As Democrats prepare to let the Bush tax cuts expire, the budgetary ramifications of those cuts will be a topic I will return to as the debate continues. This is an article I wrote back in February for another website. However, it’s still very valid and I will continue to hammer the main points made in this piece over the next few months as elections approach.

Originally written February 2, 2010

After spending the last few weeks trying to bolster his reputation as a deficit hawk, President Obama destroyed any hope of fiscal sanity by releasing his $3.8 trillion 2010 budget proposal that will result in a $1.6 trillion deficit while also implementing a slew of tax hikes. Last week’s announcement that the economy grew by 5.7% last quarter coupled with the previous miniscule drop in the unemployment rate has increased the White House’s confidence that their excessive spending is restoring economic growth. Echoing the administration’s intentions to throw taxpayer dollars into the economy until it recovers, House minority whip James Clyburn told Fox News that “We’ve got to spend our way out of this recession, and I think economists know that.” However, economist Arthur Laffer, Ph.D. recently told his clients in his latest economic outlook that the economy is heading for a “train wreck” in 2011 that will make the last downturn look mild. According to his projections, the economy will experience a “false recovery” where GDP will grow around 4% in 2010 and unemployment could drop as low as 7%. But President Obama’s planned tax increases and unprecedented deficits will quickly reclaim any economic progress made this year. After 2010, Laffer predicts, “All the factors that will make 2010 (and have already made the last half of 2009) look so good will reverse direction, and 2011 will be a train wreck.” Chief cause for concern is Obama’s plan to allow the Bush tax cuts to expire while also implementing other new tax increases for businesses and wealthy individuals. From reading the president’s “Budget Message”, it’s clear that this administration either doesn’t understand the true effects of the 2003 Bush tax cuts or (what’s probably much more likely) is so ideologically blinded by social-engineering-wealth-redistribution schemes that they willfully misrepresent the true record. Whatever the reason, the president and his lackeys in Congress are laying the foundation for a monumental economic catastrophe. 

We are already witnessing the beginnings of a false recovery like Laffer described. The administration was rewarded last week with the news that US GDP grew at a rate of 5.7% last quarter. However, Investor’s Business Daily explained that “most of the gain – nearly two-thirds, in fact – was a result of an end to the panicked inventory liquidation that took place at US firms last year. Remove that, and a different picture emerges – a 2.2% rise in GDP.” The same article points out that “most economists agree that GDP growth of 3% or so is needed to boost employment. That may in part explain why GDP could grow 2.2% in the third quarter and 5.7% in the fourth quarter, while businesses slashed 735,000 jobs over the same six months.” When GDP growth is looked at year-over-year, a whole new picture is drawn. IDB said, “By that measure, we barely grew – real GDP rose just 0.1% in the fourth quarter from last year, virtually flat. Worse, real nonresidential fixed investment – a proxy for business investment in future output – plunged 14.6% from last year. That’s a shocking vote of “no confidence” in Obamanomics by America’s entrepreneurs and businesses.” Even the recent drop in the unemployment rate from 10.2% to 10% wasn’t the positive event it was made out to be. Writing in American Spectator, financial journalist James Srodes said, “The recent headlined dip in the jobless rate turns out to have been caused by more than 50,000 already jobless people simply giving up and dropping out of the workforce. This has the statistically absurd result that the percentage of people deemed to be unsuccessfully seeking work is judged to have improved.” Obviously, there is plenty of reason to be wary, not celebratory, about the economy’s condition. The president’s budget proposal will only make a bad situation worse.

Seeing how the current “good news” isn’t all it’s being cracked up to be, Laffer’s concerns become more clear. As businesses and individuals react to looming tax increases, Laffer predicts “GDP growth in 2010 will be some 3 to 4% higher than it otherwise should be, thus green shoots. The transfer of income from 2011 to 2010 will not only make 2010 [economic growth] higher than it otherwise would be, it will also make 2011 growth 3 and 4% lower than it otherwise should be because people have shifted income out of 2011 into 2010.” What tax increases are expected to cause this disaster? “In 2010 the US will have a payroll tax rate increase, an estate tax increase, and income tax increases. There’s also a tax increase coming in 2010 on carried interest. This rate will rise from its current level of 15% to 35%, and then it will rise again in 2011.” Stanford economist John Cogan concurred with Laffer’s assessment of looming danger in Obama’s planned tax increases, especially in light of the unprecedented peace-time deficits this administration is proposing. “The primary sources of [deficit] risk come from uncertainty about US government economic policy. In the area of taxation, personal income taxes, especially those on savings and capital formation are set to rise substantially in a year,” Corgan told Human Events.

