Editorial: Obama's Budget Represents Shifting Priorities
President Barack Obama unveiled his budget last week—to the tune of $3.6 trillion. While it addresses many of the points he campaigned on—such as its funding of Medicare by upwards of $600 billion over the next decade—it reveals a hefty shift in priorities from the last administration.
President Obama's budget represents an increase over the 2009 budget of nearly 25 percent. The budget then, at $2.9 trillion, was expected to not cross the $3 Trillion threshold until 2010. But the change of administrations brought with it a change in budgetary priorities—social program funding is on the rise, while across-the-board tax cuts have fallen out of favor. There is even a $750 billion chunk set aside in case the $700 billion bailout passed by Congress last fall isn't enough to help failing banks.
While the price tag is high, Obama's plan also opens up some new revenue sources—via increased taxes and penalties on upper-income earners. Those who make over $250,000 will see their taxes rise as the Bush tax cuts expire. The capital gains tax rate will be increased. And deductions will be decreased for charitable giving by the wealthy—and as many Republicans have pointed out, many small businesses would be caught in the crossfire.
This last change has Republicans and Democrats alike siding with the charities, who express concern that the change could hurt giving. And at a time when many charities are struggling just to stay afloat, the enactment of such a policy could have profound effects on the very institutions that provide the nation with many of the social programs that Mr. Obama wishes to emulate via government largesse.
When confronted with this issue, the Office of Management and Budget director replied that the government would give money to the charities to help cover their losses. While to some this exercise would seem meaningless—why take the money in taxes when you are giving most of it back anyway—to the Obama administration, it makes perfect sense. The Obama Administration can then choose which charities it favors to receive government funding. To the Administration, the government is able to spend money more wisely than private individuals, businesses, or charities. Hence the push for increased federal control and spending—and the resultant higher taxes.
Upper-income Americans and small-businesses won't be the only ones hurt, however. Bigger businesses will have to shell out more than $600 billion to buy carbon permits once his cap-and-trade program gets running—by 2012. Despite the current economic climate, Mr. Obama evidently expects the economy to have sufficiently recovered in the next three years to allow businesses to absorb these exorbitant fees while somehow still making a profit.
But not all economists agree with this assessment. Some believe that the current economic situation will worsen and that the government's projections are nothing more than best-case scenarios. If such a view is correct, it will result in lower revenues, higher expenditure costs, larger deficits and yet more debt that can never possibly be paid back. This will only push any budget balancing projections even further out of reach.
Like his predecessor, who promised budget cuts but never quite delivered, Mr. Obama seems doomed to repeat the errors of the big spenders who have gone before him. Banking on his political capital from November, the President is moving quickly to enact a radical policy agenda while his popularity remains high. But he had best be careful—in 2004, President Bush followed his successful reelection with a policy blitz which failed and ultimately made him less popular. His political capital dried up quickly.
President Obama risks the same fate if he does not proceed with caution—and a good dose of honesty. Claiming to cut the deficit while pushing out a budget that causes a $1.75 trillion deficit will not be viewed favorably by a truth-hungry American population. (And don't forget the trillions in bailouts and stimulus money spent.) The administration may have changed, but America is still the same truth and justice loving country, honoring honesty and skeptical of the government wasting their hard-earned tax dollars.
So while his new budget encapsulates his policy priorities, President Barack Obama should be careful in how he pitches it to the American people. If his bloated budget is seen for the tax-raising, big-spending proposal that it is, his political capital may disappear faster than the dollars of the Americans on whom and small businesses on which he intends to increase taxes.