The $145 billion “extenders” package that the Obama administration and its allies in Congress are attempting to pass has revealed most of what they told us publicly over the last 18 months — about the stimulus, the health-care bill, the budget deficit, and taxes — to be a gusher of lies. BP has apparently plugged the hole that was hemorrhaging oil into the Gulf. Who will plug the hole Obama and his never-ending stimulus have blown in the U.S. budget?
The $145 billion is above all an extension of the $800 billion stimulus bill that passed last year. We were promised that the stimulus would be a temporary expenditure to boost private-sector employment. The details revealed its true purpose: Its biggest components were a bailout for state governments and an increase in federal assistance to the unemployed.
The Obama administration’s jobs strategy is to keep high-paid government workers from sharing the ongoing pain being felt in the private sector. As David Einhorn noted yesterday in a portentous New York Times op-ed, the private sector has cut 8.5 million from its payrolls during this recession, while local governments have let go only 141,000. Got a government job? You’re safe. Lost a private-sector job? Here’s your unemployment check — and be sure to vote Democrat next time, to keep those checks coming.
The problem with this strategy (security for government employees, welfare for the unemployed) is that it requires constant infusions of borrowed cash, hence the extenders package now before Congress. The bill contains yet another extension of unemployment benefits for those whose aid was set to expire, and yet another bailout for strapped states and municipalities.
Even if one were to concede that these are laudable steps to take in the midst of a recession, one ought to demand, in the face of record-shattering deficits and debt, that Congress find a way to pay for them. But a Democratic majority that just increased discretionary spending (the part of the budget not consumed by Social Security and other entitlements) by 8 percent for the third consecutive year just couldn’t find anything else in the budget to cut. Instead, they plan to borrow around $90 billion and fund the rest through increased taxes on hedge funds and oil companies.
Maybe the hedge-fund guys can afford higher taxes. Unfortunately, the rest of America can’t. Investment capital is the lifeblood of business expansion and job creation, and it is needed now more than ever. The tax increase on “carried interest” — the capital gains that many hedge-fund managers keep as income — is just the first step in the Democrats’ broader march toward higher taxes on all capital gains. And whatever the merits of raising taxes on oil companies (which will pass such increases on to consumers), the revenue shouldn’t count towards deficit reduction. As Keith Hennessey pointed out, the funds from this tax would be “earmarked to prefund the Oil Spill Liability Trust Fund.” As they did during the debate over the health-care bill’s “deficit reduction,” the Democrats are double-counting.
Speaking of health care, remember the Doc Fix? In order to secure an endorsement from the American Medical Association for Obamacare, Democrats promised to protect doctors from certain scheduled cuts in their Medicare reimbursements. But including that provision in the health-care bill pushed it into the red, so Democrats removed it and promised to pass it later. Well, it’s later. The first draft of the Democrats’ extenders package delayed the cuts until 2013 at a cost of $65 billion. When moderate Democrats balked at the price tag, leadership scaled the delay back to 2011, cutting the estimated cost of the measure by over half. But everyone knows that when 2011 rolls around, Congress will do the same thing it’s doing now. Is anyone still fooled by this?
The extenders package reveals that the stimulus was not temporary; it is ongoing. The health-care bill did not reduce the deficit; promises used to secure its passage are now adding tens and eventually hundreds of billions to its cost. The Democrats are not serious about deficit reduction; they ignore their own pay-as-you-go rules whenever they are inconvenient. And Obama’s promise not to raise taxes on anyone making under $250,000 has just acquired another loophole; higher taxes on oil companies will lead to higher prices at the pump. If BP really has figured out how to plug that leak in the Gulf, maybe now it can engineer a way to stop the gusher of borrowed money in Washington, which threatens to create an even bigger disaster.