Obama Makes Deficit-Reduction Deal Harder by Appearing to Plot to Use Tax Increases for Spending, Rather Than Debt Reduction

Publicly, President Obama has suggested a grand bargain to get America’s staggering budget deficits under control, a deal in which Republicans would agree to tax increases in exchange for Democrats agreeing to budget cuts. (Yesterday, I called for both massive budget cuts and tax increases to save the country from bankruptcy). But the president’s recent remarks printed in today’s Daily Caller make me doubt whether he is sincere about accepting any overall spending cuts. His remarks suggest he would like to use any tax increases to increase spending, rather than reduce the deficit. Talk of budget-cutting may simply be a ruse to get Republicans to agree to tax increases. In his remarks yesterday, the president said:

“Let’s get this [deficit and debt] problem off the table … [and] with a solid fiscal situation, we will then be in a position to make the kind of investments that I think are going to be necessary to win the future,” he told reporters gathered for a White House press conference Monday morning. The big-spending jobs agenda, the president said, could cost additional trillions of dollars. “We’ve been looking at the whole menu of steps that can be taken … [but] taking an approach that costs trillions of dollars is not an option. We don’t have that kind of money right now.”

Obama also suggested that he might want to continue some elements of the 2009 stimulus. The $787 billion law provided a flood of money to fund the employees of state and local governments.  But, he said, “as we’ve seen that federal support for states diminish, you’ve seen the biggest job losses in the public sector [such as] teachers, police officers, firefighters losing their jobs … [so] my strong preference would be for us to figure out ways that we can continue to provide help across the board.”

The last thing we need is more “investments” — a euphemism for more wasteful federal spending. We “invested” $800 billion in the stimulus package, and unemployment now is not only higher than the Obama administration said it would be if the stimulus passed — it’s even higher than they said it would be if Congress had blocked its passage! (Two economists recently concluded that the stimulus package actually reduced the size of the economy and increased unemployment.)

Other “investments” over the last few years went into areas where the U.S. already spends more, to achieve less, than many other Western countries — like federal education spending, which rose 58 percent in inflation-adjusted terms under Bush, only to rise dramatically again under Obama, with no discernable improvement in educational achievement. (U.S. spending on K-12 education is among the highest in the world, and wasteful college spending has skyrocketed even as students learn less and less in college.)

Obama has previously pledged to cut spending, only to increase it instead. In 2008, Obama pledged to implement a “net spending cut,” but as president, he has instead increased government spending even faster than George W. Bush. Federal domestic spending increased by a record 16 percent in 2010. In 2010, the Congressional Budget Office concluded that “President Obama’s policies would add more than $9.7 trillion to the national debt over the next decade.”

Past budget deals that combined tax increases with spending cuts have often resulted only in tax increases, without any of the promised spending cuts ever materializing. As James Pethokoukis of Reuters notes, “the last time” the GOP agreed “to one of these ‘$2 in spending cuts for every $1 in tax hikes’ agreements, they got snookered,” in the 1990 budget deal. The $137 billion in tax increases agreed to in 1990 were implemented, but the $274 billion in promised spending cuts never materialized — instead, spending actually went up $22 billion.

Obama’s comments in the Daily Caller make me wonder if I was snookered yesterday when I called for both tax increases and spending cuts. Are tax increases futile as a way of cutting the deficit, because they will just be used for additional spending instead?