President Obama's Budget: A Better Magic Show Than Las Vegas
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
- 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
- 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
- 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
Gambling Our Future
- 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 slower wage growth as they reduce
investment, productivity, and competitiveness of U.S. workers and
For more on
President Obama's budget, visit http://blog.heritage.org/2009/02/27/president-obamas-budget-a-better-magic-show-than-las-vegas.