Barack Obama on Deficits and Debt

Last Updated : Jul 25, 2012

Summary

President Obama's views on yearly deficits and the national debt have transitioned over time. As a Senator and Presidential candidate, he was critical of raising the debt ceiling and vocal in the need to balance the budget to help the economy. After the election and while in office, he pledged to cut the deficit in half in his first term.

Early in his administration, President Obama touted items such as spending freezes, PAYGO, and the Simpson-Bowles commission as mechanisms for addressing the debt. However, the passage of items such as the American Recovery and Reinvestment Act signaled that the President had a different viewpoint.

In the second year of his administration, President Obama urged Congress to continue spending programs to help spur jobs programs to stimulate the economy. He asked the same of European leaders. These actions and statements indicate a shift in theory from President Obama. Whereas before, a balanced budget would lead to economic prosperity the view had transitioned to one where debt was justifiable if it created jobs that would lead to increased revenue in the future. Thus, the economy is first saved through deficit spending and then the debt is addressed once the economy is strengthened.

In terms of balancing the budget, President Obama has remained consistent in his view that both spending cuts and increased revenue is required. Throughout the campaign and his time in office, he has noted that significant tax funds are lost through loopholes and legel but questionable overseas accounting practices. He has pushed for ending the Bush tax cuts on the highest taxpayers, closing those loopholes, and enacting measures such as the Buffett rule to address deficits.

Record as Senator

In 2006, Senator Obama spoke about a vote to raise the debt ceiling on the Senate floor. He asserted that the vote represented a failure in leadership from the administration. He stated that such a large and increasing debt weakened the US domestically and internationally. That same year, Senator Obama voted against a measure to raise the debt ceiling to $8.965 trillion. In 2007 and 2008, similar measures were passed to raise the debt ceiling to $9.815 trillion and $10.615 trillion. Senator Obama cast a "No Vote" on both of these measures. In late 2008, Senator Obama voted in favor of the TARP legislation, legislation which also raised the debt ceiling to $11.315 trillion.

2008 Presidential Campaign

In two debates during the Presidential election cycle, Senator Obama expressed opposition to the idea of an across the board spending freeze. He stated that such a mechanism represented an uneven burden on some sections of the government and was the equivalent to using a hatchet where only a scalpel is needed.

Senator Obama's plan for addressing the debt and deficit was outlined in two documents called the "Blueprint for Change," and the "Blueprint for Fiscal Discipline." The blueprint describes seven specific actions that Senator Obama will take if elected. These actions include reinstating PAYGO rules, reversing the Bush tax cuts for the wealthiest tax payers, slashing earmarks to pre-George W Bush levels and restoring transparency to spending, end wasteful spending such as subsidies to oil and gas and the private student loan industry, ending the offshore tax havens, and closing corporate loopholes. An added pledge to the topic of transparency included ensuring that all government contracts over $25,000 were competitively bid. 

The Blueprint for Fiscal Discipline was very similar to the Blueprint for change. It pledged to increase revenue to help balance the budget through tax reform that would be more equitable to the middle class, closing of several corporate loopholes, and ending tax haven abuse. Added in this document was a pledge to never privatize social security and to make the system solvent without raising the retirement age.

First Year as President

Before assuming office and within the first few months of the Presidency, President Obama spoke about the need to address the debt. He noted that failure to address it previously had led to the economic problems that the US was experiencing and that failure to address the problem now could lead to the problem reoccuring later. He also noted the moral problems wth passing debt on to our children and our grandchildren. Each time, President Obama pledged to cut the budget deficit in half by the end of his first term.

At the same time, the White House website noted President Obama's plan to help address the debt. This plan included four main items: cut the deficit in half by the end of the President's first term, review the budget line-by-line for waste, return to honest budgeting by including war and other items in the budget, and reinstating PAYGO rules.

Second Year as President

Early in 2010, President Obama made three significant moves to address the debt and the deficit. These actions included the passage and signing of PAYGO rules which he credited for creating the surpluses of the 1990's and blamed the ability of Republicans to run up debt and pass tax cuts on the expiration of these rules. He noted that it was silly that a law was required to get Congress to balance the budget, but that it was politically necessary.

President Obama also called for a three year spending freeze on all discretionary spending. In addition to this, he used an executive order to create a bi-partisan commission to explore mechanisms to reduce the deficit and the debt.

By June of 2010, the President's viewpoint had changed. He sent a letter to Senate and House leaders, urging them to pass legislation that would continue funding for state jobs and tax cuts for certain businesses. He noted in the letter that losing those jobs would lead to a greater loss of revenue than the debt created by paying for those jobs.

That same month, President Obama attended the G20 meeting in Toronto. After the meeting, he urged European leaders to continue stimulus measures in an effort to kickstart the economy. He asserted that all countries must balance the need for continued growth in the short-term with fiscal sustainability in the medium term. The idea was that the addition of debt today was justified if it created jobs that increased revenue to bring down the deficit in the future. In the end, the G20 members came to an agreement to cut their deficits in half by 2013 and reign in their debts by 2016.

Overall Debt

The US national debt has increased steadily under President Obama. This has been partially due to the wars in Iraq and Afghanistan, partially due to lowered revenue from a depressed economy, and partially due to increased spending from items such as the stimulus.

