This Is Where The Fund Starts
Barack Obama is spending like a Beverly Hills brat with an unlimited platinum card. Eventually, the bill for his deficit budget (into the trillions and trillions) will come -- to your address and mine. Michael J. Boskin writes about the enormous extent of it in the WSJ:
How much additional deficit and debt does Mr. Obama add relative to a do-nothing budget with none of his programs? Mr. Obama's "debt difference" is $4.829 trillion -- i.e., his tax and spending proposals add $4.829 trillion to the CBO do-nothing baseline deficit. The Obama budget also adds $177 billion to the fiscal year 2009 budget. To this must be added the $195 billion of 2009 legislated add-ons (e.g., the stimulus bill) since Mr. Obama's election that were already incorporated in the CBO baseline and the corresponding $1.267 trillion in add-ons for 2010-2019. This brings Mr. Obama's total additional debt to $6.5 trillion, not his claimed $2 trillion reduction. That was mostly a phantom cut from an imagined 10-year continuation of peak Iraq war spending....Finally, what of the claim not to raise taxes on anyone earning less than $250,000 a year? Even ignoring his large energy taxes, Mr. Obama must reconcile his arithmetic. Every dollar of debt he runs up means that future taxes must be $1 higher in present-value terms. Mr. Obama is going to leave a discounted present-value legacy of $6.5 trillion of additional future taxes, unless he dramatically cuts spending. (With interest the future tax hikes would be much larger later on.) Call it a stealth tax increase or ticking tax time-bomb.
What does $6.5 trillion of additional debt imply for the typical family? If spread evenly over all those paying income taxes (which under Mr. Obama's plan would shrink to a little over 50% of the population), every income-tax paying family would get a tax bill for $163,000. (In 10 years, interest would bring the total to well over a quarter million dollars, if paid all at once. If paid annually over the succeeding 10 years, the tax hike every year would average almost $34,000.) That's in addition to his explicit tax hikes. While the future tax time-bomb is pushed beyond Mr. Obama's budget horizon, and future presidents and Congresses will decide how it will be paid, it is likely to be paid by future income tax hikes as these are general fund deficits.
...But what is not just worrisome but dangerous are the growing trillion dollar deficits in the latter years of the Obama budget. These deficits are so large for a prosperous nation in peacetime -- three times safe levels -- that they would cause the debt burden to soar toward banana republic levels. That's a recipe for a permanent drag on growth and serious pressure on the Federal Reserve to inflate, not the new era of rising prosperity that Mr. Obama and his advisers foresee.
The statists who control the government today are trying to dig us into a hole so deep that when they lose power in two years we'll be unable to undo what they've done. They're wrong, but they're definitely making it harder for us to recover from their folly.
We can't borrow or inflate our way out of debt so we must grow our way out. Raising taxes hurts growth, so we must emphasize reducing government services and expenditures instead.
Simplifying taxation and regulation in general encourages growth. More small businesses will form if you make them easier to start and run. Some taxes (and tax breaks) involve so little revenue that they should be eliminated in order to lower compliance costs. It doesn't matter what the corporate tax rate is if nobody is making a profit so drop it and gain the revenue back by taxing the employees normally.
Giving a zillion little incentives ($150 for installing new windows?) is counterproductive in the long run. I'd give up the tax deductions I make the most use of (mortgage interest and charitable donations) if we could get rid of all (or even most) of the others too and make our tax forms look more like my utility bill.
Pseudonym at April 3, 2009 5:47 AM
This is when it's appropriate in conversation to ask people who voted for this man, "What would you say if President Bush had done this?"
This is why the Founders didn't give us a Constitutional right to vote for President. Popularity contests don't get you the most skilled help.
Radwaste at April 3, 2009 5:49 AM
"we must emphasize reducing government services and expenditures instead"
Absolutely. Close every federal department that has no constitutional reason to exist, and whack all the others by half.
Never happen. It would reduce the concentration of power in Washington, and the very people who would have to do this are the politicians who wield all that power.
bradley13 at April 3, 2009 6:40 AM
Finally, what of the claim not to raise taxes on anyone earning less than $250,000 a year?
There is also "hidden" taxes that will effect the less wealthy. The increased taxes on cigarettes for SCHIP will hit more on those making the least.
The cap and trade taxes on the green house gas emissions are estimated to raise electric rates 40%. So you get $150 to put in new windows. How can you afford to buy them if your electric bill jumps from $100 to $140 a month?
Jim P. at April 3, 2009 7:53 AM
Oh come on, he's not that irresponsible. He is making some budget cutbacks. He told the military they needed to trim their budget by 11%.
Can someone hold my hair while I puke?
Elle at April 3, 2009 8:45 AM
In 2011, Social Security will need to start spending the extra tax money it put into the SS Trust Fund. Since that money was already spent, to avoid raising taxes in the past, taxes would increase even if government spending were cut.
