A Further Perspective

He’s Kidding, Right?

Obama to raise taxes, leave entitlements untouched.

By 4.14.11

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President Obama put all his cards on the table yesterday. He made his big announcement on his response to our current fiscal crisis and festering national debt.

He wants to raise taxes (Quelle surprise!) and will not touch any entitlement program to reduce uncontrollable spending.

He has got to be kidding, right? Wrong. The President is hunkering down, pushing for a raft of new taxes, passing off more cuts in discretionary spending (necessary but hardly sufficient) and going into campaign mode for the 2012 re-election campaign.

Americans for Tax Reform, beating to quarters, excoriates the President for combining the worst of his 2012 tax increases and those also proposed by the Simpson-Bowles commission and the Gang of Six, the bipartisan group of U.S. Senators who are supposedly working on a proposal of their own.

According to ATR, the Obama plan would raise the tax revenue from 18-19 percent of the economy, the historic average, to 21 percent. Of course, this 21 percent is on top of state and local taxes which cumulatively burden workers and their families.

In addition, the President would raise taxes, oh, $1-3 trillion over the next decade. He also de-accelerates from the GOP plan put together by Budget Chairman Paul Ryan. He, Obama, supposedly cuts $4 trillion over 12 years versus 10 years as proposed by Ryan while raising taxes substantially.

There will also be tax hike "triggers," an increase in taxes on capital gains and dividends from 15 percent to 23.8 percent and a boost in the death tax rate from 35 to 45 percent with a corresponding cut in the exemption from $10 million to $3.5 million. All this is on top of the 20 new or higher taxes that came along with Obamacare.

Besides ignoring the original Simpson-Bowles commission he established, the President now calls for another commission, a congressional one, under the leadership of Vice President Biden. This is beginning to sound like the fiscal equivalent of the Groundhog Day (1993), without the happy ending.

But the most egregious thing about the President's plan is his complete abandonment of any kind of reform or cuts or overhaul of entitlement programs such as Medicare or Medicaid.

There are no serious policy analysts on the face of the globe who think America -- or any other developed country for that matter -- can escape the inexorable demographic trends that are driving these programs into bankruptcy. None. All see entitlement reform as a fiscal if not moral imperative. The status quo is unsustainable.

One might harbor the dream, nightmare really, of raising taxes sufficiently to cover these entitlement bulges, but that is a fantasy. One must assume that the President and his advisors are smarter than that. The President is taking a pass, pending his re-election campaign, without facing up to the hard choices confronting him and the nation. This is simply tragic.

But predictable. To use the current formulation, politicians of both parties have kicked this can down the road for years, which is why House Speaker John Boehner, Chairman Ryan, and, to their credit, the Tea Party caucus stand out in terms of their political courage and commitment to future generations of young Americans.

The Republicans face a titanic challenge to educate the citizenry on the fundamentals of our government finances and outline the hard choices that cannot be ignored. As former Fed Chairman Alan Greenspan has said, "We've got to resolve this issue before it gets forced upon us."

"The only question is, is it before or after a bond market crisis? Because there's no alternative."

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About the Author

G. Tracy Mehan III served at the U.S. Environmental Protection Agency in the administrations of both Presidents Bush. He is a consultant in Arlington, Virginia, and an adjunct professor at George Mason University School of Law.