But the most important question is this: Would allowing the government to tap into the savings of one group of Americans to pay entitlement benefits to another group create a system of taxation that could swiftly destroy the American dream?
Yes, it would. Here's how:
When Obama took office, the federal government confronted a massive long-term fiscal problem. The nonpartisan Peter G. Peterson Foundation estimated that revenues expected under the current tax system would fall $56.4 trillion short of covering the current federal debt and the long-term costs of promised entitlement benefits. That $56.4 trillion equaled $184,000 for every living American and $435,000 for every full-time worker. Given the fiscal trajectory at the end of 2008, the government was headed toward spending 18 percent of gross domestic product by 2028 just to cover the annual costs of Social Security, Medicare, Medicaid and interest on the debt.
To put that in perspective, the entire federal government cost only 18.2 percent of GDP in 2001 and only 19.6 percent as late as 2007. By 2028, if overall government expenditures were held at the 2001 level as a share of GDP, welfare-state entitlements would squeeze out all other federal spending -- including maintaining an Army and a Navy.
The Mack truck of the welfare state was speeding down the one-lane road straight at the little compact car of your life savings.
How did Obama respond? He massively ramped up short-term spending, submitting a budget that will spend an average of 24.13 percent of GDP over the next four years -- more than the average of 19.13 percent FDR spent during the Depression and World War II. For the long run, Obama is trying to establish a national health care system in which the federal government will subsidize health insurance not only for the elderly and the poor but also for the middle-aged and the middle class.
Redistributionist politicians like Obama see their core constituents as the net recipients of government benefits, not the net payers. Increasing the number of net recipients serves their ideology and political interests.
The new taxes Obama wants to impose on interest, dividends, annuities and rents to pay for his health care plan are in fact taxes on the life savings of the net payers -- on their 401(k)s, savings accounts, paid-off mortgages and life insurance policies -- to cover benefits for the net recipients. The redistributionists would ultimately need $435,000 from every full-time worker to cover the welfare state's unfunded liabilities -- even if Obama's health care plan were never enacted.
Obama is pointing them down the road where they will find it.
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