Re: The president's budget would borrow 42 cents for each dollar spent in 2010
- From: Mộng Đẹp <bellededay@xxxxxxxxx>
- Date: Fri, 12 Mar 2010 09:56:06 -0800 (PST)
http://www.stamps.com/welcome/
Ba^y gio*` ba` con ddang print stamp online dde^? xa`i, xing dde^`
nghi. Mr President Obama cho phe'p toa`n da^n ta print money online
luo^n :)))
Ba?o dda?m se~ create jobs va` ca'c color printer + inks se~ ba'n
cha.y nhu* to^m tuo*i
On Mar 12, 9:34 am, Mai Dao <maida...@xxxxxxxxx> wrote:
Tinh Tu' la~o qua'i o+? WH va` dda'm ky' sinh tru`ng o+? QH se~ ddu+a
nu+o+'c My~ va`o ma.t va^.n, :-(((((((
http://online.wsj.com/article/SB1000142405274870397680457511415163780...
Obama's $3,000,000,000,000 Tax Hike
The president's budget would borrow 42 cents for each dollar spent in
2010
By BRIAN M. RIEDL
From the Heritage Foundation
When he released his new budget proposal on February 1, President
Barack Obama asserted that the government "simply cannot continue to
spend as if deficits don't have consequences; as if waste doesn't
matter; as if the hard-earned tax dollars of the American people can
be treated like Monopoly money; as if we can ignore this challenge for
another generation."[1]
Yet the President's new budget does exactly that-- raising taxes by $3
trillion and federal spending by $1.6 trillion over the next ten
years. If enacted, this budget would increase the 2010 deficit to more
than $1.5 trillion, and leave a deficit of more than $1 trillion even
after an assumed return to peace and prosperity. Overall, the
President's budget would double the national debt over the next decade.
[2]
President Obama's Budget
•Would permanently expand the federal government by 3 percent of gross
domestic product (GDP) over 2007 pre-recession levels;
•Would raise taxes on all Americans by nearly $3 trillion over the
next decade;
•Would raise taxes for 3.2 million small businesses and upper-income
taxpayers by an average of $300,000 over the next decade;
•Would borrow 42 cents for each dollar spent in 2010;
•Would run a $1.6 trillion deficit in 2010--$143 billion higher than
the recession-driven 2009 deficit;
•Would leave permanent deficits that top $1 trillion as late as 2020;
•Would dump an additional $74,000 per household of debt into the laps
of our children and grandchildren; and
•Would double the publicly held national debt to over $18 trillion.
Source: Heritage Foundation calculations based on U.S. Office of
Management and Budget, Budget of the United States Government, Fiscal
Year 2011 (Washington, D.C.: U.S. Government Printing Office, 2010),
pp. 146-179, Tables S-1 through S-14. Also includes the cost of House-
passed cap-and-trade bill, which President Obama endorsed yet excluded
from his budget tables.
Before the recession began, annual federal spending totaled $24,000
per household. President Obama would hike that spending above $36,000
per household by 2020--an inflation-adjusted $12,000-per-household
expansion of government. (See Chart 1.) But even these steep tax
increases would not finance all of this new spending: The President's
budget would lead to trillions in new debt over the next decade.
In fact, the President's new budget proposal contains even more
spending and debt than last year's proposal. Over the 10 years in
which both budget projections overlap (fiscal years 2010 through 2019)
this year's budget would add an additional $1.7 trillion in spending
and an additional $2 trillion in budget deficits. (See Table 1.)[3]
Overall, this year's proposal shows annual budget deficits as much as
49 percent larger than last year's proposal--raising the debt by an
additional 6 percent of GDP over the same period. It is a spending
spree that will drive up both taxes and deficits.
Yet Another "Stimulus"
In a triumph of hope over experience, the President proposes spending
$267 billion on yet another stimulus bill. Last year's $787 billion
stimulus bill (now estimated to cost $862 billion)[4] was supposed to
create (not just save) 3.3 million net jobs. Since its passage one
year ago, more than 3 million additional net jobs have been lost,
pushing the unemployment rate to 10 percent. This failure was utterly
predictable--as the United States during the Great Depression and
Japan in the 1990s have shown that governments cannot spend their way
out of recessions or depressions.[5]
The proper response from the government would be to repeal the unspent
portion of the stimulus and stop piling more debt onto future
generations. Instead, President Obama prefers to borrow an additional
$267 billion from the more productive private sector so that
politicians and bureaucrats can spend those dollars. This move would
only weaken the economic recovery, increase the debt, and eventually
push interest rates higher by draining funds from global capital
markets as a massive and growing federal government competes with the
private sector for resources.