President Obama’s plans to raise taxes are not only ill-advised because the economy has not fully entered a recovery, but also because his analysis of the Bush tax cuts’ effects on the deficit are wildly false. In his “Budget Message”, Obama asserts that a large portion of the national debt is the “result of the failure to pay for two large tax cuts, primarily for the wealthiest Americans.” This claim willfully misrepresents both the true “costs” of the 2003 Bush tax cuts and their true effects on both the wealthy and middle class.

In their book, “The End of Prosperity”, authors Arthur Laffer, Stephen Moore, and Peter Tanous found, “From 2004 to 2007 federal tax revenue increased by an enormous $785 billion, the largest four-year increase in revenue in American history.” After the Bush tax cuts spurred economic growth that led to more jobs and increased corporate profits, personal and corporate income tax receipts rose 40% in the following three years. The largest gains in tax receipts from the Bush tax cuts came from the cuts in dividend and capital gains tax rates. When “The End of Prosperity” went to press in 2008, the latest data from the Congressional Budget Office reported a “70% increase in capital gains receipts and a 31% hike in dividend tax payments since 2003.” How could the Bush tax cuts have increased federal tax receipts by nearly $1 trillion and still increased the budget deficit?

President Obama’s assertion that the wealthy received disproportionate benefits from the Bush tax cuts is as implausible as his claims that they increased the deficit. When the amount of taxes collected under the Bush plan were compared to those paid under the previous system, it was evident that the Bush tax cuts shifted more of the federal income tax burden onto the wealthiest tax filers. The number of tax filers claiming over $1 million in taxable income rose from 181,000 to 354,000 from 2003 to 2005. Over that period, the total taxes paid by millionaire households “rose 107% in two years, to $273 billion from $132 billion.” The Bush tax cuts led to a thriving economy that almost doubled the number of millionaires in the nation while doubling the revenue collected from these filers. While the wealthiest were paying more, the lowest tax rate was lowered and child credits increased. The resulting tax rates made the tax system more progressive under the Bush cuts. The top 1% of earners paid more income taxes than the bottom 90% combined even though the bottom 90% earned three times the income of the top 1%.

However, as successful as the Bush tax cuts were in fostering economic growth and increasing revenue, they were not enough to offset the effects of the real deficit culprit –  “drunken sailor spending.” Out-of-control spending out-paced federal revenues each year of the Bush administration. This trend increased further after 2006 when Democrats assumed control of Congress and the nation’s purse strings. (If you recall, President Obama was a senator in 2006 and he voted for every spending increase George W. Bush signed into law.) Excessive spending seems to be the only aspect of the Bush economic program that President B. Hussein Obama is not only dedicated to continuing but is taking to a whole new level. Unfortunately, as they continue their failed efforts to spend the nation back to prosperity, the administration is only laying the foundation for an even deeper economic downturn.

Obama's constant deception would almost be humorous if it didn't pose such a large threat to every Americans' health.

During last night’s press conference, B. Hussein Obama spun some really far-fetched fantasies. He claimed that he is actually a deficit reducer who is working diligently to lower a $1.3 trillion deficit he inherited. Apparently, Obama wants us to forget that he strong-armed through his $787 billion economic “stimulus” package which is pushed well over the $1 trillion-dollar-mark once interest payments are added to the cost. He also hammered through an omnibus spending bill that increased discretionary spending from previous levels and carried a price tag over another $450 billion. A staggering amount of both the stimulus and omnibus bill rely on deficit spending because as Obama admitted early in his tenure, “We are already out of money.” B. Hussein doesn’t count the omnibus spending bill as his deficit because it was supposed to have been passed under the Bush administration but the Democrat-controlled Congress decided to sit on the bill until Obama came to office so they could have all of their goodie-bag spending projects which would have been threatened with a veto by President Bush. The stimulus and omnibus bill alone represent well over the $1.3 trillion deficit Obama claimed to have inherited.

 However, the most offensive claims made by the president were directed at doctors and private insurance companies. In the press conference, President Obama claimed that his plans to hijack the American health care industry are required because doctors currently prescribe procedures solely based on the profit margins of the available treatments. The president gave the example of bringing a child with persistent sour throats to the doctor. In this scenario, Obama said that instead of finding the appropriate treatment, the doctor looks at the payment schedules for various treatments and decides to unnecessarily remove the child’s tonsils. This is an outrageous claim made by the president about our nation’s medical professionals that they are currently prescribing unneeded procedures for the sole reason to greedily line their pockets. Under the current Medicare and Medicaid systems, our nation’s doctors often treat patients covered by these programs at a financial loss because the government has set payments well below the actual costs required to treat these patients. Many doctors in the nation forego positions in large cities or in private practices where they could make significantly more money than where they currently work in small towns or non-profit hospitals. Through issuing his blanket accusation of American doctors’ greed causing the current problems in the American health care system, the president insulted some of America’s smartest and hardest working professionals. This is unacceptable.

