The Obama administration unveiled its first budget today. Obama expects a deficit for the current year of $1.75 trillion. By way of context, that is around three times the largest deficit the country has ever experienced with a Republican Congress. Obama says it is a budget that reflects “hard choices,” but of course that is silly. The administration has made no hard choices at all; it has simply opened the floodgates and spent money in nearly every possible way, to the tune of $3.7 trillion, an amount that would have been unimaginable just a few years ago.
Among many other things, Obama’s budget includes a $634 billion “reserve fund” to finance changes in the country’s health care system. The reserve fund will be paid for in part by magically appearing “savings,” and in part by higher taxes on the “wealthy”:
In a document summarizing its proposals, the White House said it would finance coverage for the uninsured in part by “rebalancing the tax code so that the wealthiest pay more.”
This will be achieved in part by reducing the deductions that are available to the “wealthy,” i.e., those earning $200,000 (if single) or $250,000 (if married) per year:
Administration officials said Mr. Obama would propose to reduce the value of itemized tax deductions for everyone in the top income tax bracket, 35 percent, and many of those in the 33 percent bracket — roughly speaking, starting at $250,000 in annual income for a married couple.
Under existing law, the tax benefit of itemizing deductions rises with a taxpayer’s marginal tax bracket (the bracket that applies to the last dollar of income). For example, $10,000 in itemized deductions reduces tax liability by $3,500 for someone in the 35 percent bracket.
Mr. Obama would allow a saving of only $2,800 — as if the person were in the 28 percent bracket….
Obama’s rationale is truly Orwellian:
The White House says it is unfair for high-income people to get a bigger tax break than middle-income people for claiming the same deductions or making the same charitable contributions.
Of course, higher income people get a “bigger tax break” only because they are paying higher taxes. Obama’s theory is consistent with the idea that the government really owns all your money and is therefore “giving” you money when it refrains from taxing you at a 100 percent rate.
Michael Barone has written that Obama was elected in November on the strength of a “top and bottom coalition.” He carried high-income and low-income voters, while John McCain won a majority of middle-income voters. As the inevitable effects of Obama’s policies become visible–higher taxes, inflation, prolonged weakness in the economy, depressed stock market–the “top” part of his coalition will begin to erode. That process likely began today.
UPDATE: This graphic from the Drudge Report illustrates how far Obama’s budget proposal deviates from any historical precedent:
FURTHER UPDATE: Jake Tapper has been studying Obama’s budget plan and finds that it contemplates nearly $1 trillion in new taxes.
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