Misdiagnosing the Cause of the Deficit
President Obama's misplaced budget priorities may be the result of his
Administration's misdiagnosis of the cause of the deficit. During his
State of the Union speech in January, the President asserted that "by
the time I took office, we had a one-year deficit of over $1 trillion
and projected deficits of $8 trillion over the next decade. Most of
this was the result of not paying for two wars, two tax cuts, and an
expensive prescription drug program."[6] That is simply not true. The
various policies mentioned by President Obama were implemented in the
early 2000s. Yet even with all those policies in place, the 2007
budget deficit stood at only $161 billion. The trillion-dollar deficit
did not begin until 2009 (driven by financial bailouts, stimulus, and
declining revenues) as the recession hit its trough.
The wars, tax cuts, and prescription drug program mentioned by the
President certainly could not be responsible for most of the trillion-
dollar deficits projected for the next decade, given that most war
spending will be phased out by then, and the tax cuts and Medicare
benefit are expected to cost a combined 2.4 percent of GDP by 2020--
even as the baseline budget deficit rises past 8 percent of GDP. (See
Table 2.)[7] That even ignores whatever portion of the lost tax cut
revenues is replenished by economic growth.
By contrast, the rising costs of Social Security, Medicare (beyond
just the drug benefit), Medicaid, and net interest are responsible for
nearly 5 percent in additional deficits as a share of GDP by 2020. Yet
the President failed to mention this spending as driving long-term
budget deficits.
There is also some hypocrisy at work in that President Obama does not
want to "pay for" more than a fraction of these initiatives, either.
Just like President George W. Bush, President Obama has proposed
continued funding of the Medicare drug entitlement as well as the
costs of the wars in Iraq and Afghanistan without any offsets. He has
also proposed extending more than three-quarters of the 2001 and 2003
tax cuts without offsets. Thus, President Obama has opened himself up
to the same criticism that he heaped on President Bush.
Doubling the Debt
President Obama has harshly criticized the $3.3 trillion in budget
deficits accumulated in eight years under President Bush.[8] Yet
President Obama is now proposing to borrow $7.6 trillion during what
would be his own eight years in the White House. (See Chart 2.) In
fact, President Obama would add more to the national debt than every
other President in American history from George Washington through
George W. Bush combined.
The President has claimed that his budget deficits are a temporary
result of the recession. Yet his budget would increase the deficit in
2010 even as the economy moves out of recession. The Obama budget
fails to achieve his goal of cutting the budget deficit in half by the
end of his first term. Even by 2020--a time of assumed peace and
prosperity-- the annual budget deficit would still top $1 trillion. By
that point, the debt would reach 77 percent of GDP (nearly double the
level before the recession).
Eventually, this unprecedented surge of debt would increase interest
rates. The United States government would find itself competing with
other big-spending, deficit-ridden nations and the productive private
sector to borrow massive amounts of money from the pool of global
savings. Although U.S. Treasury bills are a popular investment for
domestic and international investors in these uncertain economic
times, many investors will shift into higher-return investments (such
as stocks) when the economy fully recovers, thereby forcing Washington
to offer higher interest rates to induce purchases of its debt.
Eventually, this could cause a vicious circle where rising interest
rates push up the cost of servicing the national debt, forcing the
government to borrow even more money from the private sector--thus
raising interest rates further. Moody's Investors Service has noted
this potential debt-and-interest-rate spiral, and signaled that it may
cost the United States government its prized AAA bond rating.[9] These
high interest rates would also slow down the economic recovery by
making it more costly for businesses to invest and more difficult for
families to afford home and auto loans.
