The Office of Management and Budget will put out next year’s budget on February 13. Under the law, the budget is supposed to be released on the first Monday in February and it’s not the first time the administration has released the budget late. I, for once, am not really looking forward to it. Based on the rhetoric at campaign stops and the president’s State of the Union speech, we already know what we can expect to see on Monday: more of the same policies that make the tax code so inefficient and unfair. For instance, we know we will get exemptions for some people and industries, and not others; and more taxes on some people and industries, and not others. And obviously, in spite of the rhetoric of fiscal responsibility, we can expect little in terms of real spending cuts.
According to the Wall Street Journal, the president wants more revenue:
About half the $1.5 trillion in revenue comes from ending Bush-era tax cuts for families earning more than $250,000 a year. Much of the rest comes from additional tax increases on families earning over $1 million a year, by taking away popular deductions and mandating a minimum 30% effective tax rate. Mr. Obama would end certain tax breaks for corporations, including breaks for oil and gas companies, as well as benefits for those who use corporate jets.
For those who think we need to raise more revenue to pay for our spending, this is not the way to go. First, leaving aside economic consequences or the question of how much revenue these proposals will really raise, they won’t come anywhere near raising the revenue we need to fix our deficits. Plus the president is planning to add some spending of his own: His renewed interest in industrial policy will likely cost a lot of money.
Also, sadly, many of his proposed savings won’t see the light of day. For instance, do we really believe that this Congress will pass “higher premiums and deductibles for many beneficiaries and lower payments to drug companies, hospitals and nursing homes”? I don’t. In the same way no one should count on the savings from the health-care law, which would require a 29 percent cut to doctors’ reimbursement fees for Medicare that lawmakers have postponed year after year since 1990, these savings are unlikely to materialize.
His refusal to tackle the real source of our fiscal problems going forward is problematic. He won’t touch Social Security — which, in the grand scheme of things, is the easiest of our big problems — but he also won’t make the structural changes to Medicare that are needed to control its cost. He won’t even suggest raising the eligibility age for the program.
Obviously, there are many things that are wrong and unfair in the tax code. For instance, there is no reason why I should get a tax deduction because I own a house or have kids as opposed to someone who makes as much money as I do but rents and doesn’t have children. We need fundamental tax reform. It’s an imperative. But not only is the president refusing to start the process, he is likely to make the situation worse. And of course, it’s unlikely that we will see the much-needed reform of the corporate income tax.
More important, this budget is likely to show that the president and, frankly, most of America, are not willing to face the cold hard reality that, if we don’t cut spending dramatically and address the root causes of our fiscal problems going forward (Social Security, Medicare, and Medicaid), taxes will have to go up for everyone. We can’t continue spending forever and not pay for the spending.
Well, we may for a while as we get more and more into debt, but that won’t last forever. If spending doesn’t come down, taxes on the rich alone won’t postpone indefinitely the consequences of a mountain of debt and the interest payments that come with it.