- The Washington Times - Sunday, March 1, 2009

ANALYSIS/OPINION:

COMMENTARY:

President Barack Obama says now that he has inflated the federal budget deficit beyond the level of human comprehension, he’s ready to start cutting it, and he won’t let anyone (Republican governors, especially) stand in his way.

But the president has no hope of making a dent on his massive deficits unless, somehow, the U.S. economy gets back on a reasonable growth path.

Reasonable people can disagree about whether the Obama-Pelosi-Reid stimulus package will help revive the economy or, as the Congressional Budget Office warns, drag down long-term growth enough to wipe out any short-term benefit.

What can’t be disputed is that no economy emerging from a serious recession can breach the massive wall of tax increases that lies dead ahead, a wall entirely of Mr. Obama’s making.

The wall starts with Mr. Obama’s renewed commitment to allow the most growth-oriented parts of the Bush tax policies to expire in 2011. This means letting top marginal tax rates go up, raising taxes on dividends and capital gains, and re-imposing federal taxes on estates, a k a restoring the “death tax.” These and other provisions due to expire will, according to the Joint Tax Committee, raise taxes by more than $150 billion in 2011 alone, and more than $2 trillion by 2018.

But that’s just the raw numbers. The composition of these tax increases is at least as important, because they target savings, investment and wealth-creation: the most critical weaknesses in our economy today.

Indeed, if the president were seeking to halt any economic recovery in its tracks, he couldn’t adopt a more effective strategy than this.

What’s more, this is only the beginning. Already Mr. Obama and his single-party Congress (let’s call it “the Obama regime”) have enacted a huge increase in cigarette taxes to divert funds into their national children’s health insurance initiative, an initiative that will demand more and more revenues in the years ahead. The Obama Regime stimulus bonanza is, under official budget projections, assumed to phase out after two years, but many of the policy initiatives and bloated funding levels in the stimulus clearly will end up being permanent: and some (green energy pork, education spending) were supported on that very premise. House Republicans on the Budget Committee project a $1.5 trillion cost by 2019 for just 19 of the most popular programs pumped up by the stimulus.

That cash either must be borrowed or covered by taxes. Place your bets now.

On top of all this, the Obama regime is moving full speed ahead toward national health insurance, either carbon taxes or a permit-trading system that will raise the cost of every unit of energy we use, and more rounds of TARP bailouts and mortgage relief (no point even trying to tabulate all that), but assume another trillion dollars and some rounding error.

Oh, and we still have to go through the normal “budget process” for this year, starting with Nancy Pelosi’s $410 billion wrap-up of appropriations from last year that somehow never got done.

If the numbers alone are staggering, consider that President Obama just reaffirmed his commitment to so-called “paygo” rules, which under the Obama regime signify that no tax-cutting will be allowed without dollar-for-dollar offsets in equivalent tax increases. Since there’s no constraint on tax increases, this is a recipe for automatically ratcheting up the tax burden, even without legislated tax increases.

Worse, in a little-noticed statement designed to win Blue Dog support for the stimulus package, Office of Management and Budget Director Peter Orszag affirmed that “the president is committed to paying for any of the temporary tax cuts included in the recovery plan that he would like to make permanent.” This means, e.g., the welfare-type tax rebates typical of the stimulus package, plus really useful things like faster writeoffs for new investment, will be subject to tax-increasing paygo rules if they continue.

In short, at the same time the Bush cuts aimed at investment expire, so will the new Obama-stimulus tax cuts (or they’ll be replaced by other, probably more damaging, tax increases). Add at least several hundred billion dollars to the 2011 tax wall.

Is this all on purpose? It doesn’t matter. It must be opposed, at a minimum by demanding economic triggers to head off these massive tax increases if the economy is still struggling late next year. And with this policy mix in place, it most certainly will be.

George Pieler is a senior fellow with the Institute for Policy Innovation, a national, nonprofit public policy organization in Dallas, Texas.


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