Are we about to see a new kinder-and-gentler President Obama? Has the tax-and-spend president of the past four years been replaced by a fiscal moderate? That’s certainly the spin we’re getting from the White House about the president’s new budget. Let’s look at this theme, predictably regurgitated in a Washington Post report.
President Obama will release a budget next week that proposes significant cuts to Medicare and Social Security and fewer tax hikes than in the past, a conciliatory approach… [T]he document will incorporate the compromise offer Obama made to House Speaker John A. Boehner (R-Ohio) last December in the discussions over the “fiscal cliff”—which included $1.8 trillion in deficit reduction through spending cuts and tax increases. …[U]nlike the Republican budget that passed the House last month, Obama’s budget does not balance within 10 years.
Since America’s fiscal challenge is the overall burden of government spending, I’m not overly worried about the fact that Obama’s budget doesn’t get to balance. But I am curious whether he truly is proposing a “conciliatory” budget. Are the tax hikes smaller? Are the supposed spending cuts larger? Actually, there are no genuine spending cuts, since the president’s budget is based on dishonest baseline budgeting. At best, we’re simply talking about slowing the growth of government.
But since Mitchell’s Golden Rule is based on the very modest goal of having government grow slower than the private sector, it’s possible that the president may be proposing something worthwhile. But possible isn’t the same as probable. Indeed, it appears that the budget is predicated on a giant bait-and-switch, since it would repeal the beneficial spending restraint imposed by sequestration!
Obama’s budget proposal, however, would eliminate sequestration.
This appears almost as an afterthought in the Washington Post article, but it should be the lead story. The White House wants to get rid of a policy that genuinely limits the growth of spending. We won’t have the official numbers until the budget is released next Wednesday, but I’ll be very curious to see whether the supposed spending cuts elsewhere in his budget are greater than or less than the spending increases that will occur if sequestration is canceled—particularly since the president also is proposing lots of new spending on everything from early child education to brain mapping.
Moreover, it looks as if the Obama tax numbers are based on some dodgy math. The White House is claiming that this is a “conciliatory” budget because the president is no longer proposing $1.6 trillion in tax hikes:
The budget is more conservative than Obama’s earlier proposals, which called for $1.6 trillion in new taxes and fewer cuts to health and domestic spending programs. Obama is seeking to raise $580 billion in tax revenue by limiting deductions for the wealthy and closing loopholes for certain industries like oil and gas. Those changes are in addition to the increased tobacco taxes and more limited retirement accounts for the wealthy that are meant to pay for new spending.
Let’s try to disentangle the preceding passage. The president wants $580 billion in new tax revenue from eliminating various “deductions” and “loopholes.” But he also wants an unknown pile of revenue from new tobacco taxes and from restricting IRAs. And keep in mind that he already got $600 billion in new taxes as part of the fiscal cliff deal.
Until we get official numbers, we can’t say anything with certainty, but I’ll be checking on Wednesday to see how much revenue the president intends to grab as a result of the tobacco and IRA provisions. Suffice it to say that I won’t be surprised if the net impact of all his tax hikes is close to $1.6 trillion—especially since he’s also proposing to manipulate CPI data, a change that would generate another $100 billion in revenues.
In other words, the revenue side of his budget likely will be a bait-and-switch scam, just like the spending side is a joke once you understand that he wants to get rid of sequestration.
P.S.: The budget approved by the House of Representatives avoided any tax increases and restrained spending so that it will grow by an average of 3.4 percent annually. Not exactly draconian, but that approach does balance the budget in 10 years.