 

Objection to Raising the Debt Ceiling in 2006

In September of 2006, Senator Obama spoke on the Senate floor about his objections to raising the debt ceiling. He stated that the need to raise the limit represented a failure of leadership.

  

Presidential Debate - Spending Freezes

During the 2008 Campaign cycle, Senator Obama particiapted in three Presidential debates with Senator McCain. In two of those debates, Senator Obama opposed an across the board spending freeze and stated that it was using a hatchet where a scalpel was needed.

 

Blueprint for Change

As part of the 2008 elections, Senator Obama and Senator Biden released a blueprint for change. The fiscal discipline of this blueprint is shown below.

 

Blueprint for Fiscal Discipline

In his blueprint for fiscal discipline, Senator Obama outline his plans for balancing the budget and eliminating waste.  

  

White House.gov Statements

On WhiteHouse.gov, policies on fiscal discipline are outlined which involve reducing the deficit by 1/2 in the first 4 years and bringing more transparency to government spending. These statements remained in place from shortly after President Obama assumed office until 2011.

 

Committment to Deficit Reduction

In November of 2008, President-Elect Obama held a press conference to introduce his budget manager Peter Orzag. During that conference, he pledged to cut the deficit in half within his first term as President. In February of 2009, President Obama held another press conference in which he again pledged to cut the deficit in half in his first term. This time, he discussed the need for this action, the fact that the initial debt contributed to the economic crisis, and the need to make the tough decisions to help reduce spending.

 

PAYGO Rules, Spending Freeze, and Simpson Bowles

In February of 2010, President Obama used his weekly address to state his support for PAYGO rules that were recently signed into affect. The President also spoke about his desire to see a three year spending freeze put into affect for all discretionary spending. While these feelings were discussed in numerous speeches, this official weekly address notes the frequent grandstanding on balanced budgets and the lack of action due to politics.

President Obama also notes his executive order creating a bipartisan commission to investigate methods to reduce the deficit. This was the Simpson-Bowles commission which the President would later state that he supported, but did not agree with enough of the substance to push the findings.

 

Letter to Congressional Leaders

In June of 2010, President Obama sent a letter to Democrat and Republican leaders in the House and the Senate asking them to pass legislation to continue certain tax breaks for businesses. The letter also asks that additional funding be authorized for state funding to prevent layoffs of teachers and state workers.

While the letter acknowledges the need to balance the budget, the President asserts that these measures are needed to prevent job loss and that job loss will lead to greater reductions in revenue than the money used to save those jobs. Ultimately, the point of the letter is that while spending cuts are necessary, they cannot be made until the economy is back on its feet.

 

2010 - G20 Meeting

In June of 2010, President Obama attended the G20 meeting in Toronto. There, the member nations agreed to cut their deficits in half by 2013 and to stabilize or reduce government debt-to-GDP ratios by 2016. In remarks after the meeting, President Obama asserted that growth was a short term goal that, if achieved, would lead to fiscal sustainability in the long term. He noted that fiscal health tommorrow will rest in the ability to create jobs today.

 

Proposed Annual Domestic Spending Freeze

In January of 2011, President Obama used a portion of the State of the Union address to call for a spending freeze to annual domestic spending for 5 years. These spending freezes would not include national security items or defense spending.

Voting Record

Housing and Economic Recovery Act of 2008 - Debt Ceiling Increase to $10.615 trillion

In April of 2008, the Senate passed the Housing and Economic Recovery Act of 2008. Included in that legislation was an increase to the debt ceiling to $10.615 trillion. The legislation passed the Senate 84-12. Barack Obama cast a "No Vote"

TARP - Debt Ceiling Increase to $11.315 trillion

In October of 2008, the Senate passed the Emergency Economic Stabilization Act - the TARP. The legislation included an increase in the debt ceiling to $11.3115 trillion. The legislation passed 74-25. Barack Obama voted in favor of the legislation to increase the debt ceiling to $11.315 trillion.

Barack Obama voted in favor of the legislation to increase the debt ceiling to $11.315 trillion.

Increasing the debt ceiling to $9.815 trillion

In September of 2007, the Senate voted to pass a measure that increased the debt ceiling to $9.815 trillion. The measure passed 53-42. Barack Obama cast a "No Vote"

Debt Ceiling Increase to $8.965 trillion

In March of 2006, the Senate passed H J Res 47 to increase the debt ceiling to $8.965 trillion. The measure passed 52-48. Barack Obama voted against increasing the debt ceiling to $8.965 trillion.

Barack Obama voted against increasing the debt ceiling to $8.965 trillion.

 

Sponsored and Cosponsored Legislation

Session-110; Bill Number-S 2166; Jubilee Act for Responsible Lending and Expanded Debt Cancellation of 2008 - Cosponsor

A bill to provide for greater responsibility in lending and expanded cancellation of debts owed to the United States and the international financial institutions by low-income countries, and for other purposes.

References

[1] Website: CBO Article: BUDGET AND ECONOMIC OUTLOOK: HISTORICAL BUDGET DATA Author: CBO Accessed on: 03/07/2011

[2] Website: Washington Post Article: President Obama urges G-20 nations to spend; they pledge to halve deficits Author: Howard Schneider and Scott Wilson Accessed on: 07/25/2012

[3] Website: China Daily Article: G20 leaders voice support on deficit cut Author: Xinhua Accessed on: 07/25/2012

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