Morning Bell: The Government Bailouts Must End
Posted June 14th, 2010 at 9:37am in Education, Entitlements,

Late Saturday night President Barack Obama sent a letter to the leadership of the House and Senate urging them to approve a tax and spending bill currently being debated in the Senate that already would add $80 billion to our nation’s budget deficit. But coming off of last year’s $862 billion stimulus, President Obama is not happy with just another $80 billion in debt for this year. He also requested another $50 billion in deficit spending earmarked for bailing-out state and local governments. Without this “emergency” money, the President claims thousands of government union jobs would be lost. But even among his own party, the President faces an uphill climb. House Majority Leader Steny Hoyer told The Washington Post: “I think there is spending fatigue.” “Bailout fatigue” is more like it. And the President’s envisioned spending spree is full of both.

The Government Union Bailout: $23 billion of the President’s additional $50 billion in spending would supposedly go to keep teachers in the classroom. This new spending would be in addition to the nearly $100 billion appropriated to the Department of Education by the President’s $862 billion stimulus bill, of which $34.7 billion in education funds remains unspent. Meanwhile, over the past decade student enrollment has increased only 6% while the number of teachers in the classroom has risen 15.8%. But over this same period, studies found a correlation between reduced class sizes and student achievement. More federal funding is unlikely to increase student achievement and will not provide a long-term solution to states’ budget shortfalls. Another bailout from Washington could even exacerbate states’ fiscal problems by creating disincentives for states to tackle out-of-control spending and make real education reforms.

The Medicaid Bailout: $25 billion of the President’s latest spending spree is set to bail-out state Medicaid programs. This would be the fourth time this decade that Congress has bailed-out state Medicaid programs. The cycle is all too familiar. Between 1990 and 2007, Medicaid spending more than quadrupled from $69 billion to $316 billion. Because of these constant bailouts, states have avoided dealing with their mismanagement of the program. More money from Washington will guarantee one thing: states will continue to spend far in excess of what they can afford, and Congress will treat the federal taxpayers like an ATM machine to cover the shortfalls.

The Obamacare Bailout: The President’s signature legislative accomplishment is just barely three months old, but it already is in need of a $400 billion bailout. In an interview with Politico Sunday, the President said of Obamacare: “I strongly believe that the health care bill was the right thing to do … I think it’s going to help us bend the cost curve in ways that will actually help us deal with the deficit, not add to it.” But just one day earlier during his weekly radio address, the President pleaded with Congress to pass a temporary fix in Medicare reimbursement rates for doctors: “Now, I realize that simply kicking these cuts down the road another year is not a long-term solution to this problem. I’m absolutely willing to take the difficult steps necessary to lower the cost of Medicare and put our budget on a more fiscally sustainable path. But I’m not willing to do that by punishing hard-working physicians or the millions of Americans who count on Medicare. That’s just wrong. And that’s why in the short-term, Congress must act to prevent this pay cut to doctors.” So which is it? Did Obamacare “bend the cost curve” in ways that will help the deficit, or is Medicare still on a fiscally unsustainable path? The reality is that Obamacare’s deficit reduction claims were always a complete fraud, and the President’s pitch for a doc fix funds exposes that fact.

Last week Gallup reported that “Federal government debt” was the issue that most threatened the future well-being of the United States. Our nation’s record deficits are largely driven by the record spending increases of the last decade and the last year in particular. There is a way out of this deficit nightmare: stop spending. If the federal government managed to return to the per-household spending level of the Reagan administration, the budget would be balanced by 2012 without any tax hikes. Or just returning to the per-household spending levels that existed before the current recession would balance the budget by 2019. But first we must stop the bleeding: the government bailouts must end.