• President Obama’s budget presented at the end of February painted a picture of a fiscal trainwreck. The Congressional Budget Office (CBO) today confirmed what many had suspected – the fiscal consequences of the President’s policies would be much worse.
• The President is calling for massive tax increases equal to about $150 B a year by 2019.
• He raises taxes not just on upper-income taxpayers as he promised, but on all Americans through his misnamed “climate revenues”, and as his budget indicates, this is just a starter program.
• The President calls for enormous increases in government spending on health care and climate change, but on a great many other programs. By 2019, spending would be almost $1T higher per year than if spending stayed at its historical level.
• The CBO saw through perhaps the greatest chicanery ever in federal budgeting when President Obama first assumed the full costs of the operations in Iraq and Afghanistan in perpetuity, and then claimed he is cutting spending when he asserts a change in policy and those spending amounts disappear.
• As a consequence of these two, the record-breaking budget deficits and government debt outlined in the President’s Budget are going to be far worse, according to CBO.
• Under Obama’s budget, the national debt will increase by more in two years than it did under President Bush in eight years.
• The national debt will increase by $4.9 T due to the President’s policies.
• Bottom line – much higher taxes, vastly higher spending, a deficit after the economy has recovered of almost $1.2T.
• President Obama has inherited and economic and fiscal mess as he asserts. His policies would make the economic situation worse, and he has faced the fiscal mess and decided to double down.
• To some extent there are always disagreements between the CBO and the Administration on economics, baselines, and policy consequences. Neither side has a monopoly on the truth. But the differences presented by the CBO go far beyond matters of professional disagreement.
1) Budget deficit expected to reach $1.8T in 2009, more than 3 times the previous record of $459 billion set in 2008.
2) As a share of the economy, the deficit will be 13.1 percent of GDP, more than twice the previous post-War record.
3) Cumulative deficits over the next ten years will total $9.3T, over half of which ($4.9T) is due to the President’s policies.
4) Revenues reach 18.9 percent of GDP (based on rough approximation of climate revenue program), much higher than historical average of 18.2 percent.
5) Spending reaches 24.5 percent of GDP, far higher than the post-war average of about 20.2 percent.