March 5, 2014

Obama’s Budget Proves Some Things Never Change

The president scraps even the cover of fiscal responsibility in favor of a leftist grab bag of spending and tax hikes.

The White House unveiled Barack Obama’s latest budget proposal Tuesday, promising that billions in new spending and another $1 trillion in class-warfare-based tax hikes will somehow result in reining in the government’s deficits and reducing the national debt as a share of the economy. The president proposes to spend $3.9 trillion, $350 billion higher than this year and $1 trillion more than 2008, while carrying a deficit of $564 billion. He’s trying to have it both ways, making at different times the Keynesian argument that government spending is the root of economic growth while also flashing his deficit reduction merit badge. The deficit reduction, however, happened against his will, and shaving his record $1.7 trillion deficit to $600 billion is hardly worth celebrating.

“Our budget is about choices, it’s about our values,” Obama declared. “As a country we’ve got to make a decision if we’re going to protect tax breaks for the wealthiest Americans or if we’re going to make smart investments necessary to create jobs and grow our economy, and expand opportunity for every American.” Tax breaks for the wealthy? He just raised tax rates on the top two brackets in January 2013. Evidently, he didn’t update his stump speech accordingly. Yet he now proposes raising taxes further – by resurrecting the so-called “Buffett rule” (now known as the “Fair Share Tax”) and capping charitable deductions, for example – so that he can spend even more money.

Just last month, the Congressional Budget Office projected that deficits will rise to $1 trillion once again and the debt will reach 79% of GDP by 2024, while Obama says his budget will cause it to fall to 69% – still a staggering $25 trillion by 2024 – a very dubious claim. Meanwhile, the administration predicts economic growth of just 2.6% per year for the next decade, but his prediction is probably too optimistic if his proposed taxing and spending increases continue to sap the economy.

To arrive at reduced deficits, the administration is also counting on a couple of unlikely things. First, Obama says higher taxes will actually yield higher revenue – record-setting revenue of 19.9% of GDP, in fact, or $3.15 trillion more than CBO projects. That’s an absurd calculation given that, well, it would tie a record, and, again, because tax hikes tend to depress growth, yielding lower revenue over time. Second, he plans on ObamaCare producing $402 billion in savings over 10 years. A certain hot place freezing over is more likely.

Finally, he proposes nothing regarding reforming Social Security or Medicare, which are the primary drivers of long-term debt, and such “mandatory” spending already consumes more than two-thirds of federal spending. Even The Washington Post understands this, editorializing, “In a federal budget of nearly $4 trillion, the president and Congress will argue over about $1  trillion, divided roughly evenly between defense needs and every other federal function. Under these circumstances, even the most modest policy prescription becomes a recipe for political trench warfare.”

Indeed, the president’s budget is nothing more than a leftist wish list. It would never pass the House and the Senate has already decided not to bother with a budget again this year. But at least Obama has reaffirmed that reality hasn’t changed his priorities.

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