Obama rolls out another budget the Senate won’t pass
As expected, President Barack Obama rolled out his budget proposal for FY 2013, which, as we noted yesterday, comes with a $1.33 trillion budget deficit. As you can imagine, there is a lot to parse through it the proposal, which has been all but declared dead-on-arrival in Congress.
Some of the budget proposals are familiar. President Obama is once again pushing tax hikes on individuals earning more than $250,000 — more than the millionaires and billionaires he so frequently targets. James Pethokoukis has a run down of the tax hikes in the budget:
Obama’s new budget isn’t about economic growth or cutting debt or creating a “built to last” economy. The Obama campaign is built around the idea of reducing inequality. So in his budget, Obama takes the populist whip to the wealthy and to business:
1. The top income rate would be raised to 39.6 percent vs. 35 percent today.
2. Under the “Buffett rule,” no household making over $1 million annually would pay less than 30 percent of their income in taxes.
3. Between now the end of a second Obama term, Obama proposes $707 billion in “net deficit reduction proposals.” Of that amount, only 16 percent is spending cuts.
4. The majority of small business profits would be taxed at 39.6 percent vs. 35 percent today.
5. The capital gains rate would rise to 25.0 percent (including the Obamacare surtax and deduction phase out) from 15 percent today.
6. The double-tax on corporate profits (including dividends) would increase to 64 percent based on the statutory corporate tax rate (58 percent using the effective tax rate), easily the highest among advanced economies.
7. The double tax on corporate profits (including capital gains) would increase to 51 percent (44 percent using the effective tax rate), also among the highest among advanced economies.
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.
Pethokoukis also notes that spending in Obama’s budget never dips below 22% of gross domestic product (GDP), above the post-World War II average of 20% we’d seen before the spending explosion in 2008.
Veronique de Rugy finds that Obama’s promise to find $4 trillion in deficit reduction to be phony as there will be $46.9 trillion in spending over the next decade, but only $2.5 trillion in spending cuts. The remaining $1.5 trillion in deficit reduction will come in the form of higher taxes. Perhaps the biggest point that De Rugy raises is the $7.9 trillion that will be added to the nation debt in the next 10 years. So much for a “new era of responsibility.”
Another reason this budget is bad for taxpayers is because it will add to TARP bailout losses, recently reported to be $133 billion. Obama once punted on entitlements, which are the elephant in the room, leaving it for some future administration and Congress to handle.
Senate Minority Leader Mitch McConnell is apparently so sure that Senate Democrats will not support President Obama’s budget that he plans to introduce it himself. It wouldn’t be the first time he’s done so. McConnell forced a vote on President Obama’s FY 2012 budget back in May 2011, and the Senate subsequently voted unanimously against it.
So why even propose a budget? It’s an election year stunt by President Obama and his team, essentially acting on the plans for class warfare laid out in his State of the Union speech. Unfortunately, it’s just more of the same from Team Obama.