President Obama's budget spin-meisters at the Office of Management and Budget deserve nomination for the Biggest Whopper of 2013 Award, thanks to their claim that the chief executive's 2014 budget proposal "represents more than $2 in spending cuts for every $1 of new revenue from closing tax loopholes and reducing tax benefits for the wealthiest." Sounds like smart budgeting, but is that statement true? As the Heritage Foundation's Morning Bell put it, "In a word, no."
Look beyond the rhetoric at the concrete numbers in the Obama budget -- which, let it not be forgotten, was submitted two months late and after both the Senate and House adopted their own versions of 2014 spending blueprints -- and what becomes clear in three ways is that the president and his key advisers are intrigued by the figure $1.1 trillion. First, remember the sequestration budget cuts that were supposed to produce Armageddon if actually implemented? Those cuts totaled -- can you guess? -- $1.1 trillion over 10 years.
Second, as Morning Bell ably notes, the Treasury Department calculates that the Obama 2014 budget proposal contains new tax increases totaling $1.1 trillion. Third, remember the 2011 Grand Bargain That Never Was? That was when House Speaker John Boehner insisted on a lengthy list of spending cuts and conceded to $800 billion in new revenues by closing tax loopholes? It never happened because at the last minute Obama demanded another $400 billion in new revenues, which Boehner wisely rejected. Well, now Obama is endorsing Boehner's spending cuts, which just happen to total $1.1 trillion.
How do these three $1.1 trillions add up? They don't. Obama's budget cancels the $1.1 trillion in sequestration budget cuts, thus hiking spending by the same amount. But that also cancels the $1.1 trillion in Boehner spending cuts tardily endorsed by Obama, thus leaving only the $1.1 trillion in new tax hikes proposed by the president. Somewhere out there may be an alternative universe in which Obama's 2014 budget proposal actually does contain $2 in spending cuts for every $1 in tax hikes as conjured by OMB, but here in the real world the claim is false.
So who will pay Obama's $1.1 trillion in new taxes? The answer to that question requires that Obama's oft-repeated promise never to raise taxes on people making less than $250,000 be tossed in the trash. This is because under his 2014 budget proposal, everybody who pays taxes gets hit with a bigger bill. One of President Reagan's key 1981 tax-cut measures was indexing taxes for inflation.
The purpose of Reagan's reform was stopping "bracket creep" -- the movement of taxpayers into higher tax brackets solely because inflation made it appear they were earning more. Bracket creep was a hidden tax hike imposed every year. Now Obama wants to change the indexing so that government will again enjoy the fruits of bracket creep. Even if it means Americans making less than $250,000 a year get to keep less of the fruit of their labor.