From todays IBD editorial…
Phony baseline spending forecasts. Obama’s budget assumes that the government will continue to spend $170 billion a year on the Iraq War until the end of time. By cutting that number back, he magically credits himself a huge $1.49 trillion in savings over 10 years.
• Unreasonable assumptions: The budget counts on $316 billion in savings from Medicare, not through benefit cuts, but through efforts to promote “efficiency and accountability.” History has shown that such promises are easy to make, but almost impossible to keep.
• Rosy economic scenarios: Budget forecasts are hugely dependent on underlying economic assumptions. And Obama’s predictions assume that the economy will perform better over the next 10 years than the Congressional Budget Office or the Blue Chip Consensus predicts.
By 2013, for example, Obama says the GDP will be $700 billion bigger than the Blue Chip forecast, with unemployment, interest rates and inflation lower over the next four years. In the past, Democrats and the mainstream press routinely blasted GOP presidents for such sunny forecasts. Don’t expect the same from them now.
• Spend now, save later: A subtler trick used by the administration is to front-load spending hikes while promising fiscal discipline later. In this case, Obama asks for an increase in discretionary spending of 6.5% this year, but then expects us to believe that he will hold spending hikes to 2% in the following years.
The president is right. This is certainly a new era. But somehow we doubt this is what voters had in mind when they voted for change last November.
For the icing on the cake, read the 2% Solution editorial from the Wall Street Journal.
The bottom line is that Mr. Obama is selling the country on a 2% illusion. Unwinding the U.S. commitment in Iraq and allowing the Bush tax cuts to expire can’t possibly pay for his agenda. Taxes on the not-so-rich will need to rise as well.
and this is because there aren’t enough rich people…
But let’s not stop at a 42% top rate; as a thought experiment, let’s go all the way. A tax policy that confiscated 100% of the taxable income of everyone in America earning over $500,000 in 2006 would only have given Congress an extra $1.3 trillion in revenue. That’s less than half the 2006 federal budget of $2.7 trillion and looks tiny compared to the more than $4 trillion Congress will spend in fiscal 2010. Even taking every taxable “dime” of everyone earning more than $75,000 in 2006 would have barely yielded enough to cover that $4 trillion.
Hope and Change! The definition of rich keeps changing, that’s for sure!