I didn't vote for any of these crooks. We already had a huge problem before Obama went crazy with our credit card.
Maybe it'll be a mandatory bullet in the back of the head at age 66, to solve the problem. It's for the children, you know.
Well, government schools exist to make government subjects. Thinking is hazardous to your health.
MarkD at April 3, 2009 8:51 AM
What does $1 Trillion look like?
A Trillion Dollars On Display
There is hope in four things:
(1) The idiocy of Obama's budget will sink in to a majority of voters, who will vote out most of the congressmen, Dem or Pub, who voted for this budget bill or the bailout bills. We should be frightened into real change we can believe in, and carry out.
(2) No country, even China, will lend us this money. There will soon be reports of government printing presses, sudden inflation, and higher interest rates. Obama is trying to borrow 1/2 of a full year's income for the entire US economy.
(3)This budget cannot be administered without vast corruption, which may finally wake up the starry-eyed liberals in the press.
(4) Contact your senator, representative, and the president. Say that you are going to vote against anyone who supports these plans to borrow and bankrupt the US.
easyopinions.blogspot.com/2009/04/contact-congressmen-senators-and.html
Contact Congressmen, Senators, and the President
Andrew_M_Garland at April 3, 2009 9:05 AM
Second link above:
Contact Congressmen, Senators, and the President
Andrew_M_Garland at April 3, 2009 9:07 AM
Sorry, the first link is:
A Trillion Dollars On Display
Andrew_M_Garland at April 3, 2009 9:09 AM
I sure wish somebody would tell the people the truth about money in a way that would make the idea stick.
Your idea of "prosperity" is when you and the people around you have a surplus of money to spend on non-essentials.
This is totally independent of how "much" money you have. "Much" is in quotes because {what you call the marker} is NOT {what the marker is worth}.
Right now, we call it a "dollar". In no way is it the same "dollar" we used in 1960. Things which were flatly impossible can be bought now, to gauge one "direction" in which the dollar is different; more of them are needed to "buy" an hour of labor - another dimension.
Now for the hard part: the "direction" the market is going produces a temporary change in the level of perceived prosperity.
(Don't be shallow here. "Perceived" is used specifically because although some people lose their jobs and this is a reality, not "just" a perception, what happens in all markets is viewed from millions of different points.)
When inflation is occurring, a constant rate of change occurs because people ask for more pay for labor, and this is followed by increases in the prices of goods bought by the fruit of this labor. This is not part of the supply/demand link. As long as this rate is stable, people are happy because they maintain their position.
Remember fear of the unknown? Whenever something happens to make somebody afraid of the relationship between what they do and prosperity, fists clench on what remains in the wallet, and market communication spreads that fear impersonally by reducing trade.
The worst damned thing you can have is what we have now: the mint owner playing with the very definition of the "dollar", with chicanery right from Wimpy: "I'll gladly pay you Tuesday for a hamburger today."
Cheers from the idiota, who don't realize they're being written a loan from their own bank account which they can't pay, by an agent who won't admit that not being able to understand the word, "loan" is what put us here in the first place.
Radwaste at April 3, 2009 9:12 AM
Looks like Obama took at least one thing Cheney said to heart: "Deficits don't matter."
cheezburg at April 3, 2009 9:44 AM
> Obama took at least one
> thing Cheney said to heart
Chezzy! Glad to see you concur with the Great American from Wyoming.
Crid [cridcridatgmail] at April 3, 2009 10:23 AM
What gives you that idea? I just think it's funny to see the supply-siders getting religion on fiscal discipline now.
cheezburg at April 3, 2009 10:37 AM
The cap and trade taxes on the green house gas emissions are estimated to raise electric rates 40%.
The estimate I read this morning predicted a much larger increase than 40%, which makes sense, since cap and trade will make us more dependent on foreign oil, which won't stay cheap for long.
I just think it's funny to see the supply-siders getting religion on fiscal discipline now.
What's amazing to me is that compared to what we've seen lately, 2000-2006 now look like years of fiscal discipline. The Obama - Pelosi - Reid troika has managed to make Bush look not so bad after all. Maybe that's what they meant by "bipartisanship".
Pseudonym at April 3, 2009 12:26 PM
Well MarkD if they do mandate a bullet will you run on last day?
lujlp at April 3, 2009 12:55 PM
Cap and Trade raises the price of energy by 40%. That is not only your heating, light, and gasoline bill. It is the energy portion of all products and services that you buy. So, everything costs 10% more.
How does that square with Obama's promise that you won't pay an additional nickel of tax if you make less than $250,000?
Cap and Trade is an energy tax.
Andrew_M_Garland at April 3, 2009 2:10 PM
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