Crimes Against Liberty

by David Limbaugh

  A VAT is especially insidious because it is invisible; it’s incorporated in the price of goods and services, which makes it easier for government to raise the rates. Every European nation began promising a low VAT rate, but all have raised their rates to at least 15 percent—and some much higher for the ostensible purpose of balancing their budgets. The problem is that the VAT, along with other tax hikes, simply won’t extricate us from our fiscal imbalance and unprecedented debt. These tax increases (as the Bush tax cuts expire and the new ObamaCare taxes kick in) would smother an already ailing economy, just as it needs to be unshackled.

  The 2009 fiscal year deficit of $1.41 trillion—as compared with the 2008 fiscal year deficit of $454.8 billion—could be blamed largely on TARP and other items, and much of it occurred during President Bush’s last year in office, albeit under a Democratic congressional majority. But Obama had no such excuses for his profligacy in FY2010. In February 2009 Obama presented a projected budget deficit of $1.258 trillion for FY2010, and a cumulative, ten-year deficit of $7.107 trillion for FY2010-2019. Just a year later, he had to revise those figures dramatically upward, offering a projected FY2010 deficit of $1.56 trillion, some $300 billion higher. His revised projected cumulative deficit for fiscal years 2010-2019 was $9.086 trillion, almost $2 trillion higher, as shown on the Heritage Chart on the right.

  President Proposes $2 Trillion More in 2010-2019 Deficits Than Last Year

  Proposed Budget Deficits, in Billions, by Fiscal Year

  LastYear’s Budget Proposal ThisYear’s Budget Proposal

  2010 -$1, 258 -$1,556

  2011 -$929 -$1,267

  2012 -$557 -$829

  2013 -$512 -$727

  2014 -$536 -$706

  2015 -$528 -$752

  2016 -$645 -$778

  2017 -$675 -$778

  2018 -$688 -$785

  2019 -$779 -$908

  Total -$7,107 -$9,086

  Source: Table S- of President Obama’s FY 2010 and FY 2011 budgets.

  Obama unveiled his FY2011 budget in February 2010, with his Office of Management and Budget (OMB) projecting the cumulative deficit for FY2011-2020 at $8.53 trillion. The CBO projected it would be $9.75 trillion—almost $1.2 trillion higher. This difference in calculation, according to Brian Riedl, “represents an additional debt of $10,000 per household above and beyond the federal debt they are already carrying.”15

  The Washington Times reported that the federal public debt was $6.3 trillion when Obama took office, amounting to $56,000 per household. It now totals $8.2 trillion ($72,000 per household) and is headed toward $20.3 trillion by 2020 (more than $170,000 per household and more than triple the debt of $6.3 trillion when Obama took office). According to the CBO, this would increase the national debt to 90 percent of the nation’s total economic output by 2020, compared to 40 percent of GDP at the close of fiscal year 2008,16 as illustrated on the chart on the opposite page.

  Some experts believe the forecast is much worse: that if we don’t repeal the Obama tax and regulatory policies and reform entitlements substantially we’ll end up with a ruinous debt-to-GDP ratio of 104 percent by 2019.17

  At any rate, this projected tripling of the national debt, though based on Obama’s fiscal agenda, wouldn’t finally occur until 2020, four years after the end of Obama’s second term, should he be re-elected. But Riedl looks at the projections for Obama’s hypothetical two terms and finds that just in his eight years, Obama would more than double the national debt. Riedl notes Obama “harshly criticized” Bush for the $3.3 trillion in budget deficits he accumulated in his eight years in office, but the conservative projected deficits for Obama’s eight years total $7.6 trillion (averaging almost $1 trillion per year), which is almost two and a half times Bush’s cumulative total and easily more than the total debt to date of $6.3 trillion when Obama took office.18 And this is without even considering the recent upward revisions to ObamaCare, his cap and tax dream, or a host of other expensive proposals he seeks to enact.

  Obama’s Budget Would Send Federal Debt to Levels Not Seen Since World War II

  In 2008, publicly held debt as a percentage of the economy (GDP) was 40.8 percent, nearly five points below the post-war average. Under President Obama’s budget, this figure would more than double to 90 percent by 2020. Continued structural debt poses serious economic risks.

