LRW_Blog

It is established practice in Washington that if you have to release bad news, it is best to do it on a Friday … the later in the day the better. So not only did the White House schedule the publication of the “Mid-Session Budget Review” for last Friday, but they then released it three hours late to ensure that as few reporters as possible were left in the nation’s capital to cover it. But Heritage’s dedicated budget team patiently waited the Obama administration out, and their analysis shows that this year’s mid-session review is nothing short of a complete admission of failure of the White House’s economic policies.

When President Obama sold his $862 billion economic stimulus to the American people, he promised that, if enacted, it would prevent unemployment from ever rising above 8%. With unemployment currently at 9.5%, the American people are now well aware that the President’s stimulus has been a complete failure. But Friday’s report was the first time this Administration was forced to admit just how long Americans will have to suffer for their failed economic policies. According to Friday’s report, the Obama administration now projects that unemployment will average 9% throughout all of next year and 8.1% throughout 2012.

And if that news wasn’t bad enough, the report pegs this year’s budget deficit at $1.471 trillion, or 10% of the entire U.S. economy. In nominal dollars, it’s the largest deficit in American history; and as a percentage of the economy, it’s the largest deficit since World War II. To pay for that $1.471 trillion hole, our government will borrow 41 cents of every dollar it spends. And the Obama Administration concedes that these large deficits are here to stay. It projects another $1.42 trillion deficit in 2011, which is $150 billion worse than previously predicted. Looking ahead, the President’s budget includes deficits that never fall below $698 billion and leaves our children with $18.5 trillion in debt by 2020. And all this assumes the economy will grow 4% from 2012-2014. The only times the economy performed that well in the past thirty years was from 1997-2000 and from 1983-1985.

These future deficits are driven almost exclusively by rising spending. As Heritage Foundation analyst Brian Riedl noted earlier this year: “Before the recession, federal spending totaled $24,000 per U.S. household. President Obama would hike it to $36,000 per household by 2020 — an inflation-adjusted $12,000-per-household expansion of government.” There is a way out of this deficit nightmare: stop spending. If the federal government managed to return to the per-household spending level of the Reagan administration, the budget would be balanced by 2012 without any tax hikes. Too ambitious? Just returning to the per-household spending levels that existed before the current recession would balance the budget by 2019.

But that is not the route this President wants to take. President Obama wants to close the gap between what our government spends and what it takes in by raising taxes by $3 trillion. His Treasury secretary was on television yesterday claiming this massive tax tsunami would have no effect on economic growth. After last Friday’s Mid-Session Budget Review exposed the failure of this Administration’s economic stimulus claims, does anybody believe anything this Administration says anymore?

British Prime Minister David Cameron visited the White House for the first time as Prime Minister yesterday. At a time when the United States is engaged in a war in Afghanistan, when Iran is on the verge of acquiring nuclear weapons, and while the world economy is teetering through a weak recovery, one would hope our press corps would focus on lasting issues of physical and economic security. Unfortunately the press conference and the media coverage focused exclusively on the Scottish government’s release of the 1988 Lockerbie bomber and whether BP was involved in the decision.

This must have been especially galling to Cameron, since as leader of the opposition party in Britain at the time, Cameron objected to the terrorist’s release when it happened. As Cameron said yesterday, there is “violent agreement” between him and President Barack Obama on the issue, adding: “It was the biggest murder in British history, and there was no business letting him out of prison.” Unfortunately Cameron parroted President Obama on another key issue as well, telling BBC News about Afghanistan: “People in Britain should understand we’re not going to be there in five years’ time, in 2015, with combat troops or large numbers because I think it’s important to give people an end date by which we won’t be continuing in that way.” This echoes President Obama’s mistaken decision to identify July 2011 as the beginning of U.S. withdrawal from the region. As long as we are being frank, we ought to acknowledge that the biggest problem with the President’s entire strategy was setting that artificial timeline for withdrawal. That led our military leaders to question the strategy in Afghanistan and put tremendous, unnecessary pressure on our armed forces to accomplish the task at hand. It also gave a psychological advantage to the Taliban, who will convince their recruits that the American will is lacking and thus they can just “wait us out.”

As U.K. Defense Secretary Liam Fox recently put it in a major speech at the Heritage Foundation, an early departure from Afghanistan “would be a shot in the arm to jihadists everywhere, re-energizing violent radical and extreme Islamism. It would send the signal that we did not have the moral resolve and political fortitude to see through what we ourselves have described as a national security imperative.… To leave before the job is finished would leave us less safe and less secure. Our resolve would be called into question, our cohesion weakened, and the Alliance undermined. It would be a betrayal of all the sacrifices made by our armed forces in life and limb.”

At least Cameron is still taking a hard line on government spending and deficit reduction – a position in direct opposition to President Obama’s call on all G20 nations to spend themselves further into debt. Instead of pushing for a fifth round of deficit spending like the Obama administration has done, U.K. Chancellor George Osborne has identified 85 billion pounds worth of budget savings and cuts.

The world needs robust U.S.- British leadership, which has been strikingly absent in recent months. But from the lack of U.S. ratification for the U.S.–U.K. Defense Trade Cooperation Treaty to the Obama administration’s slap in the face on the Falkland Islands, the once “special relationship” between our two nations has faltered under the Obama administration. Britain – not China – is the largest foreign investor in the U.S. economy, and the U.S. is the largest investor in Britain’s. There are three times more U.S.-owned firms in Britain than there are in any other European country. The ties go on and on – from tourism, to defense procurement and to intelligence sharing, the United States and Britain are the best partners in the world. The British government should cooperate fully with any Congressional investigation into BP’s role in the Lockerbie decision. That way er can get beyond the BP issue and focus on the so much more that our countries can accomplish together.

