Obama's Budget: Dead on Arrival

President Obama's budget proposes far too many new taxes, cuts too few programs, and won’t do enough to rein in the deficit.

At a glance, President Obama’s budget looks like it might pass muster with some fiscal conservatives: there are plenty of program cuts (200), an end to many offensive corporate subsidies, no new broad-based taxes and a promise of smaller deficits in years to come. Unfortunately, for all the good intentions—and, even, some genuine good ideas—the overall budget plan just isn’t the right way to get America’s fiscal house into order. In fact, it proposes far too many new taxes, cuts too few programs, and won’t do enough to rein in the deficit.

On the tax front, the budget proposes no fundamental reforms but, instead, raises a lot of taxes on businesses and wealthy individuals. Some of these proposals, most particularly a move to impose a massive new tariff on offshore reinsurance transactions, will directly hit consumers in the pocketbook.  Others may end up impacting investment, stockholder dividends, employee pay and, sure, purchases of yachts, caviar, and private islands by the very wealthy. In any case, even if taxes have to go up to balance the budget, placing the heaviest burdens on the most productive enterprises and individuals will simply sap entrepreneurial energy and, probably, produce less revenue than anticipated. (Wealthy people and big companies can almost always figure out ways to avoid any tax that’s sufficiently high.)

Obama’s program cuts are probably the best thing in his budget but they still don’t go far enough. In some cases—an end to energy subsidies, cuts to environmentally destructive Army Corps of Engineers projects—Obama has exactly the right proposals and deserves lots of support from conservatives. In others, such as cutting the duplicative Low Income Energy Assistance Program, he’s even showing some courage and willingness to take on the interest groups that form the base of his own party. But, all-in-all, the cuts are awfully timid. Obama proposes continuing funding for dozens of programs (Amtrak, the Department of Education’s Vocational skills program) that his own Office of Management and Budget rates as “ineffective” or “not demonstrated.”  In addition, he makes no moves—even timid ones—in the direction of fundamental changes to defense or entitlement programs that make up most of the budget.

Finally, the deficit reduction proposals Obama advances seem illusory. Although the budget does show the deficit declining in the future—something nearly every budget from a member of either party says will happen—the budget actually increases spending for the year and continues it at high levels thereafter.

Obama’s proposed program cuts do show a sign that he’s willing to consider some cuts in government. But, on balance, his budget taxes too much, cuts too little, and doesn’t do enough to cut the deficit. Republicans in the House have pronounced it dead on arrival and they’re absolutely right to do so.

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