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March 24, 2009

Obama Budget Would Double the National Debt

By

Last fall, presidential candidate Barack Obama promised revolutionary change in Washington.

Too bad his budget policies have offered merely more of the same.

The president promised a "net spending cut." Then he signed a massive so-called "stimulus" bill that critics on the left and right agreed was deeply flawed, and that will dump $9,400 per household of new debt into the laps of our children and grandchildren.

Obama also pledged to "slash earmarks to no greater than 1994 levels" of 1,318. Then he signed an omnibus spending bill with 9,287 earmarks -- the second most in American history, including money for tattoo removal, a Buffalo Bill museum, and a Totally Teen Zone.

The president promised his budgets would confront the "hard choices" that President Bush had avoided by relying on budget deficits. Then he offered a budget that would create as much government debt as every other president from George Washington to George W. Bush -- combined.

President Obama's speeches loudly denounce Bush policies. Yet his budget doubles down on them. President Bush's spending spree expanded government by $700 billion.

President Obama's budget would expand government by $1 trillion (not even counting the stimulus).

President Bush began a seemingly endless series of financial bailouts. President Obama's budget would accelerate those bailouts.

President Bush created an expensive Medicare drug entitlement and began a historic education spending surge. President Obama's budget creates a $634 billion health care reserve fund and would nearly double federal education funds.

President Bush's budgets included unrealistic assumptions and gimmicks. President Obama's budget unrealistically assumes an economic boom will begin next January.

President Bush oversaw budget deficits between $300 billion and $400 billion while fighting a war. Even after (assumed) peace and prosperity, President Obama would run permanent deficits between $500 billion and $700 billion.

Where are the hard choices? Where is the new direction? President Obama's only real divergence is his proposal to raise taxes steeply. Yet all these tax increases would go toward expanding government. None would reduce budget deficits even back to President Bush's levels.

Over 10 years, President Obama would raise taxes by an average $300,000 apiece for the 3.2 million individuals and small businesses with the highest incomes. With the economy already in recession, this is downright reckless; President Hoover's tax increases, after all, helped turn a recession into the Great Depression. And delaying these tax increases until 2011 won't stop forward-looking businesses from immediately scaling back any investment and hiring plans in anticipation of the painful tax bite.

Everyone else's taxes would rise, too. Despite his promise that "if your family earns less than $250,000 a year, you will not see your taxes increased a single dime. I repeat: not one single dime," the president has proposed an (at least) $646 billion cap-and-trade energy tax. This would immediately be passed onto all consumers at a cost that could average anywhere from $650 to $2,000 per household annually.

Overall, Washington spent $24,000 per household before the recession. The president's budget would increase real annual spending to $32,000 per household by 2019 - and that assumes he proposes no additional government expansions.

Anyone who believes all these costs can be paid by the wealthiest 2 percent of taxpayers is dreaming. We'll all be paying this tab for decades.

And after all the talk about confronting "hard choices," President Obama's budget offers no solution to the coming cost of paying Social Security, Medicare and Medicaid benefits to 77 million retiring baby boomers. Absent reform, those costs could push income tax rates to over 60 percent for the middle class-not even counting the tax increases to fund the president's new proposals.

The president's proposals haven't restored the stock market's confidence. The Dow Jones Industrial Average -- which had climbed from November's 7,500 trough back to 9,000 by New Year's Day - has already plummeted by nearly 25 percent this year. And Obama's call to raise investment taxes will further depress the market.

All in all, it's a blueprint for higher taxes, lower incomes and declining retirement funds.

The biggest winners are Washington lobbyists, one of whom gleefully declared the president's budget "is like Christmas" for lobbyists.

The biggest losers are those not yet old enough to vote. President Bush had already dumped $25,000 per household of new debt into their laps.

President Obama plans to add an additional $48,000 per household to their tab. Is that the kind of "change" America voted for?

Brian M. Riedl is Grover M. Hermann Fellow in Federal Budgetary Affairs in the Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation.

First Appeared in McClatchy

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