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March 2014 - Volume 19, Number 1


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The Unstoppable Leviathan

by John Hendrickson


President Barack Obama in discussing his forthcoming budget proposal is calling for “an end to the era of austerity.”[1] Austerity in political terms refers to an era of painful budget cuts, but the reality is that after record levels of spending which created large deficits and a dangerous level in the national debt, President Obama’s fiscal policies are nowhere close to austerity. The Congressional Budget Office (CBO) recently issued their budget and economic outlook for 2014 and they projected a $514 billion deficit for 2014, which while down from the annual trillion-dollar deficits which first occurred during the Obama administration, is still not good.[2] The fact remains that the federal government continues to face a serious spending problem as demonstrated by the $17.5 trillion national debt, which continues to grow and endanger the security of the nation.


Federal spending continues to increase at a rapid pace. In 2000 the federal budget was close to $1.8 trillion and the budget today (2013) is $3.5 trillion.[3] In 2015 it is possible that the federal government will set a new record with a $4 trillion budget. As Wayne R. Crews, Jr., who serves a Vice President for Policy at the Competitive Enterprise Institute (CPI), wrote:


Trillion-dollar deficits were once unimaginable; such sums signified the level of budgets themselves, not shortfalls. President Obama’s 2014 budget projects smaller deficits, with 2013’s claimed $901 billion to fall to $575 billion in 2018, but to rise thereafter. At no point is spending projected to balance in the coming decade. To be sure, many other countries’ government outlays make up a greater share of their national output, compared with 40 percent for the U.S. government. However, in absolute terms, the U.S. government is the largest government on the planet — whether one’s metrics is revenues, expenditures, deficits, or accumulated debt.[4]


Federal spending will continue to grow unless it is checked and restrained by Congress. The CBO predicts that “the federal government will add $10 trillion to the national debt by 2024 — bringing the total to over $27 trillion.”[5] In addition the CBO is also projecting that trillion-dollar deficits will return by 2022.[6] The national debt is projected to increase by $8.5 trillion under President Obama’s administration.[7]


President Obama will call for the federal government to spend $3.9 trillion in 2015 along with calling for increasing tax rates on top-income earners in order to pay for his spending priorities.[8] This is not sound economic policy for an economy that is still very weak in the aftermath of the Great Recession. Unemployment continues to be a problem with more people not seeking work, and for many wages have not increased. Investor’s Business Daily noted that “the ranks of those not in the labor force climbed nearly 11 million, driving the labor force participation rate down from 65.7 percent to today’s 63 percent — a level not seen since 1978.[9]


In addition to the problem of unemployment the economy is also confronted with the problem of inflation:


The official inflation data confirm this. Overall, food prices are up 9% since June 2009, according to the Bureau of Labor Statistics. And the cost of many staples is skyrocketing. Pork prices have climbed 14%; poultry is up 12%; eggs, 27%; milk, 20%. Meanwhile, energy prices have climbed 18% during the recovery, and the price of gasoline is up a whopping 31.5%. Then there's college tuition, up 23%. At the same time, wages aren't budging. In fact, measured in real terms, the median household income is 4% below where it was four-1/2 years ago. And while the official unemployment rate is down, that's due to millions quitting the workforce altogether.[10]


The reason for the lackluster economy is the economic and fiscal policies that have emerged from Congress and President Obama’s administration. Some of these policies include the massive stimulus spending bill, tax increases, the Dodd-Frank financial reform bill, the Patient Protection and Affordable Care Act (ACA), and the recent proposal to increase the minimum wage. All of these policies, including the fiscal crisis as symbolized by the out-of-control spending, are causing uncertainty in the economy. The massive number of regulations being imposed on the economy is especially troublesome. “Federal environmental, safety and health, and economic regulations cost hundreds of billions, perhaps trillions, of dollars annually…,” notes Crews who is author of the annual CPI report Ten Thousand Commandments: An Annual Snapshot of the Federal Regulatory State.[11] Crews notes that “for the first time in history, the estimated cost of regulation exceeds half the level of the federal budget itself. Regulatory costs of $1.806 trillion amount to 11.6 percent of the U.S. gross domestic product (GDP), estimated at $15.549 trillion in 2012.”[12]


