President Obama’s proposed tax increases would, in his own words, put an end to the “mindless austerity” in federal spending. But as Michael Tanner, senior fellow at the Cato Institute, writes, “There has been no austerity, mindless or otherwise.”
Running a miserly 300 pages, the recently released General Explanations of the Administration’s Fiscal Year 2016 summarizes Mr. Obama’s proposed tax increases. The WSJ calls Mr. Obama the “Terminator of tax collection.” And, as the Journal points out, not in a good way.
Two years ago, Mr. Obama was able to impose the largest tax increase in U.S. history, and now the insatiable tax Terminator is back at the door. Read from Mr. Tanner President Obama’s plan for more deficits and more debt and, oh yes, higher taxes.
At least you can’t accuse the president of not trying to pay for some of his spending binge. His budget calls for nearly $1.9 trillion in higher taxes over the next ten years, mostly on businesses and higher-income earners. He would offset some of this with roughly $310 billion in tax cuts for things like education and child care, but on net, he would increase taxes by almost $1.6 trillion.
Despite the tax hikes, the president abandons any pretense at a balanced budget. In fact, this budget would add roughly $7.65 trillion to the national debt over the next ten years. Deficits would remain elevated, approaching $700 billion by 2025, even under his optimistic assumptions. Interest costs alone will grow from under $230 billion this year (1.3 percent of GDP) to roughly $800 billion in 2025 (2.8 percent of GDP).
Actually, the deficits and debt are likely to be far higher than projected, since the president relies heavily on our old friend, Rosy Scenario. For example, he continues to assume $557 billion in savings over the next decade from winding down “overseas contingency operations.” That doesn’t really seem to be going so well right now.
The president also assumes a higher annual economic growth rate than the CBO does (2.5 versus 2.3 percent). Similarly, the president projects slightly lower unemployment and inflation rates than the CBO does. Finally, the president assumes roughly $160 billion in net savings as a result of immigration reform. All of these assumptions could turn out to be true, but it seems risky to rely too heavily on them. Nor do these projections include supplemental spending for things like natural disasters or wars in the Middle East.