Friday, February 22, 2008

Barack Obama has a plan. Well, he actually has lots of plans. Paying for those plans is no secret.

Bear with us even though the costs aren’t hidden in these details. To finance (1) his 10-year, $150 billion program to “establish a green energy sector,” (2) his 10-year, $60 billion “National Infrastructure Reinvestment Bank,” (3) his nearly universal health care plan (whose annual price tag he low-balls at $50 to $65 billion) and (4) a host of refundable tax credits ranging from $4,000 per year for college students to a tripling of the Earned Income Tax Credit for minimum-wage workers, Mr. Obama plans to (1) end the war in Iraq, (2) permit the Bush tax cuts to expire for households earning more than $250,000 and (3) “change our tax code,” which “has been rigged by lobbyists with page after page of loopholes that benefit big corporations and the wealthiest few.”

In his attempt to appease the anti-war brigades, Mr. Obama may be overestimating the peace dividend. And in his efforts to engage in class warfare, he is demonizing businesses and wealthy individuals, who collectively bear the lion’s share of the nation’s tax burden.

Regarding the peace dividend, it must be recalled that Mr. Obama declined in September to promise that all U.S. troops would be out of Iraq by January 2013, which was more than five years down the road. Meanwhile, U.S. military forces in Afghanistan will soon exceed 32,000 troops, there are growing expectations that more will be needed and it is likely that our allies will be withdrawing more of their forces. If a Democratic president managed to reduce U.S. forces in Iraq by 75 percent from the surge’s peak level, there would still be 40,000 troops there. That means the Afghanistan/Iraq theaters would still have a total of about 75,000 U.S. troops. In October, when the Congressional Budget Office (CBO) examined a scenario in which 75,000 U.S. troops would remain in those two countries through fiscal 2017, it concluded that the costs “would total $1,055 billion over the 2008-17 period.” That figure did not include an additional $290 billion in interest outlays; nor did it include another $147 billion over the 2009-17 period to increase the size of the Army and Marines; and it did not include the tens of billions of dollars that will be required to reset the military’s equipment.

Regarding the lobbyists who have “rigged” the tax code with “loopholes that benefit big corporations and the wealthiest few,” two facts are worth noting. First, as total tax receipts increased from 16.5 percent of gross domestic product (GDP) in fiscal 2003 to 18.8 percent of GDP in fiscal 2007, corporate income taxes increased from 1.2 percent of GDP to 2.7 percent, the highest level in 30 years. Thus, the four-year proportionate increase in corporate income tax revenue (from 1.2 percent to 2.7 percent) accounted for 65 percent of the proportionate increase in total revenues (from 16.5 percent to 18.8 percent). The second point relates to the “loopholes” for the “wealthiest.” According to a December 2007 CBO study, in 2005 the top 1 percent of households earned 18.1 percent of income and paid 38.8 percent of individual federal income taxes and 27.6 percent of all federal taxes. The highest quintile (the top 20 percent) earned 55 percent of income and paid 86.3 percent of individual federal income taxes and 68.7 percent of all federal taxes.

Mr. Obama’s anti-war and class-warfare rhetoric borders on the demagogic.

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