  Source: Congressional Budget Office and White House Office of Management and Budget

  Obama said he wouldn’t be able to bring the deficit down “overnight,” but claimed he’d be well on his way to reductions once the recovery took hold. But Heritage’s Conn Carroll observed, “Not only does President Obama’s budget fail to reduce deficits ‘overnight,’” it “actually moves them in the opposite direction.” Obama’s budget would “permanently expand the federal government by nearly 3 percent of GDP over pre-recession levels . . . and leave permanent deficits that top $1 trillion in as late as 2020.”19

  While Obama glibly dismisses his bankrupting deficits as being caused by (and no greater than) those generated by President George W. Bush, nothing could be more misleading. We’ve already noted Congressman Jeb Hensarling’s point that Democrats took control of Congress in 2006 and that CBO numbers show that the Democrats’ and Obama’s budgets dwarf those of the Republican-controlled congresses of the preceding twelve years. And simply comparing the Bush deficits to the Obama deficits presents a similar picture. Bush’s budgets averaged some $300 billion20—and it wasn’t until his last year in office, when the economic downturn and financial crisis hit hard and sparked the TARP program, that he (and Congress) produced the type of outrageous deficit Obama is routinely generating as far as the eye can see. This Heritage Chart brings this into clear perspective:Obama Deficits Will Exceed Previous Deficits

  Sources: Congressional Budget Office and Office of Management and Budget.

  Obama whines about inheriting a $1.3 trillion deficit “when I walked in the door” and forever uses that as an excuse to crank up spending even further. But as Dick Morris points out, Bush’s projected deficit for FY2008 was about $485 billion and grew another $100 billion by the start of the fiscal crisis to about $600 billion. TARP raised it $700 billion to around $1.3 trillion, though revised figures showed the deficit ended up being around $1.41 trillion, as noted. But as Morris correctly observes, most of the TARP money was paid back, so in reality the Bush deficit for that year was much lower, maybe $800 billion .21

  Regardless, it’s absurd to use the $1.3 trillion or $1.41 trillion figure as a baseline, since it included the extraordinary TARP bailout monies, which would hopefully be a one-time occurrence. As Brian Riedl said, “President Obama’s pledge to halve the budget deficit by 2013 is hardly ambitious.” After quadrupling the deficit in 2009, to cut it in half “would still leave deficits twice as high as under President Bush.” Furthermore, three expected developments—“the end of the recession, withdrawal of troops from Iraq, and phase-out of temporary stimulus spending—would halve the budget deficit by 2013.” But Obama’s deficits will more than double, possibly triple Bush’s “even after the economy recovers and the troops return home from Iraq.” Obama deceitfully used that FY2009 deficit as a baseline when he made the preposterous pledge to cut the deficit in half, a pledge that he still wouldn’t be able to fulfill and wouldn’t even really try to—because, as mentioned above, his projected annual deficits are $1 trillion for the foreseeable future.

  And Obama’s budget hits just keep coming. The CBO reported that for just the first five months of FY 2010, the budget deficit was already $655 billion—$65 billion greater than the deficit at that point in the previous budget year, which was horrible enough. Even though bailout spending had decreased, the deficit continued to increase because of lower tax receipts, increased spending on unemployment benefits, interest on the public debt, and increased spending on other programs. The April deficit was $82.7 billion—the largest ever April deficit—compared to last April’s deficit of $20 billion.22

&
nbsp; Riedl also notes before the recession started, annual federal spending totaled $24,000 per household, but under Obama’s projected budgets that figure would reach $36,000 per household by 2020—“an inflation-adjusted $12,000 per household expansion of government.” The chart on the following page illustrates these increases.