John B. Taylor, a Senior Fellow at the Hoover Institution and a Stanford University Economist, also argues that “poor economic policies of the past few years are a reasonable explanation for today’s weak economy.”[13] As Taylor argues:


Fiscal policy has at best provided temporary stimulus before fading away with no sustainable impact on growth. More costly and confusing regulations — including many mandates in the Affordable Care Act and the Dodd-Frank Act — have reduced the willingness of firms to invest and hire. The Federal Reserve has employed a variety of unconventional and unpredictable monetary policies with not very successful results.[14]


The Affordable Care Act itself, parts of which have been delayed by the President, is not only causing uncertainty to businesses and individuals, but also creating more fiscal burdens. As Michael Tanner, a Senior Fellow with the Cato Institute wrote:


When all additional costs are included, ACA’s real 10 year cost appears to be much closer to $2.4 trillion. Since the legislation includes roughly $1.18 trillion in new or increased taxes through 2023 to pay for the benefits it provides, a calculation of the law’s full costs suggests it will add $1.16 trillion to the national debt over that period.[15]


This is an additional entitlement adding to the crisis in entitlement spending caused by the escalating unfunded mandates of Social Security, Medicare, and Medicaid.


During the 1930s the nation was in the midst of the Great Depression and President Franklin D. Roosevelt’s New Deal. Former President Herbert Hoover understood that the New Deal was not only a threat to constitutional government, but he warned that “no nation or individual has been able to squander itself into prosperity.”[16] President Obama’s policies are not only threatening the constitutional foundations of the Republic, but also leading the nation closer to economic destruction. It appears the 2015 budget request will call for more spending and higher taxes, while not addressing the urgent need to reduce spending.

[1] Zachary A. Goldfarb, “With 2015 budget request, Obama will call for an end to era of austerity,” The Washington Post, February 20, 2014, < > accessed on February 24, 2014.
[2] Will Allison, “Ryan: CBO report is a call to action,” Press Release, Office of Representative Paul Ryan, February 4, 2014, <> accessed on February 24, 2014.
[3] Chris Edwards, “Cutting the $4 Trillion Budget,” Cato Institute, February 13, 2014, <> accessed on February 24, 2014.
[4] Clyde Wayne Crews, Jr., Ten Thousand Commandments: An Annual Snapshot of the Federal Regulatory State, 2013 20th Anniversary Edition, Competitive Enterprise Institute, p. 1, <,000%20Commandments%202013.pdf> accessed on February 25, 2014.
[5] Allison.
[6] Ibid.
[7] Senate Republican Policy Committee, “February 2014: Policy by the Numbers,” February 11, 2014, <> accessed on February 24, 2014.
[8] James Freeman, “Obama to propose higher taxes,” The Wall Street Journal, February 21, 2014, <> accessed on February 24, 2014.
[9] Editorial, “Stagflation, anyone?” Investor’s Business Daily, February 18, 2014, <> accessed on February 19, 2014.
[10] Ibid.
[11] Crews, p.1.
[12] Ibid.
[13] John B. Taylor, “Let It Grow: The evidence is in that steeper taxes and overregulation fail to boost incomes and ease inequality,” Hoover Digest, 2014, No. 1. Winter, Hoover Institution, Stanford, California, 2014, p. 9.
[14] Ibid.
[15] Michael Tanner, “Obamacare: What We Now Know,” Policy Analysis, No. 745, January 27, 2014, Cato Institute, Washington, D.C., p. 20.
[16] Herbert Hoover, The Challenge to Liberty, New York, Charles Scribner’s Sons, 1934, p. 123.


John Hendrickson is a Research Analyst with Public Interest Institute.

LIMITS is one of our quarterly membership newsletters, arriving in March, June, September, and December. It consists of short articles and essays on protection of human rights by limiting the powers of government.


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