Tax hikes on rich won’t save entitlements
Last week, the Congressional Budget Office (CBO) released its latest budget outlook for the United States. The report didn’t mence any words about the fiscal situation in which the country will find itself if entitlements continue to growth at an unchecked pace.
“The aging of the population, increasing health care costs, and a significant expansion of eligibility for federal subsidies for health insurance will substantially boost spending for Social Security and for major health care programs relative to the size of the economy,” reported the CBO. Further down the report, there was a very clear warning that “such a large debt would increase the risk of a fiscal crisis, during which investors would lose so much confidence in the government’s ability to manage its budget that the government would be unable to borrow at affordable rates.
During an testimony before the Senate Budget Committee yesterday, CBO Director Doug Elmendorf was asked by Sen. Ron Johnson (R-WI) about steps that would need to be taken to avoid the substantial fiscal shortfalls that Medicare and Social Security face. Pointing out that President Obama has pushed tax hikes to deal with these unfunded liabilities, Philip Klein offers some points on the exchange:
Throughout his presidency, President Obama has advanced the idea that the nation’s mounting debt problem could be solved by “modest adjustments” to entitlement programs and asking wealthy taxpayers to pay just a little bit more. But in Senate testimony today, Congressional Budget Office director Doug Elmendorf communicated that it wasn’t quite that easy.
“It’s very difficult Senator, if you look at our projections, to see how one could put the budget ultimately on a sustainable path without making significant changes in either of those large benefit programs or in taxes paid by a broad cross-section of Americans,” Elmendorf said at a hearing of the Senate Budget Committee.
What does that mean? Klein explains, “[T]he reality is that if Obama doesn’t want to allow significant changes to entitlements, then he’s going to have to support higher taxes on all Americans — not just the rich.”
The answer to just about every budget deficit proposal that President Obama has offered has involved higher taxes on wealthy Americans. The problems with that are many, but specifically, Congress can’t just raise taxes without affecting economic growth and job creation. Additionally, the tax proposals being put forward aren’t going to do much to trim the $9.4 trillion in budget deficits over the next 10 years.
This is why President Obama has to stop piddling around on entitlements and actually come up with a serious plan for reform. If he doesn’t, there are some very substantial economic problems on the horizon.