FACT CHECK: Obama off on thrifty spending claim

Pres­i­dent Barack Obama speaks at a cam­paign grass­roots event at the Iowa state fair­grounds, in Des Moines, Iowa, Thurs­day. (AP Photo/Nati Harnik)

ANDREW TAYLOR

Asso­ci­ated Press

WASHINGTON — The White House is aggres­sively push­ing the idea that, con­trary to wide­spread belief, Pres­i­dent Barack Obama is tight­fisted with tax­payer dol­lars. To back it up, the admin­is­tra­tion cites a media report that claims fed­eral spend­ing is ris­ing at the slow­est pace since the Eisen­hower years.

“Fed­eral spend­ing since I took office has risen at the slow­est pace of any pres­i­dent in almost 60 years,” Obama said at a cam­paign rally Thurs­day in Des Moines, Iowa.

The prob­lem with that rosy claim is that the Wall Street bailout is part of the cal­cu­la­tion. The bailout bal­looned the 2009 bud­get just before Obama took office, mak­ing Obama’s 2010 results look smaller in com­par­i­son. And as almost $150 bil­lion of the bailout was paid back dur­ing Obama’s watch, the analy­sis counted them as gov­ern­ment spend­ing cuts.

It also assumes Obama had less of a role set­ting the bud­get for 2009 than he really did.

Obama rests his claim on an analy­sis by Mar­ket­Watch, a finan­cial infor­ma­tion and news ser­vice owned by Dow Jones & Co. The analy­sis sim­ply looks at the year-to-year topline spend­ing num­ber for the gov­ern­ment but doesn’t account for dis­tor­tions baked into the fig­ures by the Wall Street bailout and gov­ern­ment takeover of the mort­gage lend­ing giants Fan­nie Mae and Fred­die Mac.

The Mar­ket­Watch study claims that spend­ing is grown only 1.4 per­cent over 2010–2013, or annual increases aver­ag­ing 0.4 per­cent over that period. Those are stun­ningly low fig­ures con­sid­er­ing that Obama rammed through Con­gress an $831 bil­lion stim­u­lus mea­sure in early 2009 and presided over sig­nif­i­cant increases in annual spend­ing by domes­tic agen­cies at the same time the cost of ben­e­fit pro­grams like Social Secu­rity, Medicare and the Med­ic­aid were tick­ing steadily higher.

A fairer cal­cu­la­tion would give Obama much of the respon­si­bil­ity for an almost 10 per­cent bud­get boost in 2009, then a 13 per­cent increase over 2010–2013, or aver­age annual growth of spend­ing of just more than 3 per­cent over that period.

So, how does the admin­is­tra­tion arrive at its rosy claim?

First, there’s the Trou­bled Assets Relief Pro­gram, the offi­cial name for the Wall Street bailout. First, com­pa­nies got a net $151 bil­lion from TARP in 2009, mak­ing 2010 spend­ing look smaller. Then, because banks and Wall Street firms repaid a net $110 bil­lion in TARP funds in 2010, Obama is claim­ing credit for cut­ting spend­ing by that much.

The com­bi­na­tion of TARP lend­ing in one year and much of that money being paid back in the next makes Obama’s spend­ing record for 2010 look $261 bil­lion thriftier than it really was. Only by that mea­sure does Obama “cut” spend­ing by 1.8 per­cent in 2010 as the analy­sis claims.

The fed­eral takeover of Fan­nie Mae and Fred­die Mac also makes Obama’s record on spend­ing look bet­ter than it was. The gov­ern­ment spent $96 bil­lion on the Fannie-Freddie takeovers in 2009 but only $40 bil­lion on them in 2010. By the administration’s reck­on­ing, the $56 bil­lion dif­fer­ence was a spend­ing cut by Obama.

Taken together, TARP and the takeover of Fan­nie and Fred­die com­bine to give Obama an unde­served $317 bil­lion swing in the 2010 fig­ures and the result­ing 1.8 per­cent cut from 2009. A fairer read­ing is an almost 8 per­cent increase.

Those two bailouts account for $72 bil­lion more in cuts in 2011. Obama sup­ported the bailouts.

There’s also the ques­tion of how to treat the 2009 fis­cal year, which actu­ally began Oct. 1, 2008, almost four months before Obama took office. Typ­i­cally, the remain­ing eight months get counted as part of the prior president’s spend­ing since the incom­ing pres­i­dent usu­ally doesn’t change it much until the fol­low­ing Octo­ber. The Mar­ket­Watch analy­sis assigned 2009 to for­mer Pres­i­dent George W. Bush, though it gave Obama respon­si­bil­ity that year for a $140 mil­lion chunk of the 2009 stim­u­lus bill.

But Obama’s role in 2009 spend­ing was much big­ger than that. For starters, he signed nine spend­ing bills fund­ing every Cab­i­net agency except Defense, Vet­er­ans Affairs and Home­land Secu­rity. While the num­bers don’t jibe exactly, Obama bears the chief respon­si­bil­ity for an 11 per­cent, $59 bil­lion increase in non-defense spend­ing in 2009. Then there’s a 9 per­cent, $109 bil­lion increase in com­bined defense and non-defense appro­pri­ated out­lays in 2010, a year for which Obama is wholly responsible.

As other crit­ics have noted, includ­ing for­mer Con­gres­sional Bud­get Office Direc­tor Dou­glas Holtz-Eakin, the Mar­ket­Watch analy­sis also incor­po­rates CBO’s annual base­line as its esti­mate for fis­cal years 2012 and 2013. That gives Obama credit for three events unlikely to occur:

—$65 bil­lion in 2013 from auto­matic, across-the-board spend­ing cuts slated to take effect next January.

—Cuts in Medicare pay­ments to physicians.

—The expi­ra­tion of refund­able tax cuts that are “scored” as spend­ing in fed­eral ledgers.

Law­mak­ers are unlikely to allow the auto­matic cuts to take full effect, but it’s at best a guess­ing game as to what will really hap­pen in 2013. A bet­ter mea­sure is Obama’s request for 2013.

“You can only make him look good by ignor­ing the early years and adopt­ing the hope and not the real­ity of the years in his bud­get,” said Holtz-Eakin, a GOP econ­o­mist and pres­i­dent of the Amer­i­can Action Forum, a free mar­ket think tank.

So how does Obama mea­sure up?

If one assumes that TARP and the takeover of Fan­nie and Fred­die by the gov­ern­ment as one-time bud­getary anom­alies and remove them from cal­cu­la­tions — an approach taken by Holtz-Eakin — you get the fol­low­ing picture:

—A 9.7 per­cent increase in 2009, much of which is attrib­ut­able to Obama.

—A 7.8 per­cent increase in 2010, fol­lowed by slower spend­ing growth over 2011–13. Much of the slower growth reflects the influ­ence of Repub­li­cans retak­ing con­trol of the House and their bud­get and debt deal last sum­mer with Obama. All told, gov­ern­ment spend­ing now appears to be grow­ing at an annual rate of roughly 3 per­cent over the 2010–2013 period, rather than the 0.4 per­cent claimed by Obama and the Mar­ket­Watch analysis.

Posted by AP News on May 25 2012. You can follow any responses to this entry through the RSS Feed. Comments can be made below.