In the long run, Washington is dumping a colossal amount of debt into
the laps of Americans' children and grandchildren. Between 2011 and
2020, President Obama's proposed budget would add $8.5 trillion
($74,000 per U.S. household) in new government debt. By 2020, 35 cents
of every dollar paid in individual income taxes would be used to pay
interest on this debt. Moreover, given the unsustainable costs of
paying Social Security, Medicare, and Medicaid benefits to 77 million
retiring baby boomers, the federal debt will continue to expand after
2020.[10] Without real reforms, the federal government will undertake
the greatest intergenerational transfer of debt in American history.
Younger generations, not old enough to vote when most of these
policies were enacted, will be relegated to staggering tax increases,
deep government debt, and slower economic growth in order to pay for
their parents' and grandparents' retirement benefits. The President's
budget not only does nothing to prevent this fundamentally immoral
situation--it makes it worse.
Nearly $3 Trillion in Tax Increases
Last year, President Obama promised that "if your family earns less
than $250,000 a year, you will not see your taxes increased a single
dime. I repeat: not one single dime."[11] Yet even before the budget
was released, he signed into law a 62 cent tobacco-tax increase that
has a disproportionate negative effect on lower-income smokers. He has
endorsed the $846 billion cap-and-trade tax passed by the House in
2009, which electric utility companies, oil refiners, natural gas
producers, and other energy producers would immediately pass on to
consumers, including those earning less than $250,000.[12]
Consequently, President Obama's budget would raise everyone's taxes.
(See Table 3.)
The President has pared back some tax cuts proposed last year (the
making-work-pay tax credit would now expire in 2013). He also proposes
new tax cuts, some of which are helpful (automatic enrollment in
Individual Retirement Accounts would help more people save for
retirement) and others that are not (expansion of the child and
dependent care tax credit is biased toward those who choose paid child
care over staying home with their children).
A nearly $1 trillion tax increase is reserved for couples earning more
than $250,000 and individuals earning more than $200,000. Beginning in
2011, the President's budget will increase these Americans' taxes by:
•Raising the top two income tax brackets from 33 percent to 36
percent, and from 35 percent 39.6 percent ($364 billion);
•Raising capital gains and dividends tax rates from 15 percent to 20
percent ($105 billion);
•Phasing out personal exemptions and limiting itemized deductions
($208 billion); and
•Reducing the value of tax deductions by approximately one-fourth
($291 billion).
This $1 trillion tax hike would fall on the backs of only 3.2 million
tax filers--an average tax hike of more than $300,000 per filer over
10 years on a group that is already shouldering an increasing portion
of the income tax burden.[13]
Moreover, businesses and upper-income individuals would also pay a
substantial burden of the proposed $743 billion in new taxes to
finance the President's health care reform. American businesses,
trying to compete globally despite the world's second-highest
corporate tax rate, would also face an additional $468 billion in
various new taxes at a time when they are--according to the White
House--supposed to be getting back on their feet and begin hiring new
employees.
Such tax increases would significantly reduce economic growth by
reducing people's incentives to work, save, and invest. Specifically,
higher investment taxes may prevent the economy from receiving the
investment capital it needs to recover. Because most small businesses
pay the individual income tax, they would face new barriers to
expanding, investing, hiring, and even staying in business. Wealthier
individuals would be more likely to allocate their wealth to wherever
they can avoid these new taxes, instead of in areas where their wealth
would be most productive for the economy.
While there is never a good time to raise taxes, President Obama's
proposal to raise taxes at the beginning of a tenuous recovery is
especially problematic. Even if the tax increases are not implemented
until 2011, many businesses planning investment and hiring will likely
begin scaling back their plans in anticipation of the coming tax
hikes.
More than $1.6 Trillion in New Spending
One could, ostensibly, defend this $3 trillion tax increase as
necessary to rein in the staggering deficits contained in the
President's budget proposal. But even stipulating that argument,
President Obama would still use more than half of these tax increases
to expand government instead of reducing the deficit. Nearly $600
billion would go toward a new health care entitlement. More than $800
billion would go toward cap-and-trade energy legislation. An
additional $168 billion would be spent on more failed "stimulus"
spending, and $52 billion would create educational entitlements. While
the President would reduce the growth of non-security discretionary
spending by nearly $250 billion over 10 years, all the savings would
go toward other discretionary spending.
