"It will be virtually impossible for Mr. Obama to keep his promise not to raise taxes on the middle class while paying for an enormous increase in spending. Given the planned spending levels, taxes will have to rise substantially to get to the target 4 percent deficit figure that the White House wants," Stanford University economist Edward P. Lazear writes in the Wall Street Journal.
"Medicare tax increases on wages and dividends, and new levies on businesses, are already being discussed. In the longer run, we may see a push to introduce a federal value-added tax," Lazear says. Indeed, a value-added national sales tax is already being considered by the Democrats on Capitol Hill.
Federal budgets are complicated and the news media, particularly the nightly network news shows, do an abysmal job of explaining what they contain and what they will mean to the average American.
But Heritage's Brian Riedl is especially adept at explaining its statistical nuances in plain English so that most people can understand. Here are seven points he thinks every taxpayer should know about what Obama's budget would do:
-- Permanently expand the federal government by nearly 3 percent of gross domestic product (GDP) over 2007 pre-recession levels
-- Raise taxes on all Americans by more than $2 trillion over the next decade (counting health care reform and cap-and-trade)
-- Raise taxes for 3.2 million small businesses and upper-income taxpayers by an average of $300,000 over the next decade
-- Borrow 42 cents for each dollar spent in 2010
-- Run a $1.6 trillion deficit in 2010; $143 billion higher than the recession-driven 2009 deficit
-- Leave permanent (annual) deficits that top $1 trillion in as late as 2020 (a time of assumed peace and prosperity)
-- And double the publicly held national debt to over $1.8 trillion
All of this is going to place a huge burden on our economy in the years ahead as more investment capital is siphoned off by Washington to feed the expansion of government at the expense of the private sector, which remains weak and undernourished.
It is the reason, as I reported in my last column, that the nonpartisan Congressional Budget Office is forecasting anemic economic growth in the 1.6 percent to 1.8 percent range this year and next.
Not so for the Obama administration. It is exuberantly forecasting better than 4 percent annual growth in the next few years from 2011 to 2014. Not many economists are buying into their claims.
Says University of Maryland economist Peter Morici: "'Rosie Scenario' wrote this budget. A populist government, similar to those that drove Latin American republics into bankruptcy during the 1970s, is in charge," he says.
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