (which included these proposals), and Congress has already approved a budget that would spend $1,086 billion on regular discretionary spending in FY 2010. The discretionary savings proposals affect only the composition of such spending. Thus, even if the entire $12.5 billion in discretionary spending cuts are enacted, the savings would automatically be plowed into other programs to maintain discretionary spending at that pre-set $1,086 billion level. So this exercise is about reorganizing — not reducing — government.
Even on the entitlement side, $3.6 billion of the $4.6 billion in 2010 savings comes from phasing out the subsidized student-loan program, with all savings redirected into expanded Pell grants. There is virtually no deficit reduction from these reforms.
To be fair, Bush’s cuts may have meant just as little, for the reasons Reidl outlined.
But as to the media coverage of the current alleged reductions, Reidl is right. If anyone in the establishment media caught what Reidl did, I haven’t seen evidence of it. Among many others, it’s not this LA Times story; it’s not at this piece at the Caucus blog at the New York Times; a Poltico story fails to even mention the total size of the federal budget.
The sleight-of-hand certainly isn’t in evidence at the AP item I referred to above.
AP reporters Tom Raum and Andrew Taylor, despite being supposedly wily news veterans — or perhaps because they are supposedly wily news veterans — also let Obama get away with this propaganda howler:
If there was a theme to Obama’s cuts and spending initiatives, it was to continue to provide generous increases to domestic programs that had been squeezed during the eight years of the Bush administration while reviving oft-rejected Bush-era proposals to cut programs that critics say have outlived their usefulness but still have important support on Capitol Hill.
“What we’re trying to do is reorient government activity toward things that work,” said White House Budget Director Peter Orszag.
Orszag’s use of the word “reorient” is a red flag that there really is no spending reduction going on here.
Sadly, the Obama administration’s claim that the Bush administration put any kind of meaningful squeeze on spending during its first seven years of budget responsibility is clearly a load of rubbish, as the following list of annual federal spending during those years shows:
The only year that had anything even resembling control on the spending side was 2006-2007, the last budget for which the Republican majority can claim credit.
Bush’s eighth year of budget and spending responsibility would ordinarily have been the fiscal year ending September 30, 2009, and he surely still bears responsibility for some spending increases, especially those relating to the initial bank and auto bailouts. But the fact is that most of the spending increases that will push this year’s federal spending to $4 trillion, including the $800 billion or so-called stimulus package, were pursued by Barack Obama and enacted after Obama took office.
Obama’s spending increases are real. As shown earlier, the spending “cuts” are just a mirage.
Cross-posted at NewsBusters.org.
Although the trimed money will be invested back in someother programs but this new programs will be more beneficial than earlier ones.
Hence this move does make a difference.
Comment by Boni — May 8, 2009 @ 2:46 am
As said obama is trying to save as much money possible keeping the down fall in mind. This helps the government to give more & more loans for people who are in need of money to develop there business.
Comment by dipin vg — May 8, 2009 @ 3:34 am
#1 and #2, but they aren’t “cuts,” and are being dishonestly sold as “cuts.”
If Obama is as convinced of the value of putting money in “some other programs,” he should have said what other programs he wanted to put money into instead of pretending that he “cutting” anything – and HE is indeed pretending, because HE said that the $17 billion is “taken OUT of discretionary spending.” As shown above, it’s not.
Comment by TBlumer — May 8, 2009 @ 7:18 am
Hi,
Cuts are cuts. We obsess so much over comparison against prior presidents that we lose sight of the present. I think that we should forget precedent and focus on the fact that he is a liberal spender who is cutting spending, which is a good thing.
Ryan
Comment by What Is Cash Gifting — May 8, 2009 @ 8:49 am
#3, bingo, the “retasking” of money is not a cut, the money is still going to be spent. So far the MSM and Obama have lied to the American people by attempting to mislead them into believing the $17 billion is a spending reduction.
The real story is Obama and the Democrats believe spending money you don’t have will prime the economy out of a recession. This is in complete contrast what the American people as a whole believe. Pump priming may have been a short term benefit when the Dems ruled the Congress for 50 years prior to 1994, but that doesn’t hold anymore. Not when the Fed is printing money to pay for the so called stimulus. The Fed is buying an ever greater percentage of bond offerings by the Treasury, that means private money is not available for either public bonds or private investment. No investment, no expansion of plant and equipment to create jobs. Our economy is an inverted pyramid, where industrial activity may represent 30% of the GDP but what the fools don’t understand is the 70% is completely dependent on the existence of the 30%. This is why you can’t spend yourself out of a slump, you can only invest yourself out of a slump. Without expansion there can be no new jobs much less replacement jobs that are deleted due to productivity gains, period…
Comment by dscott — May 8, 2009 @ 9:01 am
#4, It’s as if you didn’t read the post.
I could not in good conscience allow the link to your web site to remain.
This is why. Please get out of it.
Comment by TBlumer — May 8, 2009 @ 9:18 am
Tom, expanding on my point of the 30% supporting the 70%, please do an article or post on this idea, it would be a good economics primer to those who don’t understand the mechanics of the economy and go a long way to shutting down the lib myth that you can spend your way out of a recession. Once people understand that manufacturers create value and therefore wealth and jobs by their activity the whole notion of this liberal myth is so absurd, they will look upon liberals as either total idiots or self serving liars.
