Sunday, March 29, 2009

Obama's Budget Failure

Check out Matthew Continetti's new essay at the Weekly Standard, "A Big, Fat Failure: Obama's Budget Makes a Bad Situation Worse":

RamireObama Budget

Well, it's about time. The Beltway is waking up to the realities of President Obama's budget plan, which taxes, spends, and borrows as far as the eye can see. The president's vast new commitments in the areas of health care, energy, and education have already spooked small-government Republicans and the foreign investors who help finance America's public debt. Now even some Democrats are beginning to realize that the president's fiscal policies are unsustainable in the long--and maybe medium--run. What took them so long?

The realities of the modern global economy require government to play a substantial role in ensuring the national and economic security of the people. Americans aren't going to dismantle the welfare state. Social Security, Medicare, and Medicaid are--like the Pentagon--here to stay. The task, then, is to ensure that those programs are sensibly structured and financed, and compatible with robust economic growth. And on this score, Obama's budget is a big, fat failure.

It's true, as he so often reminds us, that Obama inherited a public debt that had doubled to 40 percent of GDP from 20 percent, and an economy in the midst of a deep recession. But Obama proposes to take a bad situation and make it much worse.

It was pretty much inevitable that government would pick up the pieces of the financial crisis and its aftermath. A stimulus bill and some form of bank bailout were going to be facts of life. And tax revenues are plunging thanks to the recession. So the federal government's balance sheet was always going to deteriorate in 2009. The problem is that Obama's policies would move us from deterioration to disaster. The national debt Obama gripes about? His budget will double it to 80 percent of GDP in 2019. Whatever that is, it's not "a new era of responsibility."

The debt burden, moreover, is likely to increase as tax hikes weigh down the economy. Obama's budget brings rates up to Clinton-era levels. But those rates probably will be raised even more to service a growing debt and pay for new spending. And don't forget the added levies that will hit us if Obama has his way. There could be taxes on employer-provided health benefits, the indirect tax of a carbon cap-and-trade scheme, an increase of the payroll-tax cap, and maybe a national Value Added Tax.
There's more at the link.

See also, John Steele Gordon, "The Economic Contradictions of Obama-ism":

In its proposed budget for fiscal year 2010, the Obama administration has also said it would inaugurate a “cap-and-trade” program to reduce the emission of carbon dioxide into the atmosphere. This program would require all companies to buy at auction the right to emit the gas, which all fossil fuels—oil, gasoline, coal, natural gas, etc.—do, in varying amounts. The total amount of emissions allowed would be strictly limited.

While billed as a program to reduce greenhouse gases, cap-and-trade is, inescapably, a tax on virtually all economic activity, as fossil fuels are an input in nearly all economic outputs. Even a lawyer, after all, has to use electricity to have the lights on in his office and power his computer. And electricity is mostly generated by fossil fuels, especially coal, the biggest emitter of carbon dioxide.
Cartoon Credit: Michael Ramirez.


All-Mi-T [Thought Crime] Rawdawgbuffalo said...

tells me that the fundamentals still aint sound re- our economy

Mark30339 said...

The biggest obstacle to a balanced budget amendment was the need to let government overspend in times of emergency. Elected officials now grab and spend all they can and kick the can to future generations and future legislatures. It's time to bring the Amendment back, and write in an exception for low interest liberty bonds. By that I mean, Congress can enact deficit spending to the extent it is funded by American citizens investing cash in liberty bonds.