President Obama has talked about tough choices and balanced approaches in his speeches about the country’s fiscal challenges, but his budgets have never lived up to the hype. His latest budget proposal is no different. The savings are mostly bogus — he includes $2 trillion in savings from the debt deal and makes dubious assumptions about the wars in Iraq and Afghanistan — and no major structural changes to entitlements are even contemplated.
Now, these presidential budgets aren’t even worth the paper they are printed on. Obama’s first budget projected a $581 billion deficit for this year; we are actually $1.33 trillion in the red. But this budget barely touches Social Security, Medicare or Medicaid. It leaves most of the Bush tax cuts intact, with some populist tax increases on investment for high income earners. The “Buffett rule” won’t be sufficient to pay for our current spending commitments.
Here’s the bottom line: the president’s $3.8 trillion in spending for the next fiscal year is actually $230 billion above the Congressional Budget Office’s most recent baseline. Spending over the next decade is $2.7 trillion higher than the CBO baseline. The $6.7 trillion in deficits over that period is more than double the CBO’s estimates. The national debt will also be nearly $4 trillion higher in 2022 under Obama’s budget than the CBO projects.
And all this is despite the fact that Obama relies on much more optimistic economic growth assumptions than the CBO. Obama also jacks up the dividends tax rate from 15 percent to 43.4 percent next year. Capital gains taxes will rise from 15 percent to 23.8 percent. The effective tax rates will be even higher. More taxes, more spending, more borrowing, and more politics.