I’m in a foul mood. This weekend I spent $4.29 a gallon to gas up my car, and I know this isn’t the top. But Ben Bernanke doesn’t think we have an inflation problem. And I am weary of Chicago’s non-spring; this weekend my entire first-grade soccer team flirted with pneumonia playing in the April sleet. This morning I woke up to snow on the ground.
On top of it all, today is tax day. That always sets my teeth to grinding.
So, now that we’ve set the mood, let’s dig into President Obama’s big deficit speech, shall we? I don’t mind – heck, I even expect – that a speech like that would be political. But it bugs me no end when it is so mendacious. As the late Senator Moynihan said, “everyone is entitled to his own opinion, but not his own facts.”
In Obama’s telling of the nation’s financial history, his “how we got here” narrative, everything was going swimmingly until Cretin 43 came into office: “committed to fiscal discipline during the 1990s, we lost our way in the decade that followed [that is, it’s all Bush’s fault]. We increased spending dramatically for two wars and an expensive prescription drug program -– but we didn’t pay for any of this new spending. Instead, we made the problem worse with trillions of dollars in unpaid-for tax cuts -– tax cuts that went to every millionaire and billionaire in the country; tax cuts that will force us to borrow an average of $500 billion every year over the next decade.”
Obama, like a lot of liberals, is still consumed by Bush hatred. He is like a dog that continues to savage a chew toy long after the stuffing has been spread all over the family room. He’s obsessed. Moreover, it’s an article of progressive faith that the Bush tax cuts “for the wealthy” caused our deficits. But no amount of repetition can make something true that isn’t.
In the first place, the Bush tax cuts resulted in an increase in government tax revenue, not a decrease. Not only did tax revenue increase instead of decrease, but it increased more rapidly than the Congressional Budget Office projected: by 2006, tax revenues were $47 billion higher than expected. That’s because of the incentive effect of allowing people to keep more of their hard-earned money.
Secondly, let’s dispense once and for all with this “tax cuts for the wealthy” trope. Obama – like all card-carrying liberals – loves to use this, probably because it polls well in left-leaning focus groups. But it’s not true. Recall last December, when the fight was on to extend the Bush cuts? The ten-year cost of extending all the cuts was $3.7 trillion dollars, but Obama only objected to about 20% of that. Fully 81% of the money went to tax cuts for the “middle class” that Obama was happy to maintain – it was the $700 billion for millionaires (that is, couples making more than $250,000) he said we couldn’t afford. So my question is, if 81% of the money went to the middle class, why was this ever characterized as “tax cuts for the wealthy”?
Finally, the irony is that the top echelons of our economic scale have never borne a higher percentage of the tax burden than they do today. According to data from the IRS, the 1.4 million families that make up the top 1% of earners now pay a higher proportion of the income tax take than the bottom 95% – 134 million families – put together. And Obama wants to make our tax code more progressive?
Obama also said, “When I took office, our projected deficit, annually, was more than $1 trillion.” Well, there are a lot of shell games and obfuscations in government revenue discussions, but the Feds are great at statistics, so let’s fact-check this claim as well, shall we? Here’s a great site for research.
As of the close of fiscal 2008, just months before Bush left office, the federal deficit was $458.6 billion. Three months later, according to Obama, it was close to $1 trillion. Let’s see, what expenditure happened at about that time that might account for the big jump?
Love it or hate it, TARP, the rescue program for the nation’s banking system, prevented our economy from grinding to a halt like an engine with sand in the gearbox. And yes, we borrowed plenty to provide that liquidity. But here’s a distinction that is missed by virtually all in Washington but is plain as day to any businessperson: TARP provided loans, which have now almost all been paid back with interest. So, yes, the Bush folks incurred debt to keep the system running; but the money was only spent to the extent that Congress re-spent it when the loans were repaid. And this, of course, is what happened. But don’t blame that on Bush.
On the other hand, let’s look at the spending side of the ledger. Again according to the government statistics mill, total government spending in fiscal 2008 – Bush’s last fiscal year – amounted to $2.98 trillion, or about 20.7% of the economy. This is right in line with historical averages. By the end of fiscal 2010, the figure had swollen to $3.46 trillion, nearly 24% of GDP. That’s a 16% increase of the entire federal structure of outlays in just two years!
As Obama said in his speech, “we took a series of emergency steps that saved millions of jobs, etc. … these steps were expensive, and added to our deficits in the short term.” Apparently to Obama words like “emergency” and “short-term” go through some Orwellian vortex to mean “structural” and “long-term”. Because the 2012 budget he submitted calls for $3.7 trillion in spending, and the future – at least until Republicans regain control – looks like more of the same.
It can’t be clearer. The problem is spending rates that are too high, not tax rates that are too low. Obama, even in his Big Deficit Reduction Speech, couldn’t bring himself to suggest any meaningful cuts apart from taking big swaths out of defense (which, by the way, was the key to Bill Clinton’s balanced budget, but he didn’t have 2 1/2 Mideast wars to fight), and accelerating the “cost reductions” expected from Obamacare (don’t laugh, he means it). This last must be what Candidate Obama meant by the audacity of hope. Beyond that, he is counting on the “most fortunate among us” to pony up “a little more.”
Obama knows there isn’t enough money in the pockets of the oft-invoked “millionaires and billionaires” to make a meaningful solution to this debt hole. But I think he can’t help himself. He just hates it that people out there make so much money.
I noticed, though, that the First Couple’s tax return, released to the public today, doesn’t seem to show any extra tax payments over an above the statutory requirement. One might have thought with $1.7 million in income and free room and board, he could have contributed “a little more.”