WND EXCLUSIVE

OBAMA BUDGET HIDES FULL IMPACT OF SPENDING SPIKE

Projections assume historically low interest rates

Jerome R. Corsi

NEW YORK – When the White House’s Office of Management and Budget released its 2017 federal budget – which included 10-year projections – groups such as the Washington-based non-profit Committee for a Responsible Federal Budget heaped praise on the Obama administration for shrinking the deficit and stabilizing the debt.

In its “Analysis of the President’s FY 2017 Budget” published Feb. 9, 2016, the CRFB concluded that by “reducing Medicare cost growth, reforming the immigration system, and enacting a large number of tax increases, the President’s budget would not only pay for his new initiatives, but reduce projected deficits in order to stabilize the debt as a share of the economy.”

However, a close examination of the proposed budget reveals the Obama administration is attempting to hide the full impact of its increased spending by employing deceptively low interest-rate assumptions that mask potentially trillions of dollars in interest on the growing federal debt that will have to be paid in the coming decade.

Whether the economy is up or down, Dave Ramsey’s “Total Money Makeover” is a proven plan for financial fitness

President Obama’s current spending agreement with Congress suspends the nation’s debt limit, allowing the U.S. Treasury to add another $1.7 trillion to the national debt by the end of his second term on Jan. 20, 2017. It’s projected that by that time the national debt will reach $20 trillion, which means it will have doubled during Obama’s two terms in office.

According to the Congressional Budget Office, Obama’s fiscal year 2017 budget projects that by 2026, the national debt will grow by nearly another $10 trillion to nearly $30 trillion, a number also likely understated by the historically low interest-rate assumptions the OMB used in preparing the 2017 federal budget.

Historically low interest rate assumptions

On Sept. 3, 2014, the Congressional Budget Office estimated that net interest rate payments would more than triple under then-current budget estimates, climbing from $231 billion in 2014, or 1.3 percent of GDP, to $799 billion in 2024, or 3 percent of GDP – the highest ratio since 1996. The projections were based on historically low interest rates, assuming the average interest rate on the debt will rise from 1.8 percent in 2014 to 3.9 percent in 2024.

As WND reported last week, despite the global equity selloff, Federal Reserve Chairman Janet Yellen refused to adopt a dovish position in her testimony to Congress. She suggested that while the Fed might slow the pace of planned interest rate increases beyond March, it intended to adhere to the announced plan to continue increasing interest rates for the foreseeable future.

In December, the Federal Reserve Open Market Committee decided to raise interest raise rates for the first time since June 29, 2006, increasing the target federal funds rate modestly, from zero to 25 basis points (0.25 points).

In presenting the budget for fiscal year 2017, the Office of Management and Budget bragged that the budget “keeps deficits below 3 percent of GDP while stabilizing debt and putting it on a declining path for most of the next decade – key measures of fiscal progress – showing that investments in growth and opportunity are compatible with putting the Nation’s finances on a strong and sustainable path.”

Key to these favorable projections is a dramatic downward adjustment that assums the maximum interest rate the federal government would have to pay on the national debt over the next 10 years is 4.2 percent, down from the 5 percent projected in the 2014 budget, the 5.1 percent in 2015 and the 6.1 percent in 2001, as seen in Table 1.

Table 1
U.S. Federal Budget Projections
Maximum Interest Rate Projections

The CBO’s baseline projections show that net interest outlays are projected to rise from $223 billion in 2015 to $830 billion in 2026. Net interest outlays are the amount of interest needed to be paid each year on the national debt.

To arrive at this conclusion, CBO used a maximum 10 Year Treasury rate of 4.1 percent in the projections. The White House OMB projected that net interest outlays would rise to $787 billion in 2026 using a maximum 10 Year Treasury Note rate of 4.2 percent.

The OMB used a maximum value of 5.1 percent in its 2015 budget projections, and the CBO used a maximum value of 5.5 percent in its 2014 baseline projections. Lower interest-rate assumptions result in lower projected net interest outlays required to keep the national debt current.

The OMB projects net interest outlays for the 10-year period from 2017 to 2016 will be nearly $5.8 trillion.

However, if the 10-year Treasury rate assumption values used in the 2017 budget were replaced with those used in the 2015 budget, the projected net interest outlays would increase to nearly $8 trillion.

