The good, the bad and the budget

Monday, March 9, 2009

Recently, President Obama submitted his budget proposal to fund the government for the next fiscal year. This proposal marks the starting point for what will hopefully be a bipartisan discussion on how we deal with the challenges our economy currently faces.

The fiscal blueprint our government needs to follow should be one which provides a path to balancing the budget, preferably by returning to proven pro-economic growth policies -- such as making sure taxes do not hinder economic recovery and keeping wasteful government spending in check.

The Administration's budget, however, weighs in at a whopping $3.5 trillion dollars. To put that in perspective: if you spent $100,000 a day every day, it would take almost 10,000 years to go through it. I am always cautious when massive spending is held up as an economic growth engine.

The budget would increase the national debt by $2.7 trillion this year to $12.7 trillion, requiring another increase in the debt limit (which was just increased to $12.1 trillion in the recently passed stimulus bill). This budget doubles the national debt in just eight years.

Despite these eye-popping amounts, there were some bright points in President Obama's budget proposal.

I give him credit for highlighting the dire problem of the unsustainable growth in mandatory spending on government programs.

His budget proposes to fix the Alternative Minimum Tax (AMT) -- a tax created to ensure wealthy individuals paid their taxes but which has ensnared more and more middle class taxpayers. The reform of the AMT falls short of full reform, however, as it only adjusts for inflation.

The President should also be commended for proposing to budget for spending we know will occur instead of relying on "emergency supplementals" outside of the budgetary framework. Such a move would help the American people see the true cost of government.

However, there are aspects to this budget proposal with which I have serious concerns. It assumes $646 billion in new energy tax revenue from an untested "cap and trade" system for carbon emissions. These tax increases on energy will hurt families, small businesses and agricultural producers most. The budget would also eliminate direct farm payments based on gross sales of $500,000, not adjusted gross sales, severely hampering one of the few positives in our economy right now: agriculture.

President Obama's proposal also increases our dependence on foreign sources of energy by imposing punitive new taxes on domestic energy production, encouraging U.S. companies to move jobs overseas. Having just seen $4.00 for a gallon of gasoline at the pump last summer, these tax increases should send up warning flags for anyone concerned about their personal budgets.

This budget discourages critical investments in our economy by raising the top tax rate on capital gains and dividends by one-third. To help steady our economy and calm the capital markets, we should be encouraging long-term investments which lead to job creation by preserving lower tax rates on investment capital.

While purporting to provide $326 billion in "tax relief," this proposal adds, in reality, new federal spending. The budget extends and expands various refundable tax credits, which are actually cash transfer payments to individuals who in many cases don't pay any income or payroll taxes. At the same time the budget proposes billions of dollars in Medicare cuts, some of which take away seniors' choices. These Medicare savings wouldn't be used to provide better benefits to other seniors, but instead to offset attempts to nationalize health care.

Our country's strength lies in the American people. Every day you are making tough choices to weather this economic storm. Families are tightening their budgets and small businesses are cutting expenses. The federal government should be held to the same requirement.

History shows us the best way to promote an economic turnaround, preserve jobs, and spur economic growth is to keep taxes low and regulatory burdens minimal.

The American people know we can't borrow and spend our way back to prosperity. The path to our economic recovery starts with fiscal responsibility in Washington. Though there were glimmers of this restraint in President Obama's recent budget proposal, I believe the federal government would best be served by adopting Nebraska common sense: tighten the budget and eliminate wasteful spending.

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  • I wonder when Rep. Smith says "wasteful spending" if he's willing to include such items as several billion dollars per copy aircraft like the F-22 Raptor which have little use in the so-called war on terror and basically were designed to be flown against an enemy which no longer exists.I'm fairly positive that reducing expenditures on items like this, or the Joint Strike Fighter would "tighten the budget" considerably.

    -- Posted by davis_x_machina on Mon, Mar 9, 2009, at 11:38 AM
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