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  • Obama's Battle of the Bulging Deficit

    “We’ll Need To Raise Taxes Soon” opines Roger Altman, a former Deputy Treasury Secretary under President Clinton, in a Wall Street Journal editorial today. Of course, he comes to this conclusion because deficits are high, excessive entitlement spending continues to darken the budget outlook, and, well, that’s the solution he most desires. Of course, he’s wrong, again.

    President Obama and his congressional allies have accomplished a remarkable bait-and-switch. Remember the Obama directive to his cabinet to hunt down budget savings? Nothing. Remember going through the budget line by line? Nothing. Support for pay-as-you-go budget rules? Sure, but only after passing a stimulus bill. And, of course, as all true Paygo afficionados know well, support for Paygo is a relatively painless alternative to actually cutting some spending.

    The President has turned the old budget saw upside down. The supposed conservative solution to the budget was to starve the beast – cut tax revenues and let deficit pressures restrain spending. The Obama alternative is to glut the beast – spend as much as possible and let deficit pressures force taxes up.

    The key to the glut-the-beast strategy is to create an impression of inevitability about higher spending, and therefore the need for higher taxes. Altman tries this approach. A couple scholars from the Brookings Institution did the same a few days ago when they walked through the various budget pressures and concluded we need to look at a new Value Added Tax at the modest starting rate of 15 to 20 percent.

    Secretary Altman is correct in that we are coming to the proverbial fork in the road. Either the Congress brings federal spending under control or taxes will have to go up to prevent keep federal debt from going through the roof.

    The Altman solution to restraining government is pre-emptive surrender. In fact, however, there is nothing whatsoever inevitable about government spending. Cut it, slow it, reform it, and it goes down. Get spending under control and not only are tax hikes unnecessary, but then the debate shifts to letting Americans spend their own money rather than hiring a clumsy federal government to do it for them.

    In the 1944 Battle of the Bulge, German panzer divisions encircled the 101st Airborne Division, the “battling bastards of Bastogne.” The German commander, General Luttwitz, sent the American commander, General McAuliffe, a letter under flag of truce suggesting they discuss terms of surrender for the city. General McAuliffe replied, “NUTS.”

    Mr. Altman, we the taxpayers refuse your demands for surrender. Nuts to you, sir.

    Posted in Economics [slideshow_deploy]

    17 Responses to Obama's Battle of the Bulging Deficit

    1. Andrew, New York says:

      "Nuts to you, sir." I like it. Well stated.

      andrew

    2. Catherine, Virginia says:

      Someone, please tell me when the American people are going to wake up and realize that the current administration isn't doing anything FOR us, but rather it is doing a whole lot TO us.

      Every time I hear the President lauded for "at least doing something," I cringe, because I know that his fast-pace and his "tackle-everything now" attitude is ultimately going to drive my family – my country – off a fiscal cliff.

      Am I the only one who feels completely helpless and completely at the mercy of this out-of-control administration?

    3. Pingback: » Financial News Update - 06/30/09 NoisyRoom.net: “Extremism in the defense of liberty is no vice. Moderation in the face of tyranny is no virtue.” Barry Goldwater

    4. Thomas, Anchorage, A says:

      The Brookings link doesn't seem to work so here's the url again: http://www.brookings.edu/papers/2009/06_fiscal_cr

      This is creative:

      "The CBO baseline projects that, following record deficits in 2009, the cumulative deficit for 2010-2019 will be $4.4 trillion, with deficits declining sharply to 2 percent of GDP by 2012 and remaining flat through 2019. CBO’s baseline, however, incorporates a number of rules and assumptions that make it a poor guide to the underlying fiscal policy trajectory. To generate a better measure of where fiscal policy was headed as of the early months of the Obama administration, after the passage of the February stimulus package, we replace those assumptions with alternatives that we argue are more representative of the continuation of policies enacted under former President Bush. Under this adjusted baseline, the ten-year deficit is $10.1 trillion, or 5.7 percent of GDP. As in CBO’s baseline, deficits decline in the near term, but only to 4.8 percent of GDP by 2012, and unlike in CBO’s baseline, deficits then rise, to 6.4 percent of GDP by 2019."

      At least they acknowledge this:

      "Reinstatement of PAYGO rules, as proposed by the administration, would exempt most of the major causes of fiscal deterioration over the next decade. This approach buries important fiscal choices and will make constructive tax reform more difficult."

    5. Carole Nemy says:

      Catherine, no, you are not alone. Unfortunately, the stupid public who voted for Mr. Obama will wake up when their wallets are hit with high utility bills, a rise in Federal taxes, higher gas at the pump, etc. Hopefully, the coming elections in 2010 will get some of the 'pimps' out of Congress. By then, lets hope its not too late to reverse some of the damage. Mr. O has broken too many of his campaign promises and will hopefully pay a heavy price. He is a fraud

    6. Bill, Columbus, OH says:

      Of course Altman would neve consider that it's the expense side of the ledger that's the problem, so it must be the revenue side that needs to be fixed. These people make me want to puke!

