Thursday, June 11, 2009

President Obama said on Tuesday that “Entitlement increases and tax cuts need to be paid for. They’re not free.” To look like he’s getting tough on the deficit, he’s promoting the “pay as you go” rule, which provides a justification for raising taxes. Mr. Obama shouldn’t go there.

The proposal would require lawmakers to make up for new spending programs and tax cuts by cutting other programs or raising other taxes. The rule wouldn’t be retroactive, so it would not pay for the extravagant spending programs Mr. Obama already has introduced, such as the $787 billion stimulus bill he signed in February. The mandate wouldn’t apply to the $2.5 trillion worth of new spending priorities that the Obama administration plans to enact in the future. Steps toward nationalized health care would be exempt.

Mr. Obama has been pretending to be a deficit hawk since his presidential campaign last year. On the hustings, he continually blamed last fall’s financial crisis on the deficit, which he promised to cut by shrinking government spending. During the presidential debates, he complained of an “orgy of spending and enormous deficits” and promised to correct the costly spending cycle.

His rhetoric didn’t change after he moved into the Oval Office. Mr. Obama told C-SPAN on May 23 that “we are out of money now,” and said at a May 14 town meeting in New Mexico that our deficit spending is “unsustainable.” But the president continues to spend at record levels.

The Congressional Budget Office projects that the national debt will surge over the next 10 years from $6 trillion to $15 trillion. In 2019, debt will exceed 80 percent of the gross domestic product. For comparison, in the 2007 budget, the last fiscal year that Republicans controlled Congress and the presidency, the annual deficit was $162 billion. In 2006, it was $248 billion - and Republicans were hardly frugal. CBO’s estimated deficit for this year is $1.8 trillion, but that figure does not account for the soaring unemployment rate that took off after the calculation was made.

On April 14, Mr. Obama boasted: “Already we’ve identified $2 trillion in deficit reductions over the next decade.” The claim was too much for the liberal New York Times, which reported, “Three-quarters of those ‘reductions’ reflect assumptions that the nation would have had as many troops in Iraq in 10 years as it does now, even though President George W. Bush signed an agreement with Baghdad before leaving office that will result in the withdrawal of all American forces within three years.” Administration spokesmen continue to repeat this misleading figure even though the supposed savings resulted from Mr. Bush’s action, not Mr. Obama’s.

“Pay as you go” rules provide politicians with a ready excuse to raise taxes. If deficits are projected, they can point to the rule and say the law requires them to compensate for the revenue shortfall. Spending cuts are a better way to fill budget gaps, but it’s never easy to pry nickels and dimes from profligate politicians, let alone billions. Mr. Obama’s “pay as you go” proposal opens the door to massive new taxation to pay for out-of-control government spending - and it does nothing to address his growing deficits.

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