President Barack Obama is basing his re-election bid on a platform of tax and spend. That was reaffirmed Monday when he released his proposed budget for fiscal year 2013, which begins Oct. 1. The $3.8 trillion spending plan includes a $900 billion deficit. Assuming the numbers pan out — a big assumption — it would be his first budget without a deficit of more than $1 trillion. The deficit of the current fiscal year, which ends Sept. 30, is projected to be $1.3 trillion.
Supposedly the 2013 budget proposal would slash deficit spending by $4 trillion over the next decade. But those are imaginary numbers. Nothing binds a future Congress to any promise made today.
The Obama proposal increases taxes by $1.5 trillion over the next decade. It would jack up taxes on the "wealthy," defined as people making more than $250,000 a year. But, as we have pointed out, in expensive areas such as California, a $250,000 income still ranks in the middle class.
Despite the endemic deficits, the president also wants to spend even more money. For example, he wants to boost federal education spending by 2.5 percent, to $70 billion. Yet 50 years of Washington's meddling in education have brought, if anything, a decline in achievement.
A tax increase also would slam the economy just as it's finally showing a modest recovery. "The economic recovery is fragile," Esmael Adibi told us; he's the director of the A. Gary Anderson Center for Economic Research at Chapman University. "What the president basically is proposing is no basic change except raising taxes and spending more money. There were no serious cuts in spending, except a little in defense. Looking down the road, we have to address the major issue: the deficit."
Adibi said the tax increases are unlikely to pass muster in the Republican-controlled House of Representatives. "And if the taxes don't materialize, the deficit will be as large as it is now," a reference to the $1.3 trillion in red ink in this current fiscal year. He said the Obama proposal does nothing to address the major budget busters: Social Security, Medicare and Medicaid.
Adibi pointed out that the federal government currently benefiting from low interest rates, less than 2 percent, on the money borrowed for the deficits. But those rates "will go higher" once Europe's fiscal crises are resolved, and European money no longer flees to America, a process that has helped hold down interest rates.
Currently, 7 percent of the federal budget goes to service the $15.5 trillion debt. But if interest rates start rising, that share for debt service could rise sharply and crowd out other spending.
The president, of course, is looking to November. He's excusing the tax increases as an appeal to envy, what his partisans have called a "Buffett rule" tax on the rich, who are supposed to start "paying their fair share." But the rich are the major investors in business and jobs creation. Taxing their wealth means less of both. And bringing up Warren Buffett, one of the richest people in the world, could backfire. The foreclosure-abuse settlement that Obama just brokered among several major mortgage lenders and 49 states was supposed to help middle-class homeowners, but netted Buffett $154 million.
All the Republican candidates for president have pushed tax and budget cuts. So the forces are aligned on both sides of the debate, with the voters deciding.
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