By Robert Romano – When he addressed students at George Washington University on the dire fiscal emergency facing the nation, Barack Obama attempted to lay blame for the $1.645 trillion budget deficit at the feet of tax cuts enacted in 2001 and 2003.
Obama said, “we made the problem worse with trillions of dollars in unpaid-for tax cuts — tax cuts that went to every millionaire and billionaire in the country; tax cuts that will force us to borrow an average of $500 billion every year over the next decade.”
There’s only one problem. It’s not true.
In 2007, with the current tax rates in place the budget deficit was $160.7 billion, but it is projected by the Office of Management and Budget to rise to $1.645 trillion this year. That’s a 923 percent increase, and it is adding velocity to the growth of the $14.2 trillion national debt.
So, just how did the budget deficit rise so fast when tax rates were pretty much the same?
Americans for Limited Government (ALG) President Bill Wilson explains, “Since 2007, annual spending has increased $1.119 trillion, and revenues have decreased by $394 billion. Put simply, 75 percent of the increased shortfall is because spending increased, and only 25 percent is because revenue dropped because of the down economy.”
Wilson emphasized, “That means we have a spending problem, plain and simple.”
Obama’s contention is not without irony. In 2009, when he was urging Congress to adopt what became his $826 billion so-called “stimulus” bill, Obama promised to take measures so that “as the economy recovers, the deficit starts to come down.”
He would have been right, except the economy has not fully recovered, and now the deficit is higher than ever. So now he’s flailing around for excuses.
“Barack Obama wants to pretend that the reason we are spending more than we take in is because we don’t take in enough, when the real problem is that we are spending too much,” Wilson explained.
Because 75 percent of the problem has been caused by increased spending, Wilson suggested that “75 percent of the solution will need to include spending cuts,” adding, “the other 25 percent of the solution will be growing the economy so that revenue increases.”
That revenues have not increased yet, when tax rates have remained the same throughout this whole period, is a sure indicator that the economy is a long way from repairing itself. Unemployment also remains high, growth is sluggish, and now inflation is rearing its ugly head under the torrent of government spending, borrowing, and money printing, with the producer price index rising 5.8 percent in the past 12 months.
As the cost of doing business increases, it will surely hurt consumer spending as well. Over the past year, the consumer price index has already crept up, now 2.7 percent. And as gasoline prices surge ever closer to $4 per gallon nationally, Americans are feeling the pain.
If Obama had been right about his spending and money-printing scheme to save the economy, revenues would have already recovered. He also would not be proposing a budget that will add about $1 trillion to the debt every year, rising to over $24 trillion by 2021, and saying now that we need to raise taxes.
That’s Obama’s tax and spend irony, and it should not be lost on the American people as we head towards 2012.
Robert Romano is the Senior Editor of Americans for Limited Government.
