Is Obama Buying the Election With His Welfare Explosion?

By: Larry Kudlow
CNBC Anchor

 

With the unprecedented budget explosion of means-tested, welfare-related entitlements, does Team Obama think it can buy the election?

Getty Images President Barack Obama

It’s a cynical question. But I wouldn’t put it past that cynical bunch.

Remember Harry Hopkins, Franklin Roosevelt’s close aid? It was Hopkins who argued tax and tax, spend and spend, elect and elect. Sound familiar? And if I’m not mistaken, the high-tax, anti-rich, big-spending, redistributionist FDR is one of President Barack Obama’s idols.
 

So let’s take a look at some of the recent budget-explosion data points:
 

According to Jeff Sessions, the ranking Republican on the Senate Budget Committee, means-tested welfare programs soared to over $1 trillion last year. The federal government accounted for $750 billion of that, while $250 billion came from the states, which leveraged federal payments into even larger expenses.
 

Between 2008 and 2011, federal welfare payments have jumped 32 percent. Food stamps have surged, with 71 percent more spending on the program in 2011 compared with 2008. Health payments, principally Medicaid, have climbed 37 percent.
 

By the way, it’s not just the deep recession and weak recovery that’s driving up these programs. It’s a substantial eligibility expansion, which started under George W. Bush, but has gone much further under President Obama. (Read More: Kudlow: Romney Trouncing Obama in 'This' Critical Area.)
 

In a larger budget context, reporter Jeffrey H. Anderson uses a Treasury Department study to chronicle the 7-Eleven presidency. In fiscal year 2012, ending Sept. 30, the government spent nearly $11 for every $7 of revenues taken in. The exact figures are $2.5 trillion in tax revenues and $3.5 trillion in spending. In other words, it spent 44 percent more than it had coming in. Previous fiscal years look even worse: The government spent 56 percent more than revenues in fiscal year 2011 and 60 percent more in fiscal year 2010.

All in all, according to Anderson, the government under the Obama administration received $6.8 trillion in taxes and spent $10.7 trillion — 56 percent more than it had available.

What’s going on here is fiscal profligacy on the grandest scale in American history. And there are consequences.
 

Massive amounts of capital are being drained from the private sector and transferred to the government. This is one reason why American businesses have gone on a virtual capital-investment strike. Small businesses, in particular, can’t get the capital being drained by Uncle Sam. (Read More: Did Obama Really Cut Small Business Taxes 18 Times?)
 

After four years of trillion-dollar deficits, both businesses and individuals have held back investment because they fear massive tax increases are on the way. That’s a big reason why the so-called recovery has been so weak.
 

In addition, in our new entitlement nation, growing government dependency is ruining the very moral fiber and backbone of America’s traditional work ethic. Increasingly, the feds are paying more to not work, rather than providing after-tax incentives to go back to work.
 

Mitt Romney has taken a lot of flak for raising the issue of growing government dependency. But however inartfully he may have expressed his view, his basic story is correct. The sheer volume of spending going on in this country is bringing us ever closer to bankruptcy. (Read More: Romney on '47 Percent': I Was 'Completely Wrong'.)
 

And consider this: The spending explosion for means-tested welfare programs is outpacing spending on Social Security and Medicare, which are themselves veering toward bankruptcy.
 

I may be too cynical about Obama trying to buy the election with this entitlement explosion. Perhaps. But Obama wants to raise taxes in order to spend more on government unions and entitlement programs. It is redistribution, but it could be vote-buying, too.
 

—By CNBC's Larry Kudlow

http://www.cnbc.com/id/49481081