President Obama’s Speech Fails to Address Spending Problem

President Obama’s speech yesterday at George Washington University was full of his typical doublespeak. He started his speech off praising free markets and our healthy skepticism of too much government. President Obama could have been mistaken for a limited government constitutionalist when he stated “we have put our faith in free markets and free enterprise as the engine of America’s wealth and prosperity.” The charade didn’t last long though. He quickly reverted back to his big government rhetoric.

President Obama said that it “starts by being honest about what’s causing our deficit.” He correctly noted that the previous administration has played a major role in expanding our deficit. In the two terms of the Bush administration, Congress did pass costly legislation such as No Child Left Behind, Medicare Part D and the Troubled Asset Relief Program. However, the deficit quadrupled under President Obama’s watch in 2009. Despite his rhetoric, President Obama has been even more fiscally irresponsible than former President George W. Bush.

The speech was supposed to be about President Obama’s budget plan. In his speech, however, we heard little on this topic. FreedomWorks has already graded his budget plan to be an F-. It will never balance the budget and doesn’t even try to do so. His plan fails to cut spending, reform entitlements or shrink the size and scope of government. President Obama pledges that his plan would reduce the deficit by $4 trillion over the next twelve years. To do so, it would raise the death tax, capital gains taxes and taxes on small businesses. However, raising taxes on Americans has historically failed to generate anticipated revenue.  As we should expect, his budget plan continues to fund ObamaCare even though the majority of Americans are still opposed to it.

One of the main themes of his speech was raising taxes on the wealthiest Americans. He said that “the most fortunate among us can afford to pay a little more.” President Obama wrongly states multiple times that tax cuts cost the government money. This flawed logic implies that all of our income belongs to the government in the first place. Allowing Americans to keep more of their hard-earned paycheck is not “reckless spending.”  

Taxes are already too high. President Obama stated that “the tax burden on the wealthy is at its lowest level in half a century.” In reality, the top 1 percent of wage earners pays nearly 40 percent of the income tax. The top 50 percent of wage earners which includes the middle class pays 97 percent of the income tax. Raising taxes is an inefficient way to reduce budget deficits. As Cato Institute scholar Dan Mitchell states “this is because of ‘Laffer Curve‘ effects, as taxpayers change their behavior to earn less income and/or report less income. Simply stated, people respond to incentives, and this means taxable income falls as tax rates increase.”

He spent a great deal of his speech criticizing the budget proposed by Budget Committee chairman Paul Ryan. FreedomWorks has graded the Ryan Budget to be a solid B. It would eventually balance the budget by the year 2040. The Ryan budget plan would completely repeal ObamaCare, block grant Medicaid to the states and reform Social Security and Medicare. It would reform Medicare by introducing a new system of competing private insurance plans, similar to the health care benefit plans enjoyed by members of Congress. The Ryan budget plan is a step in the right direction although we would like to see it go even further to get spending under control.

Many people say that Washington is dealing with a spending problem not a revenue problem. That’s true but it is also dealing with a philosophy problem. The role of government should not be to “take care” of Americans from cradle to grave. The purpose of government is solely to protect our liberty. It’s clear that President Obama’s budget will not restore the principles of a limited and constitutional government. It will only lead to even greater debt and government dependency in the future.