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  • 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 responsibility.
    • 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 trillion dollars.

    A Mirage

    • 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 reserve fund.
      Treasure Island
    • 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 their budget.

    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 in slower wage growth as they reduce investment, productivity, and competitiveness of U.S. workers and companies.
    Posted in Ongoing Priorities [slideshow_deploy]

    4 Responses to President Obama's Budget: A Better Magic Show Than Las Vegas

    1. Bill in Texas says:

      Why do all the conservatives keep saying the average person will see tax increases? It's not part of the plan. What is your alternative plan? I do not hear any ideas on how to fix the ecomomy. Tax cuts generaly benefit the rich and will not help this dire situation. Reaganomics helped create this mess and will not solve it as well. I would love for someone to offer a solution and not just complain. Could it be you have no ideas?

    2. Jim in Tennessee says:

      To Bill in Texas:

      President Obama's plan includes "cap and trade", which passed, will increase the utility bills of every single utility user in the nation. A tax increase on companies, large and small, will be passed to the customers (you and me) and although it will not be called a tax on the customers, it will be a decrease in our take home pay just the same. If you honestly believe that Reaganomics helped create this mess, my opinion is that you might want to do more evaluation after you read at least one good economics book.

      We cannot spend our way out of a recession any more than you can spend your way out of debt.

      My proposed solution would be to decrease the size of the Federal government by eliminating some of the so-called entitlements. The Constitution does not contain any "entitlements" other than the freedom to be responsible for your own life and to assist only those who cannot help themselves.

      You have definitely "bought into" the proponents of BIG GOVERNMENT that the tax cuts only benefit the rich. They do not! They benefit everyone who depends on free enterprise to create jobs. If you have a job, these so-called "rich" are the ones who pay your wages.

      If you had saved more when the economy was good prior to 2006, then you would not be complaining now that our economy is faltering. The democrats forced banks and loan companies to give loans to people to buy houses they couldn't afford and the Bush administration did not sufficiently "force" the necessary regulations needed to prevent our economy from faltering. Both parties are to blame for what we are experiencing and "We The People" have allowed Congress and our President to lead us into this recession by spending more than they should have.

      Every cent that the Federal Government spends must first come from US and we never recover all of it.

      All of us need to wake up and re-take control of our Federal Government.

    3. Jackie D., Islip, NY says:

      Well said, Jim. In addition and to put in in plain dollars and cents- Bill, if I own a business and pay someone, say, $30,000. per year and my taxes go up, let's say, $20,000. per year, then I will have to get that money from somewhere in this slumping economy. That means that the person who is costing me $$$ is going to lose their job because I will be sending my $20,000. to the Federal Gov't. so that they can divide it up and give a few lower income folks $12. a week until my $20,000. runs out. My $20,000. (disallowing any of the costs of distribution and handling) would give $12. to 1666 people one time. Then what??? Where does the rest of the billions come from? I have lost a productive employee. They have lost a job and benefits. They cannot spend because they have no income, which affects all of the goods produced and consumed. They go onto the Federal rolls for health care and unemployment, which cost me again and the cycle starts. If 5%-10% of the taxpayers in America are paying 60% of the taxes, how long do you think it will take to put them out of business by taking even more from them? What good does a few dollars a week do for the millions who are now unemployed, uninsured, homeless, and depressed?

      This plan has never worked and never will. Our President and his Puppeteers are destroying America. This is the real plan.

    4. Scott Sarran, SFO says:

      How's this for a premise: Government can't solve the problems it creates, by throwing money at it!

      How's this for ideas: Let's not print more money and acquiesce to government solutions (power grabs vs OUR FREEDOMS), but rather let's DEREGULATE the private sector and let it solve the problems!

      Bill, you mentioned Reaganomics, so a little history is in order. Reaganomics deregulated the airline industry, the telephone industry and protected us from illegal strikes by air traffic controllers. MCI and Sprint, fiber optics, wireless communications, explosive employment growth, communication efficiencies and a massive reduction in costs for phone calls and air travel resulted – long distance costs plummeted from over $1 per minute to less than $.05 in less than 5 years following "reagonomics" deregulation. Similarly, airfares fell dramatically – coast to coast roundtrip ticket prices dropped 80% in the 1980s allowing competition and explosive job growth as new airlines came on line and new service routes allowed more affordable business travel and opened this formerly elite mode of transport to millions of families and individuals. Government spending as a % of GNP fell from around 22% pre-Reagan to less than 18% as private sector employment, capital formation and foreign investment flourished in the wake of this common sense visionary who cut taxes and regulation in tandem with Mr. Volker's policies to slow monetary growth to kill inflation.

      "..Make no mistake, government cannot solve our problems because government is the problem…" Ronald Reagan

      I'd much prefer "Morning again in America" following the tax and regualtory cuts of Reagan to "Mourning America" 4 years from now in the wake of massive inflation, unemployment and capital flight in the wake of the misguided policies of the Obama administration.

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