New budget shows the 2012 election campaign will feature an assault on entrepreneurs, investors and small business people.
President Obama unveiled his budget for Fiscal Year 2013 on Monday and threw down the gauntlet to Republicans, daring them to oppose his idea of "fairness" in an election year -- ideas that, as he will frame the debate, will no doubt be popular with many Americans. Indeed, as CNN's Alan Silverleib points out in his analysis, "It's all about election year 2012, not fiscal year 2013."
It is an extraordinary document. Not because it has a ghost of a chance of becoming law, but because it reveals themes and issues the president plans to run on in the fall, while exposing the rancid nature of Obama's redistributionist ideas: taking, taking - and then taking some more -- from those who produce and create the nation's wealth and jobs all in the name of a cynically dishonest notion of "fairness."
It is also extraordinary because in a year that the administration projects the government will run a deficit of $901 billion dollars (a rosy scenario considering Obama has yet to come anywhere close to achieving his deficit goals), the president is proposing hundreds of billions of dollars in new spending. In essence, Mr. Obama is not taxing producers in an effort to slow the runaway spending and deficits his policies have caused. He is going to use those new found revenues in a bid to buy votes by divvying up the extra cash among favored constituencies.
Obama said his budget would "renew the American values of fair play and shared responsibility." But how does he square that with the "values" of the president and his party where cronyism, political favoritism, and corruption dominate the landscape? How does the president get away with talking about "fair play" and "playing by the same rules" when his party continuously demonstrates a predilection for favoring groups based not on merit, but on the color of their skin, their ethnicity, their sexual preference, their gender, and their affiliation - or not - with a union? It is this kind of hypocrisy that permeates this budget document and makes the president's calls for "fairness" ring hollow.
His spending "cuts" included in the budget do not touch entitlements, forcing the nation's defense to take the brunt of the cutbacks. The defense budget will fall 4%. In practical terms, it means slashing eight Army combat brigades, six Marine Corps battalions and 11 fighter squadrons, and will start to pull two Army brigades out of Europe.
Meanwhile, the Department of Energy becomes a huge winner, increasing its budget a whopping 41% -- mostly to fund Obama's green energy fiascoes. The Department of Justice makes out a big loser, with its budget falling 15%. But it is where the cuts will be made that will rile Republicans. The president proposes to massively cut a program that reimburses states and cities for jailing illegal immigrants for committing crimes. Funding would fall from $240 million to just $70 million.
The Hispanic vote is vital to his re-election and allowing illegal aliens who have committed crimes out on bail or to simply disappear will no doubt sit well with liberal Latino groups who have been agitating against enforcing any of the nation's immigration laws.
For some reason, the president is proposing a big increase for the Commerce Department. This useless federal bureaucracy will get a $10 billion gift "to help build an interoperable public safety broadband network." Critics point out that the government has already spent $13 billion on radio equipment since 2001 and that a public auction of frequencies -- ostensibly to recover the costs of the program -- won't realize nearly enough to pay for it.
Agency after agency, department after department, will see new spending. For the Department of Transportation, a pork-laden, five-year $476 billion highway bill and a $50 billion "infusion" for roads, bridges and other transportation infrastructure. Did we mention the $47 billion for high speed rail? Such trivialities are an asterisk in this budget.
Foreign aid gets a boost, including $800 million for the "Arab Spring." The president wants to create a "Middle East and North Africa Incentive Fund" -- explained in the budget document as a fund that "will provide incentives for long-term economic, political, and trade reforms to countries in transition -- and to countries prepared to make reforms proactively." Analysts are unsure if this is "new money" or simply collecting cash from other programs and placing it in a fund with a new name.
No comment yet from the Muslim Brotherhood whether Shariah finance rules will allow them to participate in the "incentives for reform" in economic, political, and trade matters.
Meanwhile, Medicare and Medicaid spending continues its unsustainable pace, rising 9% in FY2013. The administration is claiming $360 billion in savings as a result of paying doctors and hospitals less for Medicare services -- the old "doc fix" that is added to HHS budgets every year and is shot down every year by Congress and the AMA.
One might expect the "green" energy initiatives, the defense cuts, and the massive increase in transportation spending where Obama's union allies will get a windfall. But it is how the president wants to raise taxes that the class warfare theme of his campaign for re-election and, what can only be described as his hatred for the successful, the entrepreneur, the savvy investor, and the small business person, becomes apparent.
Larry Kudlow sums up a few of the tax increases in Obama's budget:
The capital-gains tax goes from 15 percent to 24 percent (including Obamacare). The dividends tax goes from 15 percent to nearly 40 percent, and that's not including the double tax on corporate profits embodied in dividends and capital gains. The Bush tax cuts for top earners are repealed. There's the 30 percent Buffett-rule minimum tax on millionaires. The carried-interest tax for private equity, hedge funds, and other investment partnerships goes from 15 to 39.6 percent. The estate tax jumps to 45 percent. Oil and gas companies get hit. And there's probably more stuff in there I haven't read yet. (Jimmy P. lays it out nicely.) Paul Ryan's press release calls it $1.9 trillion tax hike, with $47 trillion in government spending over the next decade and the fourth straight year of trillion-dollar deficits.
Oil and gas companies will lose subsidies, which is the same thing as a tax increase and will make energy more expensive. And if you are going to die and want to pass on your estate or small business relatively intact, it would be better to go sooner rather than later. After an estate is taxed every year for purposes of income (and taxed when the money is first earned), Obama doesn't believe that is enough. Before it is passed on to your children or spouse, it must be taxed again with nearly half of your life's work going to the government.
Thus is "fairness" served in Obama's eyes.
Perhaps the most egregious bit of deceitful and fraudulent budgeting is in the "savings" Obama is claiming from ending the wars in Iraq and Afghanistan. The administration puts that figure at a nonsensical $850 billion. Even his allies are embarrassed to defend this bit of tripe. It's as if they pulled the number out of thin air, believing no one would notice. Since it is a fairy tale number, there is little doubt Obama's deficit projections are also in the realm of fantasy.
Writing at the AEI blog, James Pethokoukis surveys the wreckage:
All in all, Obama has proposed some $1.6 trillion in new taxes over ten years, taking tax revenue as a share of GDP to 20.1 percent in 2022 vs. a historical average of 18 percent. And despite all those new taxes, Obama’s plan would still add $6.7 trillion in new debt and make no progress in lowering the nation’s total debt levels as a share of output. The debt-to-GDP ratio is predicted to be 74.2 percent this year and 76.5 percent in 2022.
At the same time, federal spending would never fall below 22 percent of GDP. Indeed, Obama — if he serves two terms — would be the first U.S. president in history to spend 22.0 percent or more of GDP for eight straight years (and then beyond). And keep in mind that these debt and spending numbers claim about $850 billion in savings from unwinding the wars in Iraq and Afghanistan, spending about a quarter of those phony “savings” on highway funding.
Pethokoukis also points out the cynically dishonest projections for economic growth upon which much of the budget is based: 3.4% growth in 2015, 4.1% in 2016, 4.1% inn 2017, and 3.9% in 2018. Pethokoukis notes that the "U.S. economy has only seen a run like that three times in the past four decades. And the Obama Boom is supposed to happen amid rising tax rates, interest rates, and debt? Good luck, Mr. President."
No, James. Good luck to us. We're going to need it if we're going to survive this assault on capitalism from a president who has presided over the worst economy in nearly 80 years.
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