The Obama Budget: A Plan or a Train Wreck?
The president has released his budget, with the usual threats to refuse to negotiate with Republicans in the co-equal branch of government called Congress. The proposal is monumental, with total spending in the budget totaling $3.778 trillion. Or, as the average accountant would write it:
Looking at it another way, we currently have a national debt in the $16-trillion range. This sum has been accumulating since George Washington was first sworn in as president and on through the War of 1812, the Civil War, the Spanish-American War, World War I, World War II, the Korean Conflict, Vietnam, the assorted wars that never even earned a real name, the construction of the Transcontinental Railroad, landing men on the moon, and a few other odds and ends. All that went on over more than 200 years, yet for only the next year -- just one single year -- Obama intends to spend an amount that is nearly 25% of that number. He wants to spend in twelve months one quarter of the debt the nation has accumulated over 200 years.
So perhaps "monumental" really is the best description. Just what such a monument will memorialize is something to be determined at a later date.
Obama's budget, which was submitted two months late, is supposed to cover the government's expenses for the twelve months beginning October 1, 2013, slightly less than six months away. The president's proposed budget relies heavily on his demand for a "balanced" approach, meaning increased taxes on the less favored of our citizens rather than fiscal restraint alone.
Have a problem with "less favored"? Why else would taxes be levied against only certain taxpayers unless they deserved to be punished in some way? For example, in Obama's budget, $78 billion in new taxes is tagged to pay for early childhood education, with is bureaucratese for "Head Start." Now, we all agree that education for our children -- or in my case, my grandchildren -- is important. We all want what's best for our kids, right? So why aren't we all contributing to such a worthy program?
We all aren't? No: in fact, under Obama's budget proposal, not everyone will be coughing up the money to send our four-year-olds to pre-school. The president is demanding (remember that whole "balanced" approach thing?) that Congress enact a tax that will add ninety-four cents a pack to all cigarettes to cover the entire $78 billion. Does this mean that the president thinks that only smokers care about our tots? If educating four-year olds is so critical to their development and the ultimate future of America, shouldn't all of us be contributing and not just smokers?
One of the president's favorite "less favored" groups is those who are rich and successful, unless those who are rich and successful reside in Hollywood. The president's budget shows that the man who once said "at a certain point you've earned enough" is now able to say that "at a certain point you've saved enough for your retirement." Obama would like the Congress to raise taxes by limiting the deduction for IRA contributions when the IRA account reaches $3 million. He avoids any mention of what he might do to totals above that three-million-dollar level.
Now many on the left -- and, to be honest, not a few on the right -- would think that this is a reasonable demand. And if the tax revenue realized from such limitations would help reduce the deficit and our national debt, even I might not fight it too hard. But, and here's where the devil really is in the details: Obama not only tells Congress just what taxes he wants to raise, but an estimate of how much revenue will increase if they accede to his quite reasonable views. He will raise a whopping $9 billion...over ten years. You can instantly see how that nine billion will make a huge dent in a national debt that is headed for the twenty-five thousand billion level, can't you? Since Mr. Obama has almost made "millionaires and billionaires" a full blown fetish, any action that singles out the wealthy and successful is always described as reasonable, and he might even see it that way.
But as any examination of taxation will tell you, these things never seem to maintain their rifle-like focus. They seem to spread -- more like a shotgun blast (and we all know that Obama shoots skeet, so the analogy is probably close). For instance, the original income tax was supposed to be limited, too.
So the president's demand to limit IRA deductions for his personal nightmare, those millionaires and billionaires, might creep to lower and lower levels within the social fabric of America. It's happened before.
Finally, there is the president's push for the creation of a sort of Infrastructure Bank, to invite private parties to participate in improving, expanding, or repairing American's deteriorating roads, rails, and public buildings. Why would any private enterprise want to be involved with building or repairing roads? Perhaps because they saw how well it worked out for Solyndra.
In essence, then, Obama's new budget is almost identical to every other "initiative" that has come out of the White House since 2009, which comes down to rewarding his supporters and punishing his enemies.
Jim Yardley is a retired financial controller, Vietnam veteran, and independent voter. Jim blogs at http://jimyardley.wordpress.com, or he can be contacted directly at email@example.com.