  In the American Thinker, Steve McCann argued there is a “very high probability” that we’ll see a repeat of the financial meltdown that preceded the TARP bailouts in 2008. The current administration, however, has engulfed us in such debt that we won’t have a fallback position. Meanwhile, instead of shoring up our own financial stability to avoid Greece’s fate, we are bailing Greece out with money we don’t have and pursuing more of the reckless policies that got us into this mess in the first place. McCann remarked, “The Obama administration and its fellow travelers in Congress appear to care little for the long-term survival of this country. They are in the process of squandering the nation’s wealth and thus its well-being, in their headlong determination to ‘fundamentally change the country.’” 23

  President Obama Would Push Spending $12,000 Per Household Above Pre-Recession Levels

  Source: Office of Management and Budget, HistoricalTables, Budget of the United States Government, Fiscal Yeor 20 (Washington. D.C.: U.S. Government Printing Office, 2010), p.22,Table 1-1, and U.S. Office of Management and Budget, Budget or me United States Government, FiscQJYear 2011 (Washington, D.C.: U.S. Government Printing Office, 2010 pp. 146, Table 5-L Spending totals are adjusted to include the House-passed cap-and-trade bill, which President Obama endorsed yet excluded from his budget tables. All figures are then adjusted for inflation and the number of households.

  Chart I . B 2382 heritage.org

  If this pattern continues and our debt-to-GDP ratio does soar into the range of 90 to 104 percent or more by 2019 or 2020, the United States would “become the next Greece,” but “unlike Greece, will not have the European Union or the IMF to turn to.... Can we expect our traditional allies, who will find themselves in a similar situation, to come to our aid? As to a dramatic economic downturn, the traditional tools used to come through a recession or depression will not be available.”24 Yet Obama continues to fiddle as he burns our dollars.

  As Obama announced his record budget for FY2011 of $3.83 trillion, he declared the federal government could not “continue to spend as if deficits don’t have consequences” and that it was unacceptable to act “as if the hard-earned tax dollars of the American people can be treated like Monopoly money.”25 As surreal as those statements were, his excuses were even worse. He blamed the deficit on President Bush, previous Congresses, and on the unavoidable actions his administration had supposedly taken to prevent an economic collapse. He specifically blamed Bush and previous Congresses for creating a new drug program, implementing “tax cuts for the wealthy, and funding two wars.”26

  Obama’s Treasury secretary, Timothy Geithner, took the same tack when appearing before Congress—blaming Bush and having no explanation for why the administration was multiplying the spending of its predecessor. Republican congressman Paul Ryan told Geithner that all economists, including those of the administration, say “that the medium and long-run budget deficits have to get below 3% of GDP, yet this budget plan that you’re bringing to us doesn’t even get close to it.” Ryan was saying the administration knew we couldn’t afford these budgets but was presenting them anyway, without proposing meaningful reductions. Instead, it was passing off the problem to a “partisan commission, with a 2 to 1 ratio of Democrats and Republicans, that will give us a report after the election.”

  Geithner responded, á la Obama, by blaming Bush and accepting no responsibility even for future budgets, saying, “We’re going to solve our part of the mess we inherited.” Ryan shot back, “Why don’t you [solve this problem] in your Budget? You guys run the government, if you are going to solve our fiscal situation, why don’t you do that? Why don’t you give us a budget that actually gets the deficits to a sustainable level?” Giethner pathetically repeated his mantra: “Congressman, we are proposing a budget that takes the huge mess we inherited and cuts the deficit dramatically.” But Ryan had the last word. “You can blame Bush only so long,” he said. “You obviously inherited a tough situation, [but] you are making it worse by your own admission.”27

  Ryan was exactly right. Obama is tied to a socialist ideology and Keynesian economic theory compelling him to continue outrageous spending in order to transfer wealth from the “rich” to the “poor” regardless of the devastating debt he accumulates. But Keynesian theory doesn’t work. The money government spends, to reiterate Brian Reidl’s point, “doesn’t fall from the sky. The only way Congress can inject spending into the economy is by first taxing or borrowing it out of the economy. No new demand is created; it’s a zero-sum transfer of existing demand.”28 So increasing government demand decreases private sector demand.

  ENTITLEMENTS

  Democrats once acknowledged our entitlements would eventually bankrupt the nation, but when President Bush tried to reform Social Security, they engaged in scaremongering to downplay any problems and successfully shut down reform efforts. The problem is much more urgent now with our economic downturn and rising debt. The first chart on the opposite page shows how dire the situation is. Congressman Paul Ryan has proposed substantial entitlement reform, as shown in the second chart, which could go a long way toward restoring the nation’s fiscal solvency, though it is unlikely to gain traction as long as Democrats are in control.

