Incinerating a Hot Potato
If deficit spending is the way out of an economic downturn, as leftist economists like Paul Krugman keep telling us, then one way to characterize President Obama’s approach to reviving the ailing economy is “killing it with kindness.”
Another is “tough love”—not the kind where you force hard choices and self-discipline, but the kind where you shoot the poor beast to put it out of its misery.
James Clyburn, House Majority Whip, recently crystallized the Democrats’ position on fiscal responsibility when he announced, “We’re not going to save our way out of this recession. We’ve got to spend our way out of this recession, and I think most economists know that.”
Here are some fun facts about Obama’s proposed federal budgets over the next decade:
• The projected deficit for Obama’s 2010 budget is $1.6 trillion, which is 10% larger than the 2009 deficit, which in turn was three times as big as the record 2008 deficit under President Bush.
• The projected 2010 deficit is 10 times as large as the deficit for Bush’s 2007 budget, the latter of which included funding for the troop surge that won the war in Iraq. Hoping to match our accomplishment in Iraq, the White House Travel Office has approved a trip for Obama to go to Cambridge, Massachusetts in November to get a Democratic dogcatcher elected in Harvard Square.
• The projected 2010 deficit will render our national debt 13% bigger on the last day of this year than it is today. Projected 2010-11 deficits will cause the debt to swell 23% bigger than it is now. By 2020, the debt will be twice as big as it is today.
• By 2013 the deficit will recede to $700 billion, a “mere” half of the 2009 deficit, then ratchet up again to $1 trillion by 2020. Even this will happen only if Congress agrees to drastic spending cuts before 2013, which it has already expressed strong resistance to doing.
• All of these numbers are conditional on what many private sector economists call overly optimistic expectations held by the current administration regarding growth of the economy.
These sobering statistics raise a number of tough questions about the measures Obama has proposed to bring down the deficit—which, naturally, he will never satisfactorily answer.
For example: in his budget address on Monday, Obama stated, “Because small businesses are critical creators of new jobs and economic growth, the budget eliminates capital gains taxes for investments in small firms and includes measures to increase these firms’ access to the loans they need to meet payroll, expand their operations, and hire new workers.”
Why only small businesses? Why not medium and large businesses? Who adds more jobs to the economy—Sal’s Pizzeria, a local franchise of Linens ‘n Things, or Microsoft Corporation?
Obama proposes letting the Bush tax cuts expire for families making over $250,000 a year. He wants to impose a new tax—sorry, “financial crisis responsibility fee”—on banks and corporations who received TARP money, some of whom were forced by the administration to take it. Obama wants to strip away tax breaks from oil and gas corporations.
Why would Obama want to choke the engines of growth and job creation by saddling them with tax increases? If the absence of a $5,000 tax credit would hinder a small business from new hiring, what does he think the addition of hundreds of thousands of dollars in taxes to a corporation would do to their hiring? Do big corporations hire workers out of the goodness of their hearts, with no concern for the bottom line?
Also, given that many of those families who make over $250,000 are headed by small business owners, how does Obama justify giving them tax credits while simultaneously increasing their taxes? Is his administration even feigning consistency here?
History shows that cutting individual and corporate tax rates increases long-term tax revenue. Obama was specifically asked about this proven fact by George Stephanopoulos during a primary debate with Hillary Clinton. Obama stated outright that even if this pattern were true, he would still favor higher taxes on the wealthy to promote “fair” taxation.
Obama is free to endorse Marxist policies if he desires, but how can he turn around and claim that his proposal to increase taxes for the wealthy is an effective way to reduce long-term deficits?
When you’re handed a hot potato such as the sickly economy—a fate Obama has reminded us of precisely eight million times since he was elected office—the responsible solution is to let it cool down.
Instead, Obama proposes to cremate it.
Scott Spiegel