The rest of the tax increases would be needed just to keep pace with a
portion of the new automatic increases in Social Security, Medicare,
and Medicaid. Once the President's $3 trillion tax increase reduced
the $1.6 trillion in new spending, the additional $1.4 trillion in new
revenues will cover just one-fourth of the additional costs of these
three programs.
As a result, the President's budget would raise tax revenues to
approximately 1.8 percent of GDP above the historical average--yet
leave spending more than 3.5 percent of GDP above the historical
average. Simply put, surging spending is driving the budget deficits.
[14]
Too Many Gimmicks
President Obama does deserve credit for reversing President Bush's
policy of not budgeting for the Alternative Minimum Tax patch (the
annual reform to prevent a large tax increase), the global war on
terrorism, and future unanticipated emergencies. But the Obama budget
contains numerous large gimmicks, too:
•Cap-and-Trade Costs Are Not Included. Last year, the President simply
left the cost of his health plan out of his aggregate budget tables.
[15] This year, he budgeted for his health care plan, but removed the
costs of his cap-and-trade plan. Given that the President has endorsed
the House-passed bill that would raise taxes by $846 billion, and
spending by $822 billion, The Heritage Foundation has incorporated
this government expansion into its presidential budget estimates.[16]
•The Baseline Assumes War Spending Rises Forever. Repeating his much-
maligned gimmick from last year's budget, the President first creates
a baseline that assumes the Iraq surge continues forever (which was
never U.S. policy), and then "saves" $728 billion against that
baseline by ending the surge as scheduled under his policies. It is
like a family "saving" $10,000 by first assuming an expensive vacation
and then not taking it. This paper does not give credit for such
savings relative to a fantasy baseline.
•The $132 Billion "Magic Asterisk." The President's budget claims $132
billion in savings over 10 years from "program integrity" reforms.
Basically, this means unspecified reforms to fight waste, fraud, and
abuse. The "Budget Process" section in the budget's Analytical
Perspectives volume contends that such savings can be found chiefly
from stronger IRS enforcement of tax laws, with some additional
savings from the Social Security Administration and federal health
programs.[17]Of course, government waste is easy to identify and
difficult to eliminate. The federal government's track record on
rooting out waste is abysmal, and promises to close the "tax gap" of
unpaid taxes have not translated into progress. While the President
should be applauded for trying to root out waste, it is unrealistic to
assume $132 billion in savings to offset additional entitlement
spending.
•The $23 Billion Terminations and Cuts. The White House is advertising
$23 billion in proposed spending cuts and terminations. Given the
multitude of outdated and failed programs, many of these cuts are
necessary. Yet if last year is any indication, they will not save
taxpayers a dime.
Last year, Congress and President Obama agreed on $7 billon worth of
terminations and spending cuts (mostly in defense)--and then plowed
100 percent of the savings into new spending (mostly non-defense). Not
a dollar went toward deficit reduction.[18] There is no reason to
expect this year will be any different.
•The President's largest savings proposal ($8 billion in 2011), for
instance, would come from eliminating the subsidized student loan
program (run by banks with federal subsidies), and shepherding all
students into direct loans run by the federal government. Yet the
President would use all $43 billion in savings to help finance a $69
billion expansion of Pell Grants. The deficit would not be reduced at
all. Using "low hanging fruit" budget cuts for new spending means that
more of the higher taxes or spending cuts down the road will have to
come from the remaining higher-priority policies.
•The Lowballing of Discretionary Spending. President Obama deserves
credit for proposing to freeze a small sliver of discretionary funding
for the next three years (albeit at an inflated level).[19] However,
the President's budget projection clearly lowballs discretionary
spending over the next decade--especially for the seven years
following the freeze. Over the next decade, the President assumes that
discretionary spending (excluding emergencies like war and "stimulus")
will expand by 30 percent, just slightly faster than inflation. But in
reality, discretionary spending surged by 104 percent during the past
decade. Given that the Democratic congressional majority has increased
non-emergency discretionary spending by 25 percent over the past three
years, there is no reason to expect sudden austerity. If discretionary
spending instead grows at the same rate as the economy (about 5
percent nominally per year), it would add about $400 billion to the
2020budget deficit.[20]
•PAYGO. Much of the President's budget couples specific spending
increases with vague, process-based calls for future spending
restraint. One example is his endorsement of the new Pay-As-You-Go
(PAYGO) law (since signed into law). While the PAYGO concept--that
Congress must offset the cost of any new initiative--sounds promising,
its glaring loopholes will not reduce the deficit at all. PAYGO
exempts all discretionary spending (which comprises 40 percent of the
budget) from its constraints. It exempts the automatic annual growth
of Social Security, Medicare, and Medicaid that threatens Washington's
long-run solvency. It exempts the endless stream of emergency
"stimulus" bills. When PAYGO is violated, nearly all spending is
exempt from being cut to offset the new expansions. PAYGO is designed
to serve more as a talking point than as a tool for deficit reduction.
