Perhaps there is nothing in President Obama’s budget that better illustrates his priorities than his proposal to cap deductions on money donated to charity. “Don’t worry about giving,” this proposal seems to say. “That’s what the government is for.”
Taking, too. Obama’s budget increases taxes by $1.3 trillion. On the giving side, it increases discretionary spending by 12 percent and makes a $634 billion down payment on a national health-care system. Obama leaves the details of the system to Democrats in Congress, but he is specific about how to pay for it. He proposes to fund it in part by capping the value of itemized deductions for taxpayers in the top income-tax bracket, while simultaneously raising their tax rates. The message is clear: Turn more of your money over to us, and we’ll give it away for you.
Not all of Obama’s tax increases would come from higher rates. His budget would also impose a tax on energy in the form of a cap-and-trade program. The problems with this plan are numerous. Obama expects to fund some $100 billion in spending with proceeds from cap-and-trade. But, as Kevin Drum pointed out in Mother Jones, those numbers don’t add up unless 100 percent of commercial carbon-dioxide emissions are covered — about 50 percent is a more likely scenario, meaning that carbon-permit prices would have to approach $30 a ton for Obama to fund his spending priorities. Those permits are currently trading at $13 a ton on the European exchange. It’s worth keeping in mind that Obama’s cap-and-trade revenue projections are based on predicting fluctuations in the prices of complex financial instruments that are, not to put too fine a point on it, at present imaginary, and whose value derives entirely from a federal regulation that is subject to change with every shift in the political winds.
At its best, a cap-and-trade system is a burdensome tax on the production and consumption of energy, meaning that it will punish every working family sweating high utility bills and shackle the manufacturing sector of the economy, which Obama promised to bolster. A first step toward creating good manufacturing jobs in the United States would be to forgo a tax on manufacturing.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
ADVERTISEMENT
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
While Obama’s tax increases will almost certainly become law, his spending cuts will almost certainly not. This is particularly true in the case of agriculture. Obama says he will save $10 billion by capping payments to wealthy farmers and billions more by scrapping other costly and inefficient farm programs. But these savings will never materialize. Rep. Collin C. Peterson, the Minnesota Democrat who chairs the House Agriculture Committee, told the
Washington Times, “we just finished the [latest five-year] farm bill last year, and I don’t think we
’ll open it up.” If Obama really wanted to reform farm subsidies, he could have taken a stand when it mattered. Instead, he went complaisantly along with the subsidizers and voted for the farm bill last year.
For his other proposed cuts to take effect, Obama will have to make credible threats to veto appropriations bills that increase spending where he has called for decreases. If Obama is able to pull this off, we will be among the first to congratulate him. But neither party has an outstanding record of controlling spending when it controls both ends of Pennsylvania Avenue, and judging by the bloated bulk of the stimulus bill, we are not optimistic that the Obama-era Democrats will fare much better than their predecessors. In fact, as the Heritage Foundation’s
Brian Riedl pointed out, Obama’s spending increases are larger than the new revenues from his tax hikes. His deficit-reduction plan is to hope that the economy improves.
