Classic Tax and Spend Budget
- Increase, Raise and Hike: The President’s budget proposal increases taxes by $1.3 trillion; raises entitlement spending by $700 billion (including the health care fund), and hikes discretionary spending by a steep 12%.
- Creating Deficits, Not Eliminating Them: Given the budget deficit has already quadrupled in one year, the President’s pledge to halve it by 2013 is hardly ambitious. Even with the assumption of peace and prosperity, the 2013 budget deficit target of $533 billion would exceed any under President Bush.
- Taxes Spent: Before the recession, revenues were 18% of GDP and spending was 20%. After the recession, the President would maintain revenues at 19% of GDP and spending at 22%. All new tax revenues would finance new spending, not deficit reduction.
- Big Government at 22%: The proposed post-recession spending level of 22% of GDP has been exceeded only eight times in the post-war era. This is hardly setting the stage for fiscal responsibility.
- False Assumptions: The budget assumes economic growth rates a full third faster than the consensus of private forecasters. Obama’s revenue forecast is too high by as much as $200 billion a year, an excess he needs desperately to reach his deficit reduction target. His budget would keep unemployment high, depress revenues, and hold the budget deficit stubbornly around a trillion dollars.
- An Illusion: The budget proposes $1.133 trillion in regular discretionary spending in 2010, and claims that it is a 7% hike over the 2009 level of $1.062 trillion. But the actual 2009 baseline level, reflected in the budget resolution and appropriations bills, was $1.012 trillion. This makes the actual proposed budget increase 12%.
- Eliminating the Gimmicks: The $2 trillion in “budget savings” isn’t real. About $1 trillion is “saved” by raising taxes, and $1.5 trillion is “saved” from Iraq spending that was never going to continue at previous levels anyway. If you eliminate that gimmick, the budget actually increases spending by nearly $500 billion over 10 years—not even counting the $634 billion health reserve fund.
- Old Entitlements: President Obama fails live up to his promise to significantly reduce the long term cost of Social Security, Medicare, and Medicaid, despite his assurances of long-term fiscal responsibility.
- New Entitlements: The budget would convert Pell grants into an entitlement, put them on autopilot, and steeply increase their budget.
- Rolling the Dice: Almost as if he set out to weaken the economy in the long run, Obama proposes tax increases on savers, investors, small businesses, and upper-income taxpayers.
- Betting on Red: In addition, the President is calling for $210 billion in higher taxes on American companies trying to compete in the global economy and $646 billion in cap and trade taxes (humorously labeled “climate revenues”) on American industry at home. These taxes will ultimately be paid through lower wages and dividends and again through in slower wage growth as they reduce investment, productivity, and competitiveness of U.S. workers and companies.