Obama's "Deficit Reduction" Budget Is Almost All Tax Hikes

Posted: May 20, 2013 8:36 PM
Obama's "Deficit Reduction" Budget Is Almost All Tax Hikes
It went largely unnoticed at the end of last week due to the Obama scandalpalooza, but the Congressional Budget Office's score of President Obama's budget was released on Friday afternoon. The short summary is that a combination of tax hikes and spending cuts would decrease the budget deficit over the next four years, but the Obama budget does very little on entitlement reform and the coming tsunami of entitlement spending pushes the government ever more into the red.

The Associated Press' summary led with "Obama budget cuts deficits by $1.1 trillion" but, as Nick Gillespie points out, delving down into the actual numbers yields some worrying results. The short-term deficit is larger than the CBO's baseline, and the long-term budget only cuts the deficit relative to the baseline by - you guessed it - massive tax hikes.

Chiefly because of spending increases his budget proposes, Obama's fiscal plan would make next year's deficit $115 billion higher than the $560 billion shortfall that the budget office estimates for 2014 without the president's policies. Republicans criticized that and contrasted the $542 billion deficit Obama's budget would leave in 2023 with the spending plan approved by the GOP-run House, which relies on deep spending cuts to achieve balance by that year.

The congressional report said to achieve his $1.1 trillion in savings over the next decade, Obama relies on $974 billion in higher revenue and $172 billion in spending cuts. That is nearly a 6-1 ratio.

Obama's major revenue-raising proposals include limiting some deductions and exclusions for some higher-earning taxpayers, raising $493 billion over the decade; boosting tobacco taxes by $83 billion; and raising estate and gift taxes by $77 billion, the budget office said.

Moreover, the largest spending cut in President Obama's budget comes from winding down overseas contingency operations in Iraq and Afghanistan. A quirk of the federal budget causes the CBO to assume that OCOs would never cease. So President Obama uses the over $600 billion in budget "savings" from winding down overseas wars and puts it towards more spending programs. In total, as the AP reported, there's $172 billion in spending cuts - which means that most of that war draw-down "savings" are put towards more spending.

President Obama's budget is pretty typical for what we know about his economic philosophy. He's a Keynesian, which means the short-term deficit reduction makes sense. He also doesn't think that America's long-term entitlement problems are actually problems that need addressing - so his failure to address them, and then allow budget deficits and debt to rise in the medium- and long-term, also makes sense. While you may have read that President Obama's budget gets the deficit under control, it's mostly a one-time occasion that is predicated by an economic recovery and President Obama's tax hikes.