In the negotiations over the fiscal cliff, we have heard a lot from President Obama about raising taxes. We know that the President wants to increase taxes but despite all the talk about a “balanced approach” we have yet to see him propose any real spending cuts.
After three weeks of negotiations President Obama’s opening offer contained $1.6 trillion in tax increases – two times the level on which the President campaigned. According to media reports, the offer completely ignored the general framework on which talks had centered.
The President’s political allies would have you believe his proposal contains some $400 billion in “spending cuts.” Unfortunately his plan also contains at the very least $287 billion in new spending. Moreover, the so-called cuts count previously-enacted savings, “savings” from winding down the war in Afghanistan, and counts as savings interest the country would not be paying because it did not borrow additional money.
That is as good as crediting Georgia $5 billion in budget savings this year because we were not hit by a hurricane. It is the kind of thinking that got us into this mess and the gimmickry that lets Washington ignore our country’s problems rather than tackling them head on.
We have a spending problem, not a revenue problem. Historically, revenues are 18 percent of gross domestic product (GDP). Spending, however, is currently 23 percent of GDP and President Obama’s budget doubles down on this unsustainable path.
Since 1975, federal spending has grown nearly 10 times faster than inflation. Clearly, both parties have their fingerprints on the national debt but even if President Obama got every tax hike he’s asking for, deficits would average $715 billion during his second term. Even if the President took 100% of the income of those making $1 million or more, his budget would run a $370 billion deficit this year.
I support the President’s right to advance his views. His insistence, however, on raising rates is misguided. The very people says he is targeting – the super wealthy – are the ones that can afford to hire accountants and lawyers to reduce their effective tax rates by taking advantage of loopholes.
As it stands, the President’s definition of wealthy includes as many as 1.7 million individuals whose small business income is reported through their individual income tax filings. Increasing taxes on these individuals would have the effect of killing jobs.
While I have concerns about Speaker Boehner’s proposal to avert the fiscal cliff, I believe he put forward a thoughtful and serious offer. Now it is time for the President to do the same.
Any such offer would most certainly include substantive spending cuts. That means spending less, not exploiting budget tricks to satisfy phony accounting.
President Obama campaigned on a “balanced approach.” It is time for him to deliver just that.