Barack Obama has sworn up and down that he can pay for every dime of his new proposed Federal spending. Alan Reynolds, of The Wall Street Journal must be a closet racist. He asks the rather mean-spirited question How's Obama Going to Raise $4.3 Trillion?
On one side of the balance sheet, Reynolds lists the potential credits against which the US Treasury will have to issue outlays. About one quarter of this the Democrats can easily comprehend. It is, after all, ALL BUSH'S FAULT. (Again, I lament the lack of html sarcasm tags.)
The new president, whoever he is, will start out facing a budget deficit of at least $1 trillion, possibly much more.
Yet after that, Senator Obama's spending proposals lack cognizance of the First Law of Holes. Namely, when you are in one; stop digging.
Sen. Obama has nonetheless promised to devote another $1.32 trillion over the next 10 years to several new or expanded refundable tax credits and a special exemption for seniors...
Mr. Obama's proposed income-based health-insurance subsidies, tax credits for tiny businesses, and expanded Medicaid eligibility would cost another $1.63 trillion...
Excluding the Obama health plan, the NTUF estimates that Mr. Obama would raise spending by $611.5 billion over the next five years; the 10-year total (aside from health) would surely exceed $1.4 trillion, because spending typically grows at least as quickly as nominal GDP.
Mr. Reynolds then totals the bar tab.
Altogether, Mr. Obama is promising at least $4.3 trillion of increased spending and reduced tax revenue from 2009 to 2018 -- roughly an extra $430 billion a year by 2012-2013.
The next part of Reynolds' discussion involves a list of new debits against which the US Treasury would receive renumeration.
Mr. Obama's proposed tax hikes on the dwindling ranks of high earners would be unlikely to raise much more than $30 billion-$35 billion a year by 2012.
Mr. Obama said, "I've laid out how I'll pay for every dime -- by closing corporate loopholes and tax havens." That comment refers to $924.1 billion over 10 years from what the TPC wisely labels "unverifiable revenue raisers."
Mr. Obama is thus credited with saving $50 billion in a single year (2013) by reducing "wasteful spending" and unnamed "obsolete programs." He is said to save Medicare $43 billion a year by importing foreign drugs
Barack Obama's environmental policy is included as a source of revenue. Note the prestidigitation. The EPA originally had the mission of saving human health and welfare, not collecting revenues for the state.
CFARB assumes Mr. Obama's cap-and-trade tax would raise $100 billion in 2013 alone
So if we assume that the EPA now works for the IRS and raises about $1T over the next decade, Obamanomics begins to make sense. If we assume a stock market rebound will produce enough capital gains to tax $1T off of, without any change in the Community Redevelopment Housing Act policies that led to our mortgage fiasco, Barack Obama successfully raises enough dough to do what he wants to do.
In the real world, there isn't enough Fairy Dust handy to make Sherrod Brown, Maria Cantwell, Byron Dorgan or Ben Nelson support the cap and trade plan that raises 25% of Senator Obama's required revenue. I have yet to caucus the GOP on this issue.
Absent significant reform in the lending standards by which banks decide who to lend mortgage dollars to, I don't see our stock market getting back over 10K in the next five to seven years, under Obama, under McCain, under Nader, or under Barr. Consequent these two factors, Senator Obama probably has to find another sofa cushion to search under for at least 40% of his revenue requirements.
Senator Obama swears by his promise to only raise taxes on people making less than $250K/yr. Economist/Partisan Paul Krugman can't buy this promise. When Paul Krugman runs the numbers, he comes up with a lower cap.
Well, Mr. Obama proposes raising rates on only the top two income tax brackets — and the second-highest bracket for a head of household starts at an income, after deductions, of $182,400 a year.
Journalist/Partisan Jim Geraghty reaches a conclusion that differs from Dr. Krugman's. Predictably, it also involves tax increases on incomes far below $250K. Geraghty's analysis, as well as Krugman's, hinges on Obama campaign literature that claims the Senator would only raise taxes on the top two brackets. His examination of what that would mean in 2008 yields the following results.
If your filing status is single, you hit those top two brackets once you make more than $164,550.
If your filing status is married filing jointly, you hit those top two brackets once you and your spouse make more than $200,300.
If your filing status is married filing separately, you hit those top two brackets once you make more than $100,150.
Assuming that reneging on his $250K pledge doesn't solve Senator Obama's flagrant revenue shortfalls, Congressman Barney Frank offers us hair of the deficit dog, to kill the budgetary hangover. The Wall Street Journal leads an editorial with it, just so you'll see it in big, neon letters.
I think at this point there needs to be a focus on an immediate increase in spending and I think this is a time when deficit fear has to take a second seat . . . I believe later on there should be tax increases. Speaking personally, I think there are a lot of very rich people out there whom we can tax at a point down the road and recover some of the money." -- Barney Frank, October 20, 2008 (HT: Wall Street Journal)
I think Congressman Frank has a more accurate description of the financing policies Barack Obama would employ than either the political journalist or the budding Nobel Laureate. Senator Obama would do nothing to offset his new spending initially.
The amusing sequel occurs when Senator Obama attempts to explain to Larry Ellison, Warren Buffet and Steven Bing that they should all be patriots and pay much higher taxes. Keep putting bread in their jar, folks. They could be here for the next four to eight years.
Cross-Posted At: THE MINORITY REPORT