  ALMOST $3 TRILLION IN ADDITIONAL TAXES

  As noted in chapter three, Obama flagrantly broke his no new taxes pledge on families making less than $250,000 a year. But his real tax punishment is reserved for those making $250,000 or more. He will raise the top two income tax brackets from 33 percent to 36 percent and from 35 percent to 39.6 percent, respectively. He’ll raise capital gains and dividends tax rates from 15 percent to 20 percent. He’ll phase out personal exemptions and limit itemized deductions. He’ll reduce the value of tax deductions by about one-fourth.

  National Debt Set to Skyrocket

  In the past, wars and the Great Depression contributed to rapid but temporary increases in the national debt. Over the next few decades, runaway spending on Social Security, Medicare, and Medicaid will drive the debt to unsustainable levels.

  Source: Heritage Foundation compilations of data from U.S. Department of the Treasury, Institute for the Measurement of Worth (Alternative Fiscal Scenario), Congressional Budget Office, and White House Office of Management and Budget.

  Entitlement Reform Would Eliminate Long-Term Deficits

  In January 2010, Representative Paul Ryan (R-WI) re-introduced the Roadmap for Americans Future, legislation that would improve America’s long-term budget situation by reforming entitlements. Compared to the current trajectory, the bill would eliminate long-term deficits.

  Source: Congressional Budget Office.

  Collectively, these measures will amount to a $1 trillion tax increase on just 3.2 million tax filers, which is an average of $300,000 per filer over ten years on those who already pay a disproportionate share of the taxes, notwithstanding Obama’s demagogic misrepresentations to the contrary. But there’s more: businesses and wealthy individuals would pay most of the proposed $743 billion in new taxes imposed by ObamaCare; Obama will institute some $468 billion in new taxes on America’s businesses;29 and cap and tax, if implemented, could cost $843 billion in additional taxes. The following Heritage Chart itemizes the specifics:

  The President’s $2.9 Trillion Tax Increase

  Proposal Ten-Year Revenue Impact (in Billions)

  Cap-and-trade energy tax* $843

  Health reform tax $743

  Tax increase for upper-income families and small businesses $968

  Raise income tax rates for upperincome taxpayers. $364

  Raise capitol gains and dividends rates for upper-income taxpayers $105

  Reinstate the personal exemption
phaseout and limitation on itemized deductions for upper-income taxpayers $208

  Limit itemized tax deductions to 28% value for upper-income taxpoyers $291

  Tax Increases for businesses $468

  Reform U.S. international tax system $122

  Bank tax $90

  Other business, financial and energy tax increases $256

  Various tax cuts for families and busineses -$172

  New stimulus tax cuts -$61

  Extensions of expiring tax cuts -$47

  Other proposals $111

  Total Tax Increase $2,853

  *Figures represent the cost of House-passed bill, which President Obama endorsed yet excluded from his budget tables. Note: Policies are net of outlay effects of proposals.

  Source: Office of Management and Budget. Budget of the United States Government, Fiscal Year 2011 (Washington, D.C.: US Government Printing Office. 2010). pp. 146-179, Table S-B.

  As Brian Riedl observes, Obama might plausibly argue his $3 trillion in new taxes were necessary to balance the budget. But even if you assume no economic slowdown as a result of these taxes, his numbers don’t add up because he is planning on at least $1.6 trillion in new spending for healthcare, cap and trade, another stimulus bill, and additional education entitlements. Riedl concludes, “Simply put, surging spending is driving the budget deficits.”30

  SMOTHERING SMALL BUSINESSES

  The “soak the rich” strategy, though appealing to Obama’s fellow class warriors, has a proven track record of failure because it depresses the number of high-income producers—these are people, often small business owners, who benefit the economy by creating jobs. Tax economist Curtis Dubay of the Heritage Foundation testified before the House Committee on Small Business, warning that many small businesses are now struggling to survive in this strained economy. Punitive new taxes, he argued, will impede any recovery, while reducing taxes, lifting regulations, and reducing government spending would re-energize small businesses and benefit the overall economy.