A few quick thoughts on President Obama's Wednesday budget speech:
Obama says that he doesn't begrudge people who do well financially. Of course not, because they're his source of economic blood, just the way that I was the source of blood for a leech when hiking in Indonesia.
Obama blames the Bush tax cuts and Medicare Part D for the budget deficits. He, like all ideological Progressives and supporters of high taxes, assume that people's behavior does not change when tax rates change. But even his own former chief economic adviser, Christina Romer, doesn't buy that assumption. Romer has explained that tax increases have large and damaging effects on GDP growth. Furthermore, in a paper in which Romer (writing with her husband) argues that tax cuts don't improve the deficit, the primary reason is not because cuts reduce government revenue (she finds that any revenue drop is temporary) but rather that government does not respond to any reduced revenue by cutting spending.
And regarding Medicare Part D -- keeping in mind that it's unconstitutional and should not exist -- Bush argued and he was probably right that if that particular prescription drug entitlement hadn't passed, the Democrats would have passed one that was even more expensive. Indeed, the Democrats hate the pro-free-market competition ingrained in Part D -- the very aspects of the plan which make it the only entitlement program I am aware of which has come in under its original cost projections. So, yes, Part D has added to our budget deficit and even more so to our unfunded mandates. But any version Obama would have supported in its place would have added to them even more.
Obama decries that the recent debate over the budget for this fiscal year deals only with cuts to 12 percent of the budget. (Not that they cut the budget 12 percent, but only 12 percent of the budget was in the areas available for discussion.) The reason for that is that so much of the budget is mandatory or entitlement spending which simply could not have been dealt with in a budget for a fiscal year that is already more than half over. But Paul Ryan's budget proposal addresses far more than 12 percent of the budget, including reforms to Medicare and Medicaid (though it is silent on Social Security.)
Obama says that fiscal discipline doesn't require us to balance our budget overnight. True, but that isn't a get-out-of-jail-free to run huge deficits for another generation.
Obama says that the top 1 percent of earners saw incomes rise while bottom tiers saw no economic gain over recent years. He uses that to argue for raising taxes on the top earners even though the top 1 percent already pays over 38 percent of all income taxes (down from 40 percent in 2007 because of the impact of the economic downturn.) It's president Robin Hood.
Obama says that America is "generous and compassionate" and that we should "take responsibility for each other." But it's not compassion to have your money taken for the benefit of others at the threat of prison. It's not "taking responsibility" when government forces you to pay for someone else's lack of success or subsidize the benefits that others get from living in this nation, such as the benefits of national defense.
Obama proposed $4 trillion in deficit reduction over 12 years (versus Paul Ryan's $6 trillion in 10 years.)
Most focus was on cutting the defense budget, but Obama also wants to reduce health care spending. Obama claims that his plan will reduce the cost of health care itself, saying that Obamacare will lower the deficit. I hope plastic surgery is included in Obamacare because I saw his nose grow just after that sentence.
In a direct assault on Ryan's plan, Obama said "I will not allow Medicare to become a voucher program." In other words, he will not let competitive forces force its cost down nor let people begin to take more responsibility for their own health care spending.
Obama said that he only extended the income tax cuts for everyone including the "rich" because he didn't want a tax hike on lower income Americans (who already pay almost no income tax).
He wants to limit itemized deductions for wealthiest Americans. (Charities will fight tooth and nail against this, as will real estate agents who sell homes to those making over $250,000 a year.) This is nothing more than an additional tax and a statement that the purchases and donations of the rich are metaphysically inferior to those made by the non-rich.
Obama says that in order to increase our own freedom and happiness, we can't just think about ourselves. We have to think about others. Beyond the obvious advice to the president to read (or watch) "Atlas Shrugged," the proper response to Obama is "wrong!" Well, wrong in the sense that he means it. Obama means that we need to think about the well-being of others as an economic end in itself if we want to prosper. As Adam Smith eloquently explained, "It is not from the benevolence of the butcher, the brewer, or the baker, that we can expect our dinner, but from their regard to their own interest." In other words, and forming the basis of the concept of the "invisible hand", we only need consider what the others want for their own benefit and then provide it to them at a profit to ourselves (or not if we choose voluntary charity.) We can increase our own success and happiness by understand that that's what everyone else is doing. In other words, Obama's view, typical of Progressives from Dewey and Wilson to today, is antithetical to human nature.
The president spent a lot of time talking about "American values" as if most Americans value what he does. He talked about us as a nation built on "self-reliance" before explaining why the Republican plan to encourage more of that was cruel and anti-American. He is a walking mass of rhetorical contradiction covering a pure-bred ideological leftist.
I want to end with the point I most want you to remember: Obama said early in his speech that he thinks the upper income earners in this nation should "give back." This betrays the fundamental Progressive lie that the rich get rich by making other people poor. That might be true in a kleptocracy such as Venezuela, and there is no doubt that some companies (GE, Duke Energy come to mind) try to use the power of government to direct taxpayer money their way. But the heart of America's entrepreneurship is in companies like Apple, Microsoft, even Walmart, which have become wildly successful by offering products to people that we the consumers believe are worth more than the money we pay for them. They get rich because our productivity and quality of life are improved, in our own perceptions at least -- but what else really matters? -- even more. For all the billions earned by these companies, Americans are in the aggregate made even richer.
For this reason, a steeply progressive income tax, which former Estonian President Mart Laar rightly termed "the grand idea of Karl Marx" is immoral (in addition to being somewhere between ineffective and economically suicidal.)
Obama's budget plan is the worst sort of far-left plan, cutting defense while soaking the rich and refusing to add the benefits of competition to any major government program. The good news is that the chances of his getting a tax hike passed are close to zero with this House of Representatives. Perhaps the better news is that, in my view, Obama's speech represents him pounding the latest nail into his reelection coffin.
Edited to add detail about Romer papers.
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