By By Steve Flowers
President Obama’s budget proposal, the first organized assessment of our nation’s finances since Washington launched its series of bailouts and stimulus plans last year, established a much needed framework for near term domestic policy. Unfortunately, that framework replaces the anxiety that has recently gripped the economy with certainties likely to weaken it further.
Of course, presidential budgets are drastically altered during the legislative process, and there is great likelihood that Congress, even though it is run by members of Obama’s own party, will insert changes. Such revisions would be appropriate, considering:
Americans donated a total of $245.8 billion individually to charity in 2006, a significant portion of which came from high income earners. Obama’s budget would tax well-off donors on those contributions, to the tune of 12 percent. For Democrats, prone to over-taxation, this charity tax marks a new first, treating donations to non profit organizations like sales taxes treat plasma TV’s. If left unchanged, this provision will starve charitable organizations as donors become liable for taxation on their goodwill.
In eight years in office, President Bush ran $2.9 trillion in deficits - while waging two wars, responding to multiple hurricanes, recovering from the stock market bubble and 9/11, and responding partly to the financial crisis. During the campaign, Obama correctly referred to that profligacy as unsustainable; least he be taken serious, he now proposes more deficit spending in the first 20 months of his administration than President Bush accumulated over two terms. Already, after just five weeks in power, Democrats have outspent the total cost of the Iraq War.
The President has proposed setting over $630 billion aside for health care reform. Peter Orszag, the director of the Office of Management and Budget, has named health care cost a primary reason for the growth in entitlement spending. His prognosis is correct, but the cure to the skyrocketing cost of government health programs is not to spend over half a trillion dollars expanding them. In total, the Obama health plan could cost far more, approaching the trillion dollar range. That additional spending, not accounted for in this budget, will add to the tremendous deficits the White House has already projected.
In 2000, at the height of the Republican Revolution in Congress, federal spending plummeted to 18.4% of Gross Domestic Product. The decline enabled the budget surpluses during that time period. Recent interventions by the Bush administration, intended to be temporary, increased that number, and Obama hopes to keep federal spending at 27 percent of GDP this year. Long term, that number will fall to 22 percent, four percentage points higher than 2000. So much for the argument politics is fought at the margins.
The budget proposed by President Obama has been described as a bold, sweeping break from the policies of the last administration. It is, however, more an attempt to rearrange and expand the hodgepodge of taxes and agencies that currently constitute our federal government than meaningfully reform them. Its feasibility relies on the enactment of certain proposals - like the charity tax and a restriction to the home mortgage deduction - unlikely to ever pass Congress. Yet, even as this budget would dry up charities, it funds the most expansive domestic government program in our history. The overriding theme is clear: weaken non profits and business, and strengthen the government. Indeed, these to objectives are interrelated, because as private enterprises and charities dry up, there will be great growth in the demand for public services.
So, now we know, change we can believe in means a government we can’t afford.
That is the bottom line.
Tray Smith is a former page in the U.S. House of Representatives. He can be reached at tsmith_90@hotmail.com. His column appears weekly.