    7. David S. Lesperance says:

      Let's try to look at the world as it is, not how we wish it to be. The world as it is has the following features:

      -According to the IRS, in 2007, 17.4% of the total U.S. tax revenue was supplied by 0.1% (one out of a thousand) taxpayers;

      -These "super-contributing taxpayers" are worldly, well-advised, and are often not tied to location to generate or maintain their wealth (i.e. they aren't punching a clock at a local factory) and have the financial means to change their current tax situation;

      -The U.S. government today and in the future will need additional revenue to pay their expenses. They are not going to look where there is no revenue potential, they are going to increase the take from the super-contributing taxpayers;

      -Super-contributing taxpayers who are not happy with this current (income/capital gain) or future (gift/estate) tax burden have various options with different degrees of effectiveness:

      Option A) Fund a candidate in the mid-term Congressional or future Presidential election who promises to halt or reverse the increase in tax burden. (Value as a solution: Limited to useless as that politician has to deal with the same circumstances as the current politicians with the same legislative and political resistance. Even if successful, there is the additional tax paid until success is achieved and they will still always be super-contributing taxpayers);

      Option B) Engage in tax evasion by hiding assets in offshore accounts. (Value as a solution: Useless, as even if the individual has no qualms about breaking the law, the impact of government to government [eg. U.S. pressure against Switzerland]; government to institution [eg. US pressure against UBS and all other banks]; and whistleblowers [too numerous to mention] means that there will be no "secret" accounts anywhere;

      Option C) Engage in legal tax avoidance structures. (Value as a solution: Increasingly limited as the government keeps "closing loopholes")

      Option D) Legally leave the U.S. tax system by Expatriation. (Value as a solution: One time disruption, permanent and complete solution).

      Therefore logic would have it, that increasing numbers of American "super-contributing taxpayers" are taking steps to place themselves in a position to execute Option D. As a lawyer who has helped Americans execute Option D since 1991, I can tell you that in reality I have seen a 450% increase in the number of people retaining me in this area in the first two quarters of 2009.

      The politicians are banking that "life inertia" and "patriotism" will stop people from actually expatriating. They may be right in the majority of cases, but given their "super-contribution", if even a small number leave, the impact of total tax revenue left to spend will be tremendous.

    8. Tom McKinney, Dunwoo says:

      Dear Sir:

      Here is my solution: Starting with the 2011 budget–a reduction in total spending by 10 percent. ($3.5 Trillion budget times 10 percent equals a $350 Billion reduction). Then each fiscal year thereafter another 10 percent reduction until the budget is balanced. Let every Department and Agency cut their budget, some may be more or less than 10%, however, the $3.5 Trillion is cut by 10% in fiscal year 2011.

      Tom McKinney

      Dunwoody, Georgia

      If this does not work–let us form a new political party–the AMERICAN PARTY.

    9. Ben C, Ann Arbor, MI says:

      David S: your point is well stated and clearly you have an insight to which most of us are not exposed. To your Option D): I had a conversation with a local medical equipment manufacturer who said, "Ben, there isn't any complelling reason for me to have my company in the United States. Without much difficulty I can move my family and business to a friendlier country such as Ireland." Pehaps he is now a client. I too have been thinking long and hard about keeping my business in the United States. I too may say good bye (but unlike Arnold, there won't be a "I'll be back").

    10. Brad S,, Detroit, MI says:

      Unfortunately, with over half of the population paying ZERO in taxes, the government already has their majority to remain in power.

      What is a budget to someone that can continue to go to the bank and withdraw their "endless" supply of money ? You have to understand that the mindset of the politician is that every American has a money tree in their front yard and all we have to do is walk out an pluck some more cash from it and mail it them in Washington.

      Socialism is not about re-distributing the wealth – it is about controlling it. And it is obvious this adminstration has the goal of – BY ANY MEANS NECESSARY. (The Porkulous bill, the Taxman- Malarkey Cap and Tax bill, the nationalization of banks and industry. . . .) It seems like the plot of a very bad movie, if only it wasn't reality.

    11. bill hamilton, weave says:

      Catherine, you are by no means alone. As Carole says, though, we'll have to pray that the people who voted for King Obama will wake up and realize that even under socialism, you still have the rich and the poor; you just lose everything in between, which in our case will mean we in the middle class will lose the most and become part of the poor class.

      The poor dopes who were expecting his policies to even the playing field are sadly mistaken. I was browsing at Books-A-Million today and noticed a telling passage in James Carville's book, in which he claims that democratic policies have been successful in achieving "income equality," another of the ruling class's pie-in-the-sky fantasies. They only want equality of everyone ELSE!

      Keep praying!

    12. Marjorie Barber, Ker says:

      In pre-election campaign, Obama promised us CHANGE!!! I never did understand what change he wanted to make – now I do. He wants to be in

      charge of all facits of our lives, economy, health, economy, manufacturing, on and on and on. He

      also wants to hire our "youth" to do the work that is now being done by

      individuals who get a tax write off.

      This is the most scary of all his gimmicks. Reminds me of someone else we used to hear about. Doesn't it you?

    13. Marshall Hill MI. says:

      The Socialist list of things to CONTROL! US!

    14. David S. Lesperance says:

      Actually Ben, you can tell your friend that he doesn't have to move to Ireland. In fact he can escape the U.S. tax net and avoid falling into another country's tax net, simply by getting good advice and moving an hour away to Windsor, Ontario.

    15. Pingback: McCain Throws Down the VAT Gauntlet | The Foundry: Conservative Policy News.

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