Economy, Regs, & Taxes

Legal Plunder Central to Obama's Budget

Spending $4 trillion we don't have on "middle-class economics."

Feb. 2, 2015
Hey, we can afford it!

By law, today is the day the U.S. president must submit his budget to Congress. The word “budget” implies balancing a list of expenditures taken from projected revenue. Instead, Barack Obama’s $4 trillion budget will continue to blow the lid off the federal debt while taking from those who work in order to spend on those who don’t. “Middle-class economics” at its finest.

Obama’s projections claim that, over the next 10 years, growth of the $18 trillion malignant tumor known as the federal debt will be slowed by $1.8 trillion. He claims this will be accomplished through a formula of tax increases rather than generating more taxpayers or increasing consumer wealth for spending.

He calls this “the idea that this country does best when everyone gets their fair shot, everyone does their fair share, and everyone plays by the same set of rules.”

But his pitch is nothing new. Every single one of Obama’s seven budgets has included major tax increases. Then again, it is Groundhog Day.

Nineteenth century French philosopher Frédéric Bastiat pondered the socialistic activity that serves the state and that would be otherwise criminal – legal plunder: “But how is this legal plunder to be identified? Quite simply. See if the law takes from some persons what belongs to them and gives it to other persons to whom it does not belong. See if the law benefits one citizen at the expense of another by doing what the citizen himself cannot do without committing a crime.”

Before we break out the microscope and look at the granular items of the Obama tax-and-spend plan, appreciate that in the federal budget there are three types of spending: mandatory spending – based on existing law and approaching two-thirds of the entire budget; discretionary spending – that which goes through the annual appropriations process and is less than one-third of total outlays; and interest payments on the debt.

Mandatory spending is largely composed of earned-benefit and entitlement programs: Social Security (almost 23% of total spending), Medicare, Medicaid, food stamps, some transportation expenditures and part of our veterans’ benefits. This mandatory spending is projected to consume in excess of $2.5 trillion. So, with the exception of roads and veterans’ benefits, largely unconstitutional “mandatory” programs receive about 65% of our tax dollars.

Discretionary spending includes the military, education, housing, energy, environment and food/agriculture. Isn’t it interesting that the military budget (in the Constitution) is “discretionary” while food stamps (not in the Constitution) are “mandatory”?

To appear as appeasing Republicans, Obama will tout his call to increase military funding by reversing the “sequester” – the bipartisan shell game that reduced nominal growth and did not cut real spending. But as Obama dangles this carrot, he calls for $530 billion more in “nondefense discretionary spending” – largely entitlement spending that is already, as noted above, mammoth.

To pay for the budget-cap-busting 7% spending increase, Obama calls for new taxes on the “wealthy,” whom he despises for their success. These include:

  • Increasing the capital gains tax from 23.8% to 28%, which will serve as a disincentive to work, save and invest.

  • Implementing a new cap on all IRAs and 401(k) accounts to tax investments that provide an annual distribution of more than $210,000. Obama’s cutting you off, you greedy savers.

  • Eliminating dependent-care flexible spending accounts, which allow tax-free savings for those caring for a senior or dependent with special needs.

  • Establishing an inheritance tax of 40% of an asset’s value on top of a 28% capital gains tax applied to the increase in the asset’s value from original purchase to the time of inheritance. Obama wants you to transfer your wealth, just not to anyone in your family.

The list of new tax increases doesn’t include the proposed tax on foreign corporate profits or a bank tax directed at about 100 of the larger, profitable companies that will certainly forward those costs to customers. Nor does it include the 20 taxes hidden in the “Affordable” Care Act that will continue to pop up as the law is fully implemented.

Thanks to this redistribution of wealth, Obama claims, “We can afford to make these investments.” The $18.1 trillion debt – up from $10.6 trillion when he took office – would beg to differ. In fact, his “middle-class economics” pitch will continue to foment class division and envy while driving the nation ever deeper into debt.

Bastiat was exactly right: “The politician attempts to remedy the evil by increasing the very thing that caused the evil in the first place: legal plunder.”

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