IMF Study: Under Obama U.S. Has Become One of Developed World’s Most ‘Profligate’ Nations

“Power tends to corrupt, and absolute power corrupts absolutely.” Lord Acton wrote those famous words after the First Vatican Council moved to promulgate the doctrine of papal infallibility – the Catholic dogma which states that the Pope is preserved from the possibility of error when acting as the ruling agent in determining the formal beliefs of the roman Catholic Church.

Acton was, for lack of a better word, pissed. As a historian Acton had carefully studied past rulers and noticed a divergent trend – societies tended to grant them a favorable presumption of doing no wrong, and yet the more power rulers were able to gather, the more wrong they would do.

Can the same not be said of President Obama? Granted his corruption mostly, if not solely, lies within the realm of his views on debt. But nevertheless, power seems to have seriously besmirched his previously held views of debt and deficits.

“Increasing America’s debt weakens us domestically and internationally,” Obama said in 2006. “Leadership means that ‘the buck stops here.’ Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren.”

He didn’t abandon such views in his race for the White House. “The problem is, is that the way Bush has done it over the last eight years is to take out a credit card from the Bank of China in the name of our children . . . so that we now have over $9 trillion of debt that we are going to have to pay back – $30,000 for every man, woman and child. That’s irresponsible. It’s unpatriotic,” Obama said in 2008.

And yet what has he done? He’s increased the deficit more than any president in history. Under his watch the national debt has skyrocketed by more than $5 trillion. In light of our fiscal intransigence and sheer unwillingness to suitable reform our unsustainable entitlement programs, the United States credit rating was downgraded for the first time in history. Now, just four years after his famous pronouncement, every man, woman and child’s share of the national debt is more than $52,000.

Whether he has truly come to believe his party’s rhetoric—that entitlement’s can’t be touched, that historic spending was needed to jumpstart the economy, and that higher taxes on the wealthy are the panacea for the government’s budget problems—or he has slowly realized that reforming popular government programs is just too politically difficult, it is unassailable that his long-held views have been corrupted.

In light of the dearth of leadership out of the White House it’s unsurprising that the International Monetary Fund officially slapped us with the label of “profligate nation” this week. The Washington Post’s Howard Schneider writes:

It’s official. The United States is a “profligate” nation, according to IMF staff research that examines which countries respond to increases in public debt by trimming their fiscal sails. And that makes the nation surprisingly rare in the developed world.

. . . What that statistic means, technically, is that a country’s annual budget deficit does not get smaller (or its annual surplus larger) when its overall debt increases in relation to the size of its annual gross domestic product. In theory, a “prudent” nation would trim deficits or accumulate surpluses as overall debt grows, while a profligate one would not. . .

Using the IMF methodology the United States finds itself in, uh, interesting company. Of the 42 nations in the study, including most of the developed world, only five earned a “profligate” label – the United States, Japan, Israel, Costa Rica and Honduras. In other words we’re lumped in with a nation that has suffered one of the most prolonged periods of economic stagnation in history, a nation who has spent decades investing and fighting for its very survival, and several Latin American nations with GDP’s about the size of South Dakota.

If the United States is able to escape the path of profligacy and get back to prudence and prosperity, drastic changes must be made. First and foremost, President Obama must return to his belief that deficits weaken us. They shift the burden of today’s bad choices onto the next generation. And that they are irresponsible. But that requires setting aside the political power that comes from saying what his liberal friends want to hear. And he’s shown no willingness or desire to do that.