CBO: Obama’s Budget Would Hurt The Economy With Deficit Spending
This is interesting not just because of what it says about what Obama is proposing as a budget, but also for why we haven’t seen economic recovery after President Obama’s much-touted stimulus spending.
If deficit spending going forward hurts the economy, then certainly deficit spending from the past has done the same thing.
The nonpartisan Congressional Budget Office said Friday that President Obama’s 2013 budget will hurt the economy in the long term, arguing the larger deficits it would produce would reduce the amount of capital available to businesses.
After five years, the CBO says, the Obama proposals would reduce economic output by between 0.5 percent and 2.2 percent.
Larger deficits caused by the budget would cause the government to issue more bonds, sucking up private capital to finance its debts and thereby reducing the funds businesses could use to expand and hire, the CBO said. An increased tax on capital gains included in the president’s plan would also tend to reduce private capital, it says.
What this tells us is that the only solution is spending cuts. IF we run big deficits, we suck up private capital into financing that debt and hurt the economy. If we raise taxes, we again suck up private capital to finance the spending.
To paraphrase Milt Friedman, the only data point that matters in all of this is the size of spending. Or, put another way, the size of spending. The bigger the government, the bigger the budget, the more burden there is to the economy.
The government cannot spend our way to prosperity.Tags: Barack Obama, congressional budget office, deficits, Economy, national debt, Stimulus