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Obama's Battle of the Bulging Deficit

Posted By J.D. Foster, Ph.D. On June 30, 2009 @ 2:17 pm In Economics | Comments Disabled

“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 [1]. Of course, he comes to this conclusion because deficits are high, excessive entitlement spending continues to darken the budget outlook [2], 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. [3]

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.


Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2009/06/30/obamas-battle-of-the-bulging-deficit/

URLs in this post:

[1] in a Wall Street Journal editorial today: http://online.wsj.com/article/SB124631646572370703.html

[2] continues to darken the budget outlook: http://www.heritage.org/Research/Budget/wm2510.cfm

[3] rate of 15 to 20 percent. : http://www.brookings.edu/papers/2009/06_fiscal_crisis_gale.aspx.

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