[21]
•Deficit Commission. Another example of choosing process over
substance is the President's "deficit commission" that will recommend
a set of policies to reduce the deficit by 2015. Although such
commissions can be useful, the one appointed by the President suffers
from three weaknesses: (1) The commission's recommendations are not
guaranteed legislative "fast track" protections--or a congressional
vote at all; (2) if Congress does vote on these recommendations, the
most likely time will be after the November 2010 elections with a lame
duck Congress; and (3) there is no indication that this commission
will include any public hearings and thus will be more likely to
create its recommendations in a back room without public input.
Putting it all together, this commission will likely become a partisan
exercise that fails to bring down deficits and merely kicks the can
down the road. The President should lead the national dialogue by
offering a specific set of entitlement reforms to bring long-term
sustainability to the federal budget. If a commission is to be set up,
Congress should take the responsibility to create one that solves the
three problems listed above.
•Rosy Economic Scenario. Just like last year, the President's new
budget assumes a rosy economic scenario. For 2011, the White House
projects that the economy will grow by 3.8 percent, twice the 1.9
percent growth rate forecasted by the Congressional Budget Office
(CBO). Over the next decade, the President's budget assumes 43 percent
real growth, compared to the CBO estimate of 37 percent. The
difference is not trivial-- The White House projects that in 2020 the
economy will be nearly $1 trillion larger (adjusted for inflation)
than the CBO estimates. But if the economy performs closer to the CBO
projections, it will raise budget deficits even higher.[22]
An Irresponsible Budget
President Obama has offered a budget that does nothing to address the
nation's serious short-term and long-term fiscal problems--and indeed
makes them worse. By doubling the national debt above pre-recession
levels, America could be heading toward the tipping point when debt
levels will become too large for global capital markets to absorb,
potentially triggering a financial crisis, an interest rate spike, and
crippling tax increases.
Countries that finance U.S. debt will note that President Obama's
budget includes no plan for long-term fiscal sustainability. While he
talks of controlling entitlement spending, his budget would do the
opposite. By supporting a trillion-dollar health care expansion that
is partially offset with tax increases and Medicare cuts, he
essentially takes those policies off the table for any future deficit
reduction. That means higher taxes and deeper spending cuts down the
road.
The President who declared to the nation that "I didn't come here to
pass our problems on to the next president or the next generation--I'm
here to solve them,"[23] would, over the next decade, drop an
additional $74,000 per household in debt onto the laps of our children
and grandchildren.
A responsible budget must rein in runaway spending and deficits. It
must reject expensive cap-and-trade and health care proposals, and
repeal the remaining stimulus and Troubled Asset Relief Program (TARP)
funds. A responsible budget must reject devastating tax increases
during a fragile recovery, and instead cap the growth of government
spending at a reasonable rate. Most important, a responsible budget
must propose specific reforms to address the unaffordable Social
Security, Medicare, and Medicare spending trends. Congress's budget
should aim to meet these standards--even though the Obama budget fails
to do so.
Mr. Riedl is Grover M. Hermann Fellow in Federal Budgetary Affairs in
the Thomas A. Roe Institute for Economic Policy Studies at The
Heritage Foundation.
.
- Follow-Ups:
- References:
- Prev by Date: Re: Translation: Em xin hoa?i ca'c anh ca'c chi.
- Next by Date: Re: The president's budget would borrow 42 cents for each dollar spent in 2010
- Previous by thread: The president's budget would borrow 42 cents for each dollar spent in 2010
- Next by thread: Re: The president's budget would borrow 42 cents for each dollar spent in 2010
- Index(es):
Relevant Pages
|
