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Feb 13 2012

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A Dishonest and Cynical Budget

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We Deserve Better Than This

Today, President Obama will venture out of DC into the swing state of Virginia to announce his FY 2013 budget.

No doubt there will be much talk of budget savings, necessary cuts and the need for responsible spending. Of priorities, difficult choices and shared sacrifice.

They will sadly be empty words; carefully choreographed  happy-talk really, that obscures a cynical budget blueprint for next year, and a larger record of alarming fiscal recklessness over the past three years.

First, a few facts regarding President Obama’s fiscal stewardship since 2009.

Factoring in the the Administration’s projected deficit for 2012 ($1.3 trillion), President Obama will have added $5.3 trillion to the national debt in just four years. For comparison purposes, that is more debt than all the Presidents combined, from George Washington to Bill Clinton.

And for all the partisan critics of George W. Bush’s fiscal record, consider this: President Obama has run up more debt in just three years, then President Bush did in eight.

It is scandalously irresponsible.

Since President Bush’s last budget, federal spending has soared 24 percent, to an requested $3.8 trillion in 2013. At the same time, the sluggish US economy has grown by only 12 percent since 2008.

Do the math.

Federal spending is growing at twice the rate of economic growth.

That is simply unsustainable.

Has anyone read the news out of Greece this week? The brutal austerity required to stave off economic collapse after years of prolific government spending?  The riots that threaten social cohesion?

Our current path is is the path of the Greeks over the last decade. Greece is a time machine of America’s future unless we change course now.

Sadly,  the President’s FY 2013 budget ultimately promises not change, but more of the same, with repackaged policy failures, class warfare and outrageous budget gimmicks.

The President is again proposing domestic stimulus spending – $350 billion – with a $50 billion earmark for infrastructure.

But we have been down this road before.

The 2009 Stimulus – $862 billion – which was suppose to support “shovel ready” projects and put American back to work failed spectacularly,  with relatively little money getting to actual construction projects, and with unemployment spiking to 10%. The President himself joked that the shovel-ready projects “weren’t quite shovel ready.”

It is noteworthy that the Administration continues to press for hundreds of billions in tax payer dollars for infrastructure, but refuses to allow a huge, private sector-sponsored infrastructure program – the Keystone XL Pipeline – to move forward.  And unlike the President’s budget proposal, Keystone can create shovel ready jobs by the tens of thousands today, if only the government would allow it to proceed, not to mention the increased energy security that the pipeline would provide.

The President’s new budget also embraces the class warfare meme that the Obama campaign has been parroting in public. The President is calling for a 30% tax rate on millionaires, and again calls for the expiration of the Bush ’01 and ’03 tax cuts for people earning more than $250,000.

Again the President misses the point that a large number of small businesses – the nation’s real job engine – file as individuals, and thus the Administration’s proposed tax increase falls where it economy can least afford it.

As for millionaires paying their “fair share,” IRS statistics show that US  households earning a million dollars or more pay 29% of all income taxes.  The top 1% of American earners pay 38% of all federal income taxes. In contrast, those making between $50-75,000 pay 15%.  The bottom 50% of income earners pay little or nothing at all.

The fact is that the President’s class warfare is a red herring.

The Administration claims that the expiration of the Bush tax cuts will increase federal revenue by $700 billion over ten years, or $70 billion a year. The projected deficit for 2012 is $1.3 trillion The tax increase is worth a few days of Obama-level spending and is a drop in the bucket in comparison to the deficit.

Indeed, if the Administration taxed millionaires at 100% of their earnings, it still wouldn’t be enough to close the deficit.

The President knows that, as do the Democrats.

Perhaps the President’s tax and spending policy would be more credible if it acknowledged that entitlement spending – not lower income taxes, is the key driver in the federal spending explosion over the next 10-20 years as the Baby Boomer’s retire.

The answer remains entitlement reform, but here the President is silent in the 2013 budget.

Numerous bipartisan commissions – including Obama’s own deficit reduction committee – have acknowledged that the only way to get control of entitlements and restore their long term solvency for future generations of Americans is some combination of; raising the eligibility age, means testing benefits for wealthier retirees, changing the inflation calculator for benefit increases and introducing competition into health care services.

None of that is touched in Obama’s budget and thus the problem is allowed to fester for another year.

Perhaps most disheartening about the Administration’s budget are the continual use of gimmicks.  Let me say quickly that this is not a Democrats-only tool.  Bush, Clinton, Reagan – they all used budget gimmicks in varying degrees to reconcile what is many instances was irreconcilable.

But in President Obama’s case it has become egregious.

Despite the complete American exit from Iraq, and the current, ongoing withdrawal from Afghanistan, the budget baselines still contain spending on the wars at high levels over the next ten years – $850 billion total. This is phantom spending that obviously should simply be taken out of the baseline, with the budget figures adjusted appropriately.

But President Obama includes the spending in his budget proposal, and justifies additional spending by using funds “saved” from the $850 billion figure.

It is madness.

Say, for instance, that you have finally paid off a loan, but still have a credit line of $5,000.  In your family budget – the real world – you have no further payments to make, and your required spending would drop by the amount of your monthly charge.

But that’s not how DC budgets. In the Washington budget world, you would go out and use the credit line to spend $2,000 on a home entertainment system, then come home  and tell your family how pleased you were to have “saved” $3,000.

If there is a silver lining, it is that the Obama budget is not going anywhere.

The blueprint is effectively DOA in the Republican controlled House.

Democrats in the Senate are so embarrassed by it that it was Republican Senate leader Mitch McConnell who said yesterday that he would bring the President’s budget up for a vote, forcing Democrats to express an opinion on the Administration’s handy-work.

Last year, when McConnell did the same thing, President Obama’s budget was defeated 97-0.

But those symbolic optics are not  enough.

Americans deserve a level of seriousness from their elected representatives that matches the crises of our time.  The President’s budget does not meet that standard and is an effort unworthy of a great people.

Use November to make a change.

 

 

 

 

 

 

 

 

 

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