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  • Morning Bell: Barack Obama Is Right

    Whether it’s baseball, driving or federal budgeting, rules play a central role in determining outcomes. Lower the pitching mound five inches, and baseball teams score more runs. Put too many signs on the road, and traffic accidents go up. The federal budget process is no different and, as Heritage senior fellow J.D. Foster details, the current budgeting rules are biased in favor of higher taxes and higher spending.

    First enacted in 1990, PAYGO (short for pay-as-you-go) rules direct the Congressional Budget Office (CBO) to establish spending and revenue baselines from which all proposed federal tax and spending changes are to be judged. According to its lofty rhetoric, PAYGO then requires that all tax cuts and spending increases must be matched by an equal amount of tax hikes or spending cuts. The problem, as Barack Obama is finding out, is that the CBO baseline is biased in favor of higher spending and against lower taxes.

    Obama plans to raise taxes on those making more than $250,000 by letting the much of the 2001 and 2003 tax cuts expire. At the same time he wants to preserve the parts of those tax cuts that benefit those making less than $250,000, and he wants to cut taxes further for select groups such as low-income workers and working seniors. The problem is that under PAYGO, Obama gets no credit for raising taxes by letting any part of the 2001 and 2003 tax cuts expire. Those tax increases are cooked into the baseline.

    The CBO revenue baseline assumes that tax cuts with expirations will not be renewed. On the other hand, when CBO constructs its spending baseline, it ignores statute expirations and assumes current policy will continue. So continued spending levels for temporary initiatives like farm subsidies, SCHIP and highway funding are always cooked into CBO’s baseline spending, while lower taxes like the Alternative Minimum Tax, research and development tax credit, and the 2001 and 2003 tax cuts are all assumed to expire. As Obama economic aide Austin Goolsbee told Congressional Quarterly, CBO’s double standard for spending and taxation is “completely unrealistic.”

    Foster concludes: “It is said that politics makes for strange bedfellows. Perhaps to his own surprise, Obama has apparently joined forces with conservatives to correct the CBO revenue baseline. Maybe this also demonstrates that Washington is ready to have an honest debate about tax and spending policy.”

    Quick Hits:

    Posted in Ongoing Priorities [slideshow_deploy]

    4 Responses to Morning Bell: Barack Obama Is Right

    1. Shelly wickersham says:

      How can Russia claim the Arctic Circle's natural gas and oil?? Is the US missing something here??

    2. joe, chicago says:

      Good for Obama, finally a champion of the righteous !

    3. E Paul Lian, Scottsd says:

      Barack Obama & Joe Biden are completely wrong on their views of America and what we need. Senator Obama can draw a crowd of curiosity seekers, however, he has not offered a single idea that passes the smell test. His Energy plan, National Health insurance, taxes, Social Security, National Defense, etc. will set our country back 30 years. He hasn't demonstrated any of the personal characteristics ( trust, honesty, integrity, humility, professionalism & expertise) required of the leader of the Free World.

      Senator Biden is nothing more than an ego maniac who has proven nothing more in his life than he knows how to find the train station every AM & PM.

    4. Kelley says:

      I'm with Paul from AZ. Furthermore I'm tired of hearing the repeated cries from Obama/Biden that the Republican party needs reform and Bush has failed. The media forgets to remind us how many times Bush had good plans but our Democratic congress has failed us in their voting.

      Change? What change? More taxes???? How about some spending changes? The oil prices won't necessarily go down plus we will be paying more in taxes! Don't give the government more money when they don't have a plan for spending it. Lessen our military!! This day in age that's a very scary thought. Last but not least there are intelligent people in both the Democratic party and the Republican party I just wish we could become more interested in the needs of our country not power in the political party. God Bless America we need some help.

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