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With the federal deficit projected to reach a staggering $1.6 trillion in 2010, one would think that President Obama's FY 2011 budget would focus on repairing the ailing economy and reducing the national debt. Not so. Instead, the President has proposed a massive $3.83 trillion budget.(1) In fact, the President's FY 2011 budget spends $1.7 trillion more between FY2010-2019 than his FY2010 budget.(2) It also has the potential to run budget deficits up to 49 percent larger than last year's budget proposal.(3)
Obama's tax and spend agenda is expensive. He is expecting the American taxpayers to foot the bill for his vision. In addition to massive tax hikes, the President's plan includes provisions which will further increase skyrocketing deficits and raise the national debt by an additional 6 percent of GDP.(4)
In his budget, President Obama focuses almost all of his deficit reduction efforts on tax increases. Despite the successful employment of tax cuts to pull the American economy out of past recessions (most notably under Kennedy and Reagan), Obama plans to raise taxes for 3.2 million small businesses and upper-income families.(5) His budget includes nearly $1 trillion in tax hikes.(6) The President also plans to remove tax breaks for charitable giving and the mortgage interest deduction for millions of American families.
Worse still, President Obama still supports further government involvement in the health care system and a job-killing cap and trade bill. Both pieces of legislation are only sustainable through massive tax increases. The President's version of health care reform will cost $2.5 trillion in the first 10 years of full implementation (2014-2023)(7) and cap and trade will cost around $800 billion over the next decade.(8) In total, President Obama's tax increases will surpass $2 trillion, a figure that Americans simply cannot afford.
The President’s budget will not only raise taxes, it will also increase the national debt and leave soaring deficits for years to come. In FY2010, the federal deficit is projected to hit a record $1.6 trillion.(9) That is $143 billion higher than the 2009 deficit which was fueled by the recession. His plan will leave deficits above $1 trillion as late as 2020.(10) In 2010, 42 cents of every dollar spent by the federal government will be borrowed from other nations.(11) Even more shocking, the President's budget will permanently expand the federal government by almost 3 percent of GDP and more than double the national debt.(12)
On January 29th, House Republicans met in Baltimore for a question and answer session with President Obama. During that exchange, Rep. Jeb Hensarling (R-TX) asked the President:
"[In FY 2010] your administration proposed a budget that would triple the national debt over the next ten years... and moved the cost of government to almost 24.5% of the economy... You are soon to submit a new budget, Mr. President. Will that new budget [for FY 2011], like your old budget, triple the national debt and continue to take us down the path of increasing the cost of government to almost 25% of our economy?"(13)
President Obama responded to Hensarling's question by asserting that the figures presented were inaccurate. But, Congressional Budget Office (CBO) reports show that it is Obama, not Hensarling, who has his facts mixed up. The CBO's analysis of the President's FY 2010 budget reveals that, under Obama's plan, the level of debt held by the public will increase from $5.803 trillion in 2008 to $17.126 trillion in 2019.(14) That means that the debt held by the public will be 2.95 times higher than it was in 2008. The same report also reveals that, by 2019, government outlays will rise to 24.5 percent of GDP.(15)
It is widely believed that Republicans lost control of Congress in 2007 because of their excessive spending. Since the Democrats have taken over, however, they have done little to fix this issue. In fact, they are proposing record levels of spending which will fuel skyrocketing deficits for years to come. In FY 2009 and FY 2010, a Democrat controlled Congress will run monthly deficits that exceed the average annual deficits produced by Republicans from 1995-2007.(16) In the last year that they held control of Congress (FY 2007), the Republicans' annual deficit was $160.7 billion.(17) In October of 2009, the federal deficit was $176 billion.(18) That means that Democrats spent $15.3 billion more in one month than Republicans did in an entire year.
Despite the President's skepticism, the facts that Rep. Hensarling laid out are clear: Obama's FY 2011 budget will lead to massive tax hikes, an increase in the national debt, soaring deficits and even more economic uncertainty in the future. Such proposals will not solve America's economic woes; they will only make them worse. If the President and his allies in Congress are serious about bringing prosperity back to America, then they should consider the approach taken by Speaker of the House Newt Gingrich (R-GA) and Majority Leader Dick Armey (R-TX) in the mid 1990s which reined in government spending and brought about a budget surplus.