This transparent manipulate of interest-rate assumptions strongly suggests Obama’s deficit reduction strategy in the budget proposed for fiscal year 2017 is largely accomplished not by real reductions in spending, but by “playing” with the interest-rate assumption used to calculate the net interest outlay required yearly to maintain current interest payments on the debt.

Different picture

While the Committee for a Responsible Federal Budget, as noted, praises the president’s budget for reducing deficits and stabilizing the debt, a quite different picture emerges by comparing the OMB’s 2017 projections to projections for prior years.

Table 2
White House OMB Budget Projections
10-Year Totals
(Billions)

Table 2 demonstrates that reducing the interest-rate assumption from 5.1 percent in 2015 to 4.2 percent in 2017 was not sufficient to slow the growth in the total interest outlays required to pay the national debt, the growth of the federal deficit and the year-end national debt total. Put another way, all of these totals – including the total year-end deficit and the total year-end national debt –would have been much greater had the assumed 5.1 percent maximum 10-year Treasury rate also been used to calculate the federal budget for fiscal years 2016 and 2017.

Table 3
White House OMB Historical Tables
Total Payments for Individuals
Percent of Total Outlays

Table 3, based on the OMB’s historical tables, show that “Payments for Individuals,” including the non-salary payments made directly to individuals, as in Social Security, or paid indirectly to individuals by supporting programs like Medicare and Medicaid, have grown from 26.3 percent of the federal budget in 1960 to 72 percent in 2015.

It means the federal government in 2017 will reach the point at which approximately three-quarters of the federal budget is mandated expenditures made to individuals, not discretionary spending subject to the determination of Congress, the category in which the budget for military spending is placed.

The federal budget for fiscal year 2017 tops a record $4.2 trillion, with three-quarters devoted to mandatory spending. Paying interest on the federal debt, Social Security, Medicare and Medicaid benefits are projected to increase the deficit from $438 billion in fiscal year 2016 to $616 billion in 2017.

The 2017 budget makes clear Obama has done nothing to achieve any reduction in entitlement payments.

Instead, the federal budget for fiscal year 2017 calls for increases in entitlement programs, resulting largely from indefinite expansion of the Affordable Care Act’s three years of full federal support to states to expand Medicare.

In conclusion, while the total spending by the federal government continues to increase, so, too, does the amount of the federal deficit and the national debt.

Moreover, an ever-increasing portion of federal spending is devoted to “Payments of Individuals,” the exact type of spending contemplated by the leftist social theorists who proposed the Cloward-Piven strategy.

Cloward-Piven

On Dec. 14, 2009, WND reported concerns Obama would attempt to implement a socialist agenda with the aim of bankrupting the United States with trillion-dollar social-welfare programs that it couldn’t possibly afford.

On May 2, 1966, two Columbia University sociologists – professor of social work Richard A. Cloward and his then-research associate Frances Fox Piven – wrote a pivotal article in The Nation, articulating “a strategy to end poverty.”

In what became known as the Cloward-Piven strategy, the article advocated a revolutionary approach to mobilizing the poor through class warfare against capitalist forces that were viewed as exploiters of labor and oppressors of the poor.

David Horowitz, a longtime student of leftist political movements in the United States, characterized the Cloward-Piven strategy as seeking “to hasten the fall of capitalism by overloading the government bureaucracy with a flood of impossible demands, thus pushing society into crisis and economic collapse.”

Cloward and Piven argued a “guaranteed annual income” should be established as an entitlement for the poor.

Arguing for massive registration of poor in existing social-welfare programs, Cloward and Piven sought to create a crisis that could be exploited to obtain a fundamental redistribution of power in favor of the “have-nots.”

Advancing their socialist revolutionary aims, Cloward and Piven explained the crisis they sought “can occur spontaneously (e.g., riots) or as the intended result of tactics of demonstration and protest which either generate institutional disruption or bring unrecognized disruption to public attention.”

The Cloward-Piven strategy sought to apply the tactics of the revolutionary civil-rights movement, including urban riots, to the poor as a whole, transcending interest-group politics defined by race to involve interest-group politics defined by class.

WND wishes to acknowledge the assistance of reader Alan Davis in providing the analysis of the FY 2017 federal budget that is central to this article.

Read more at http://www.wnd.com/2016/02/obama-budget-hides-full-impact-of-spending-spike/#miWu91htwDc2e66x.99

My comments: Obama's actions show him applying the Cloward-Piven Strategy to Destroy the U.S. Economy.