This morning Congressman Paul Ryan, the ranking Republican on the
House Budget Committee, will release the GOP alternative budget,
which will come up for a vote on the House floor. This budget
will have complete and thorough numbers scored by CBO. The
difference between Obama’s budget and this budget is like the
difference between Che Guevara and George Washington.
Ryan said at a press conference yesterday that the GOP budget
would involve lower spending, lower deficits, lower taxes, lower
debt, and more jobs, all based on Congressional Budget Office
projections. The difference is shown in particular by the wide
divergence between the two budgets on the national debt. Under
the Obama budget, CBO projects that the national debt as a
percentage of GDP will soar over the next 10 years from 40% of
GDP today to a shocking 82.4%. Ryan, moreover, will show that
over the long run Obama’s budget plan will lead to the national
debt soaring to 200% of GDP by 2035. Even during World War II,
America’s national debt peaked at 113% of GDP.
Under Ryan’s budget plan, however, the national debt is just over
60% of GDP by 2019. But over the longer run, Ryan slows runaway
entitlement spending, so the debt by 2040 is held to about 70% of
GDP, and then declines thereafter to below current levels.
As Ryan said yesterday, “We cannot continue to borrow more under
this presidency than all prior 43 presidencies combined…because
if we do that, the future will be jeopardized. We will not have a
prosperous America. Our currency will be debased, and we won’t
have the kind of jobs…that we have enjoyed in this country. So
tomorrow the Republican budget will attack these issues. The
Republican budget will show a better future for America on all
the key metrics: spending, borrowing, taxing, job creation. This
is the future we want to achieve. This is the future the
President’s budget does not achieve. The President’s budget does
not solve our economic crisis, our fiscal crisis. I would argue
that this budget exploits it.”
Indeed, the last budget passed by a Congress with GOP majorities
was for fiscal 2007. That budget had a deficit of $162 billion,
or 1.2% of GDP. But under Obama’s budget, the deficit for this
year would total $1.845 trillion, according to the CBO, the
highest ever. That would be more than 7 times Reagan’s largest
deficit of $221 billion, which caused so much howling among
liberals and Democrats.
The CBO estimates that this Obama budget deficit will total an
astounding 13.1% of GDP, more than one-eighth of the entire U.S.
economy, for the federal deficit
alone! That is the largest in U.S. history, except for
World War II, more than twice Reagan’s highest deficit as a
percent of GDP.
The budget Obama proposes for this year increases federal
spending by a fiscally insane 34% over the budget adopted for
last year, with a total of $4 trillion in federal spending, the
highest ever. That spending would equal 28.5% of GDP, an increase
in the size of the federal government in Obama’s first year of
42% compared to the postwar average relative to GDP. Ryan will
show, moreover, that over the long run Obama’s budget would lead
to federal spending at roughly 50% of GDP! That is for
Federal spending alone! Talk about socialism! That means
good-bye to the America we have known and loved. Good-bye to
freedom and prosperity.
Obama’s budget adds $1 trillion in tax increases on that hated
upper 5% of income earners, mostly tax rate
increases. But the top 1% of income earners already pay
40% of all federal income taxes. The top 5% already pay 60% of
those taxes.
Another $645 billion tax increase comes from Obama’s anti-global
warming cap and trade system, which will raise costs by that
amount on the production and use of carbon energy, such as oil,
natural gas, and coal. This tax increase will be paid by
consumers in increased utility bills, gas prices, prices for home
heating oil, prices for electricity, food prices, particularly
for meat and dairy products, and in prices for every product
whose production uses energy. Indeed, that tax increase will far
more than offset the so-called tax cut for 95% of workers that
Obama promised, which is a miserable $400 tax credit per worker
for the year which will do nothing to boost the economy. Instead,
the cap and trade tax increase will destroy at least 1.5 million
jobs by 2015.
The Obama budget also projects that revenues from the corporate
income tax will more than double in 3 years, increasing, in fact,
by more than 124%. Overall, this budget represents the largest
tax increase in U.S. history, by far. All these tax increases
will drag down the economy into stagnation, not lead to long-term
economic growth. Obama’s huge budget deficits will also produce
high interest rates and soaring inflation over time, which will
further drag the economy down.
By contrast, Ryan’s GOP alternative budget includes no tax
increases. Instead, it reforms income taxes, with a low rate of
10% applying to the first $100,000 in income, and a top rate of
25% applying to all income after that. Those lower tax
rates will provide powerful incentives to boost the
economy, by allowing producers to keep a higher percentage of
what they produce. At the same time, the GOP alternative budget
will also show an eventual balanced budget, as scored by CBO.
A key question is how the so-called Blue Dog Democrats will vote
on the budget. The Democrats owe their House majority to the
election of 40-50 of these Blue Dogs, who ran in conservative
districts claiming to be better conservatives than their
Republican opponents. A few of them actually voted against
Obama’s counterproductive “stimulus” bill, which makes them
legitimate in my book. The others will reveal themselves as true
frauds if they vote for Obama’s loony left budget instead of
Ryan’s mainstream middle America budget, and provide the
foundation for a Republican takeover of the House next year.
In his press conference last week, Obama said, “But, I’m — look,
I’m not going to lie to you. It is tough. As I said, that’s why
the critics tend to criticize, but they don’t offer an
alternative budget, because even if we were not doing health
care, we were not doing energy, we were not doing education, they
would still have a whole bunch of problems in those out years,
according to CBO projections. The only difference would — is
that we will not have invested in what’s necessary to make this
economy grow.” Paul Ryan is going to make Obama regret that
taunt.
And just what is Obama going to “invest” in to make the economy
grow? (Note: Obama uses the word “invest” to mean runaway
government spending. This was explained in his underwhelming
press conference last week.)
First, he is going to create all those “green” jobs by greatly
restricting production of the proven sources of our current
energy supply, oil, natural gas, coal, nuclear power, and greatly
increase taxes on whatever supplies of this energy do get
through. Then he will greatly subsidize the new politically
correct sources of energy, wind, solar, biofuels. He figures
building all those solar panels and windmills, and growing and
processing all that agrifuel, will create oodles of jobs.
This is economic foolishness because the real economic costs of
those politically correct energy sources are far greater than for
the current sources. Then the economy is also losing the costs of
the increased taxes and subsidies. Overall, this will slow
economic growth and reduce jobs on net. If the new sources don’t
really come through with enough energy to power our economy, as
is quite likely, that will harm growth even more.
The second component of the Obama “economic growth” agenda is to
reduce health costs. But there is nothing in his health reforms
that will legitimately reduce health costs by nearly enough to
really help. The only way Obama’s health reforms are going to
reduce health costs is by depriving doctors and hospitals of
adequate compensation, and by rationing health care for those who
are actually sick, as they do in Canada, Great Britain, and
everywhere else they have so-called national health care. This
will not only trash the health care industry. It will reduce the
standard of living of the middle class, just like the new Fiat
cars that Chrysler is now going to produce will do.
Finally, Obama is going to promote economic growth by increasing
spending on education. But we already spend more on education
than anyone else in the world by far, probably still more than we
spend on national defense. That is why study after study shows
that educational performance is not related to spending in
America. What will improve education is fundamental reforms like
school choice, which Obama opposes because he is owned by the
teachers’ unions who are interested only in their own power and
money, not education performance. So Obama’s increased education
spending is not going to promote economic growth either.
Overall, the notion that this agenda is going to promote
long-term economic growth is daft, to be as polite and
diplomatic as circumstances will allow. Obama should not even use
the words “economic growth.” He knows as much about that as he
does about playing shortstop for the New York Yankees.
