Fresh from signing the $787 billion American Reinvestment and Recovery Act, President Obama presented his proposed fiscal year 2010 budget before a joint session of Congress. Outdoing even the profligate George W. Bush, at whose door he laid blame for the era of profound irresponsibility he has inherited, the new president has requested a whopping 8 percent increase in discretionary federal spending over 2009.
Hard-pressed Americans, who will foot the bill, can only dream about such a large raise.
Adding up the change you can believe in requires a calculator that can handle numbers followed by up to twelve zeros. The $3.6 trillion President Obama wants the federal government to spend next fiscal year exceeds forecasted revenues by nearly $1.2 trillion.
Possibly having channeled Ronald Reagan, the rosy scenario adopted by President Obama to help hit his own deficit-reduction targets is that the economy will rebound strongly in 2010 and 2011. No one outside the White House believes that the robust growth necessary to produce significant increases in federal tax receipts as well as significant reductions in recession-related spending will return nigh that soon.
More than half of the $2 trillion deficit reduction the administration anticipates pulling off comes from money that will be saved by withdrawing U.S. troops from Iraq over the next 19 months. These savings are based not on actual reductions in budget outlays, but on the assumption that war spending would have continued at current levels (roughly $130 billion per year) for the next decade.
The remainder consists of substantial increases in taxes, targeting, among others, the top 2 percent of income earners, who already pay 62 percent of the total federal income taxes collected from individuals, and who will see the limits on their allowable deductionsincluding mortgage interest payments and charitable contributionsbecome tighter.
But hoped-for deficit reduction is just the tip of the presidents budget plan. It contemplates a far-greater governmental role in the economy. Student loans will be federalized. The goal of establishing a national health insurance system gets a $630 billion down payment. Tens of billions of dollars more will be invested in the ever-elusive quest for commercially viable alternatives to fossil fuels. And $250 billion is earmarked for more bailouts of banks, insurance companies, and other private sector corporations deemed too big to fail.
When the books are closed out for 2009, the federal deficit is expected to be $1.75 trillion, setting a record for a one-time increase in the nations debt. The red ink in this fiscal years budget stands at 12.3 percent of GDP, higher than at any point since 1942, when America was ratcheting-up spending for the Second World War. And GDP is shrinking at alarming rates.Higher taxes and the continuation of the spending spree ignited by President Bush will only accelerate that trend. The spectacle of Speaker Pelosi leaping to her feet and applauding at almost every pause in President Obamas address ought to tell you where were headed: not to prosperity, but to a simulacrum of France.
|William F. Shughart II is a Research Director and Senior Fellow at The Independent Institute, J. Fish Smith Professor in Public Choice in the Jon M. Huntsman School of Business at Utah State University, and editor of the Independent Institute book, Taxing Choice: The Predatory Politics of Fiscal Discrimination.|