Obama’s 2016 Federal Budget And Middle Class Economics
To everyone who voted, I want you to know that I hear you. To the two-thirds of voters who chose not to participate in the process yesterday, I hear you, too. –President Barack Obama, post-election 2014
In January, the Congressional Budget Office (CBO) projected federal spending to return to $4 trillion by 2017.
Spending had topped $4 trillion back during the height of the downturn, when America was in full-stimulus mode, pouring money into “shovel-ready”projects and infrastructure.
President Barack Obama doesn’t want to wait; his just-released federal budget proposal for FY 2016 seeks $3.999 trillion in spending.
This includes seven percent increases in both domestic and military spending and big new infrastructure spending projects including an infrastructure bank to the tune of nearly $500 billion over six years.
Infrastructure “planning” coming from the same guy who in November called for regulating the Internet like a public utility in the name of net neutrality (meaning price and access controls and red tape) may not be the best idea.
Big spending didn’t work before, and won’t now. And the class warfare tone from the administration ensures worse results.
The president wants to raise $320 billion with new taxes on financial institutions by slapping a fee on overseas profits and dinging high earners and estates in the name of “middle-class economics.” The administration proclaims “everyone who works hard should have the chance to get ahead”; but how achieving that translates into Washington needing more money is mysterious.
The president’s supposed “one-time” 14 percent tax on corporate overseas profits feels like an attempt to lay a foundation for two things: (1) doing it more than once, and (2) implementing assorted baby steps toward the left’s dream of a Thomas Piketty-ish “wealth tax,” such as a proposed limit on retirement accounts.
Obama’s unhelpful framing of the American Dream—the middle class can have things just so long as the upper class doesn’t—aggravates divisions between people, setting them at odds. To him there’s a fixed pie; what one guy got, he got from you. Wealth isn’t created, you “spread the wealth around.”
Real middle-class economics is actually policy that lets the poor rise to middle class, and the middle class rise to become wealthy. Obama could easily promote middle class tax breaks without attacking the wealthy, by pointing to where government ought to roll back.
He won’t, and so both over-regulation of business and debt contribute to today’s ongoing stagnation. Obama’s remedy? To enlarge both.
While other nations’ government outlays make up a greater share of their national output, compared with 20 percent for the U.S., in absolute terms, the U.S. government is the largest on earth. Just four other nations top $1 trillion in annual government revenues, and none but the United States collects more than $2 trillion. Obama really needs more?
Trillion dollar deficits were once unimaginable, but we experienced them between 2009 and 2012. Obama’s budget implies we’ll never get there again, but CBO projects a deficit exceeding $1 trillion again by FY 2025, even without this new budget.
There is no need for people to suffer as in today’s economy, but the White House insists on more projects and spending, while costs of of federal regulation now attain heights equivalent to half of what the president wants to spend.
Policy seems more like a double-barreled attack on middle-class economics.
In the nearby chart, my own placeholder (others estimate higher costs) for estimated regulatory costs approaching $1.9 trillion is equivalent to almost half the $3.999 trillion Obama wants to spend in 2016, and around four times the deficit.
Obama wants to raise taxes, but regulations are a hidden tax unto themselves and we don’t need more of those either. Regulatory costs are greater than estimated 2014 individual income tax revenues ($1.386 trillion) and corporate tax receipts ($333 billion) combined. Regulatory costs also approach the level of pretax corporate profits, which were $2.235 trillion in 2013.
Why not recognize that middle-class economics consists of seriously confronting modern government spending and regulation? For one, my own organization’s new agenda for the 114th Congress, called Free to Prosper, surveys regulatory over-reach across sectors, pointing to opportunities to ease burdens.
It’s hard work to hire people and run a profitable enterprise. The ones who do it are infinitely more valuable to society than those in Washington throwing tax and regulatory barriers in their way. A far healthier economy would result from a less domineering federal spending budget—and from fewer and smarter regulations.
Now that would be “middle-class economics.”