After insulting the doctors, B. Hussein Obama also accused the private insurance companies of working against their customers’ best interests. He made his case by instructing us to take a look at the insurance provider’s recent profits. While no one expects the lifelong community organizer to understand any aspect of business, it would be nice if Obama could at least realize that businesses exist in order to make profits. If a company is unprofitable, they cannot serve their customers or their employees. When the companies are responsible for paying for a majority of Americans’ medical care along with picking up the tab for the difference between what government plans reimburse doctors versus the actual costs of the treatment, it is very important to see the insurance companies profiting and thriving. If the private insurers were not profitable, Americans would face much higher out-of-pocket costs and have less access to various treatments.

Even more amazing is the fact that B. Hussein Obama is pointing to the private insurers as what’s wrong with the system while pushing to eventually move all Americans onto a Medicare-type plan that is bleeding more money every year and not even compensating health care providers for the full amounts of treatments administered to patients. Any rational person would think that the government would try to be finding out what the private insurers are doing correct to remain profitable while over 80% of Americans mostly privately insured report they are satisfied with their current insurance coverage. Instead, Obama is using the failing Medicare model as the template to expand and eventually cover every American. He is throwing out a mainly successful system in favor of a failing one. This makes no sense.

No one is against reforming health care to control costs and increase coverage. However, Obama’s plans for reform represent steps backwards that will expand costs and decrease access. Instead of expanding the currently failing government health care plans that are leading the nation to insolvency, reform must concentrate on what is working and expand on current success. Recently, the World Health Organization ranked the US health care system as number one out of 191 countries studied. American patients have the best access to a choice of doctors and treatments and they currently spend far less times than patients in other nations waiting for treatments they need. Our system is not completely broken as B. Hussein Obama wants us to believe. Currently, our health care system is the best in the world which is why so many foreigners come here to receive medical treatment. Obama’s plans are not designed to improve access or quality for anyone. They are designed to make everyone dependent on the federal government for medical treatment that means life or death. Throughout the entire debate, B. Hussein is using deception and flat-out lies to push his plans through before anyone can fully digest the liberties we will sacrifice if he gets his way.

Thank goodness for the non-stimulating economic stimulus package! According to Reuters today, the nonpartisan Congressional Budget Office (CBO) announced that while the US economy is likely to start growing again in the second half of this year, unemployment is likely to peak above 10 percent. CBO Director, Douglas Elmendorf told the US House Budget Committee, “The growth in output later this year and next year is likely to be sufficiently weak that the unemployment rate will probably continue to rise into the second half of next year and peak above 10 percent.” He went on to explain that it will likely be several years before unemployment levels will return to pre-recession levels of around 5 percent.

B. Hussein Obama seems hell-bent on spending the nation into third-world status.

This is very bad for the nation’s economic outlook because the White House’s budget projections depend on very healthy growth beginning this year in order to keep the deficit around their $1.8 trillion figure. They assume that the economy will grow at a rate of 3.5% next year and an unrealistic 6.5% only two years after that. Without these impossible GDP numbers, the deficit will be much larger than the current economy-crippling estimate of close to $2 trillion.

While the CBO, which used to be considered the prominent source for budget numbers before B. Hussein Obama’s administration decided to completely dismiss them, is predicting unemployment to rise to over 10 percent, the administration and congressional Democrats are still planning on moving forward with massive proposals to tax and spend trillions more. The cap-and-trade system will place even more burdens on the already struggling economy. This would end up being the largest tax ever levied on Americans and would significantly household energy bills, prices at the gas pump, and raise the prices of anything that required energy to produce which is everything. The national health plans will require, at least, another $1.2 trillion to be confiscated out of the private sector through taxes.

The Obama administration has already done enough damage to the national economy. They rushed the stimulus package through Congress with the excuse of stemming unemployment. Since the bill’s passage in February, the US has lost over one million more jobs, yet the White House continues with their ridiculous claims that they have “saved at least 150,000 jobs.” The stimulus package was supposed to prevent unemployment from rising over 8.5%, since its passage, unemployment is pushing close to 9%. This administration is the most fiscally irresponsible administration in the entire history of the US government and they seem hell-bent on ignoring the reality that their spending is doing more harm than good with no plans to stop anytime soon.