A very simple example you could build upon:
Raw materials supplier gets about 10% profit after expenses selling their product to the manufacturer.
Manufacturer gets about 10% profit after expenses selling that product to the wholesaler.
The wholesaler gets about 5% profit after expenses selling to the retailer.
The retailer gets about 7 or 8% profit after expenses selling the consumer (end user).
Notice in my example that the combined profit of the raw material, wholesaler and retailer is around 22 to 23%. So to start off with when we compare sales volume and profit around 65% of the total sales profit is NOT the manufacturer but the wholesaler and retailer. Also, in pure sales volume the manufacturer is 1/4 of the total sales. Now this just on a macro scale to demonstrate why manufacturing is 30% of the GDP.
On the mirco sale, a retailer usually charges up to 4 times the price they buy it for. Why? To pay labor, rent, insurance, taxes (expenses) in order to get to that 7 or 8% profit. Furthermore, on the wholesaler side typically they charge up to 36% above their buying price from the manufacturer to cover their expenses as generally summed up above.
As you can see by the very simplified summary I have given here the vast majority of economic activity is totally dependent upon the manufacturing base and that any stimulus which is not directed at the base is a futile short term waste of money. BTW- as Tom and I know, the manufacturing base in this country has not decreased but increased and diversified contrary to the ludicris claims of libs who focus only on vehicle production, which is a proxy for union membership. As usual libs spin the story to show how victimized their campaign contributors are when in fact, they screwed themselves by their own greed.
Comment by dscott — May 8, 2009 @ 9:57 am
#7 that really is a good idea. It’s in need of something dumb a politician or commentator says that betrays their total ignorance about all of this.
As to the mfg sector, I need to research, but I’ll bet it grew pretty nicely in 2007 (BEA info on industries tends to trail). Too bad they only do an industry-based look yearly; I’ll betcha it continued to grow up to and including the 2nd quarter last year, until the POR econ kicked in.
Comment by TBlumer — May 8, 2009 @ 10:02 am
#8, just give me a little credit for the inspiration when you do. LOL Call me an egotist for enjoying the pure profit of seeing my name being mentioned.
Comment by dscott — May 8, 2009 @ 10:27 am
#9. If I remember …. if not, blame it on Blogheimer’s. :–>
Comment by TBlumer — May 8, 2009 @ 10:34 am
While you’re at it, this also would be a good time to tweek the libs nose by pointing out the same mechanics of manufacturers representing only 30% of the GDP but creates the other 70% holds true of tax cuts.
When you make expenses cheaper for manufacturers to allow them to expand plant and equipment, the effect is to multiply the TAX BASE (taxpayers) because all the people who supply raw materials, wholesale and retail then expand to handle that increase in supply. So for every $1 you cut taxes on the manufacturer you get back $2 from the other guys, thus neting the Treasury a $1. This is why Reaganomics works. Just targeting a tax cut (lessen expenses) to only the manufacturers would slowly reve the economy. Giving a tax cut to everyone adds a powerful stimulus kickstarting the economy, we saw this in 2003. Had it not been for the foolishness of the Dems blocking oil and gas drilling driving up energy prices, we just might have gotten by the mortgage debacle since those at the low end of the economic ladder would have had jobs to pay their mortgages and not tried to exit the market en masse thus destroying all liquidity.
Comment by dscott — May 8, 2009 @ 11:00 am
#8, Yes unfortunately it’s yearly, and 2008 data has not been updated yet:
GDPbyInd_VA_NAICS: Value Added by Industry, Gross Output by Industry, Intermediate Inputs by Industry, the Components of Value Added by Industry, and Employment by Industry:
http://www.bea.gov/industry/gdpbyind_data.htm
or you can use this one:
http://www.bea.gov/industry/gpotables/gpo_action.cfm?anon=96344&table_id=24547&format_type=0
Comment by dscott — May 8, 2009 @ 2:40 pm
#12, thx for the link. Hopefully I’ll remember where your comment is.
You’ll notice that the 2007 components within mfg aren’t there yet.
Just like clockwork, mfg was up 1.3% in REAL terms in 2007 and NOT in decline. It took the POR Economy to make that happen.
Comment by TBlumer — May 8, 2009 @ 3:59 pm
You seriously need to update the search function on your site. It would be great if you would enable a search by Commenter. That would be a good compromise if your server and program can’t handle a tracking feature like on NB.
It annoys me to no end when I know I posted a good link (my fault for not bookmarking it) and then later on want to revisit that link to see any updates especially when I need it to support my discussion with someone else. I’m forced to page back maybe 10 or 20 pages hunting various replies under tiles I think I might have commented on.
Comment by dscott — May 8, 2009 @ 4:56 pm
Thanks for the nag. In the meantime you can believe it or not find some things in Google searches that include the word “bizzyblog” that I don’t think you can find using the WP 2.5.1 search.
I need to upgrade to 2.7, but it’s tedious and time-consuming and a bit dangerous to site integrity if I mess up.
Tom
Comment by TBlumer — May 8, 2009 @ 4:58 pm