Economists: Federal Spending Spins ‘Out of Control’ Under Obama

Tuesday, March 17, 2009
By David A. Patten

The $787 billion stimulus bill, when combined with the $410 billion omnibus bill, will nearly double the year-to-year spending of several federal agencies, eventually “sucking money out of the private economy” and taking a whack out of Americans’ standards of living, conservative economists warn.

Republican staffers on the House Appropriations Committee have crunched some daunting budget numbers that far exceed the 11 percent overall budget increase reflected in media reports on the omnibus bill.

“The omnibus appropriations bill contains funding for many of the same agencies and programs that received funds in the ‘stimulus’ bill,” states the report by the GOP staffers. “Therefore, to uncover the true level of spending for these programs this year, the funding levels for both bills must be combined.”

Based on a report that factors omnibus plus stimulus spending, federal departments face a major problem: How to spend all the money Congress and the Obama administration have allocated.

The report indicates that spending by the departments of Labor and Health & Human Services will increase by 91 percent this fiscal year. The U.S. Department of Transportation, and the U.S. Department of Housing and Urban Development, will jump by 139 percent.

Interior and Agriculture -- mere paupers when it comes to budget hikes – will enjoy budgets 45 percent larger than they were last year. In other words, the budget footprints of Interior and Agriculture will swell by about half in a single year.

“It’s out of hand,” says Chris Edwards, director of tax policy for Cato Institute. “I think federal spending is more out of control now than I ever remember it in my 19 years in Washington. It’s completely unbelievable what is going on in Washington.”

Edwards, a former senior economist on the congressional Joint Economic Committee, says one of the ironies of the ballooning budget is that federal departments will have to hire thousands of new officials whose primary duty will be to find ways to spend the funds their departments have received.

“The federal bureaucracy frankly just doesn’t have the manpower to spend all this money in any kind of efficient manner in the short run,” Edwards says, “so they’re going to go hire a bunch more bureaucrats to carry out the government spending.”

The federal government, not known for spending money wisely under the best of circumstances, will be even less able to do so with funding levels that are abruptly increased, fiscal conservatives warn. The inability to fully account for billions in TARP bailout expenditures is cited as one example.

Generating new federal jobs may well give the economy a temporary boost. But conservative economists say it will eventually create a major drag on economic growth.

“The Obama administration's new budget, with deficits that make previous irresponsible deficits look like child's play, has a cover that says ‘A New Era of Responsibility,’” syndicated columnist Thomas Sowell recently wrote. “You want responsibility? He'll give you the word ‘responsibility.’ Why not? It costs nothing.”

Edwards tells Newsmax: “The money is sucked out of the private economy. It creates damage to the private economy. And it doesn’t matter whether it is defense spending or entitlement/Social Security spending, the money is sucked out of the private economy -- meaning individuals have less money to spend. The resources are allocated more inefficiently, and that lowers our standard of living.”

According to the Heritage Foundation, the 2008 federal budget tallied about $2.9 trillion. Edwards projects total federal spending this year at $3.9 trillion. Based on the experience of European governments, Edwards says, federal consumption of more of the national product means resources will be used less efficiently, leading to a reduced standard of living for Americans.

Edwards concedes that Obama believes he can make government operate more efficiently.
“And perhaps he can make some improvements,” Edwards says, adding, “But he cannot change the fundamental factors that make the government such a poor allocator of resources.”

Ironically, Edwards tells Newsmax, the “spendthrift” habits of the Bush years are what laid the groundwork for Obama’s record-smashing expansion. Obama may cancel or rename Bush programs, Edwards says – citing No Child Left Behind as an example. But he will not rescind the funding.

Edwards remarks of Bush: “He never really lifted a finger to constrain spending.”