During the campaign for re-election, Barack Obama at least made vague references to a willingness to accept $3 trillion of reduced spending in exchange for a $1 trillion dollar tax increase. The vast majority of his feigned belt-tightening was smoke-and-mirrors beltway accounting gimicks, but at least back then he was willing to pretend.
With the election behind him, the pretence is gone. Now it is all about higher taxes, more spending, and raw executive power. That's change you can believe in.
Re-election in hand, Obama is pitching what economist Larry Kudlow calls "a gargantuan $1.6 trillion tax hike" that would doubtlessly shackle the faltering economy even more than his policies have over the last four years. For the record, that's twice the tax increase he was campaigning on less that a month ago.
In addition he wants more – not less – spending in the form of yet another $50 billion "economic stimulus." And, taking a que from Eqypt's wannabe Dictator Mohammed Morsi, Obama is demanding new Presidential authority to "permanently increase the U.S. debt limit to avoid the need for congressional action."
Obama's phantom $3 trillion of spending cuts referenced last year during the campaign has now shriveled to a mere $400 billion – with the standard Obama "trust-me" provision demanding the tax increases now, and no more than a tease to "get back to me later, and we'll talk about those cuts."
The President conveniently doesn't identify where he's willing to cut. Most likely he is once again counting the "savings" from not fighting the wars in Afghanistan and Iraq; phantom dollars that were never going to be spent anyway.
Instead of pulling America back from the fiscal cliff, Obama just stepped on the accelerator.
Obama knows that this "plan" is a non-starter. As a supposed offer of negotiation to the GOP, it is "not just a bad deal, it is insulting," said Charles Krauthammer. "Robert E. Lee was offered easier terms at Appotmattox, and he lost the Civil War," Krauthammer roared on Fox News.
Obama's plan is based on the last budget he presented to congress that received exactly zero votes – even from his own Democrats. This is pure politics. He'll demagogue the "obstructionist Republicans" for their unwillingness to sign off on his "balanced" plan. Republicans will take heat from the obliging mainstream media, and Democrats will be thankful they never have to vote for this nonsense.
The real question is where will all of this end. Both parties seem focused on raising revenue now. They're just wrestling over how much, and who pays.
To their credit, Republican Leadership in the House and Senate are trying to make the point that real spending reductions and particularly entitlement reform need to be on the table, but Obama and the Democrats are simply ignoring the obvious. This is all about raising taxes for them, period.
A deal of some type will likely get made, but don't expect it to be a good deal. From the sparing going on between the principles it is hard to see a glimmer of hope for any real economic growth policy coming out of this quagmire.
Growth – not bigger, more powerful government – is most certainly what the end game should be. Revenue to the federal treasury is down; not just from where politicians would like it to be, but really depressed. As we explained on these pages recently, due to the stagnant economy and pitiful non-recovery Obama recovery total receipts in FY 2012 were $119 billion less than back in 2007. Spending, however has increased more than $800 billion. Some recovery!
The primary reason real economic recovery has lagged so long is the endless promulgation of new, more costly, confining regulation and the uncertain tax environment from Washington. The revenue lost due to unrealized economic growth because of the abusive economic policies merits charges of fiscal malfeasance against the Administration and the Democrats that have supported it.
The following chart produced by the Congressional Budget Office for a report to Congress proves the point. It demonstrates that a miniscual 1/10 of 1 percent reduction in GDP per year results in $314 billion of additional deficit spending – debt – over ten years. Thanks is due to CATO's Dan Mitchell for recently drawing our attention to this data.
The obvious question is what if instead of the paltry GDP that has been stuck around 2 percent or below for the 3 ½ years since this non-recovery recovery began, the economy was humming at 3 – 5 percent growth in GDP as normally happens during an economic recovery?
Mr. President and Members of Congress, economic growth is where your attention should be. Not whose pocket to pick.