The American people are already well aware of President Barack Obama’s historic expansion of government spending: his $862 billion economic stimulus that has completely failed to keep unemployment below 8% as promised; his still-expanding health care law which the Congressional Budget Office now admits will cost more than $1 trillion; and an Obama budget that increases government spending by $12,000 per household. But all that spending is just the first half of President Obama’s game plan.

The second half of Obama’s attempted transformation began last night when the Senate rejected Sen. Jim DeMint’s (R-SC) effort to end the Death Tax. This year is actually the first year since 1916 that Americans do not have to pay any federal taxes when a family member dies. But thanks to the way Congress had to pass the legislation that phased out the Death Tax in 2001, it is set to go from zero percent to 55 percent at the stroke of midnight on December 31, 2010. The Death Tax is but one of many government taxes on capital and entrepreneurship, and its reinstatement will be yet another job killer from the Obama administration. It rewards estate tax lawyers, insurance companies and big businesses at the expense of small family-owned enterprises. According to a study by the American Family Business Foundation, a full repeal of the death tax, like the one rejected by the Senate last night, would create 1.5 million jobs. Before the vote, Sen. DeMint described the tax as an “unfair, immoral double tax on property and assets that folks have already paid taxes on throughout their lives.” He added: “The Obama death tax is just the latest example of this administration’s assault on small businesses.”

Sen. DeMint is dead on. Last night’s vote to raise the Death Tax is just the beginning of the Obama administration’s historic tax hike campaign. Unless Congress acts to oppose President Obama’s agenda, everyone’s taxes on personal income, capital gains and dividends will rise. Married couples will see their taxes rise even higher, as will families with children. According to The Tax Foundation, a family of four with two earners making $85,000 a year would pay about $1,800 more in federal income taxes in 2011. Tax Foundation president Scott Hodge tells MSNBC: “I’m hard pressed to think of another moment in the history of the tax code in which we have had so many provisions expire at the same time impacting so many Americans all at once.”

For two generations after post-war reconstruction, Europe and America have pursued different economic models, and accordingly, moved in different economic directions. The American model was low tax, low spending and small government. It favored growth, income and vibrancy. The European model is high tax, high spending and big government. It favored fairness, equality and stability. It also featured unemployment rates double those of the United States, often hovering around 10 percent. Now that is no longer the case. Under Obama’s economic leadership, U.S. unemployment rates are surpassing Europe’s.

Last night’s vote was just the beginning of a larger choice the American people must make: do they want to continue down the Obama path of high taxes, high spending and high unemployment? Or do they still believe in American exceptionalism, in limited government and in a vibrant U.S. economy? Last night’s vote was a step in the wrong direction.

Throughout his presidential campaign, then-candidate Barack Obama promised the American people: “If you’re a family that’s making $250,000 a year or less, you will see no increase in your taxes.” After he became President, Barack Obama reiterated that pledge, promising the American people in his September 9th health care press conference: “The middle-class will realize greater security, not higher taxes.” But Obamacare does contain tax hikes. Tons of them. From taxes on tanning beds to taxes on employment and investments, Obamacare is a certified job-killing machine.
None of these taxes touches the lives of every American as closely as the individual mandate to purchase health insurance. For the first time in American history, Obamacare forces all Americans to purchase a product or face sanction from the Internal Revenue Service. This is clearly a tax, as pointed out by ABC News’ George Stephanopoulos during a September 20th interview with the President himself.
In an exchange that can only be described as “Clintonesque,” Stephanopoulos pressed President Obama to admit his individual mandate was a tax. But President Obama refused to acknowledge reality and denied it. Stephanopoulos was forced to read the definition of “tax” straight from Merriam Webster’s Dictionary. But even then Obama refused to come clean: “George, the fact that you looked up Merriam’s Dictionary, the definition of tax increase, indicates to me that you’re stretching a little bit right now. … Nobody considers that a tax increase.” Well nobody but President Barack Obama’s Justice Department.
The New York Times confirmed Friday that in preparation for defending constitutionality of the Obamacare individual mandate in court, an Obama Justice Department legal brief argues that the penalty used to enforce the mandate is “a valid exercise” of Congress’s power to impose taxes. Mr. Obama’s own Justice Department further repudiates the President’s earlier statement by noting that the penalty is imposed and collected under the Internal Revenue Code, people must report it on their tax returns, and that the Congressional Budget Office estimates that it will cost Americans $4 billion a year. Yale Law School professor Jack Balkin told a meeting of progressive activists last month that President Obama “has not been honest with the American people about the nature of this bill. This bill is a tax.”
The fact that the Obama administration and their allies are now admitting the individual mandate is a tax betrays their very real fear that the Supreme Court could find Obamacare’s individual mandate unconstitutional. In the bill itself, Congress identified the Commerce Clause as the source of their authority to force all Americans to buy health insurance. But as our legal team has made eminently clear, the mandate does not purport to regulate or prohibit commerce of any kind. To the contrary, it purports to “regulate”—and penalize—inactivity. If the Supreme Court allows the Obamacare individual mandate to stand, then Congress could do anything it wanted. They could: require us to buy a new Chevy Impala each year to support the government-supported auto industry; require us to buy war bonds to pay for the Iraq and Afghan wars; or force us to eat our vegetables.
But even if the Obama administration is now admitting the individual mandate is a tax, that still does not make the law constitutional. Rather than operating as a tax on income, the mandate is a tax on the person and is, therefore, a capitation tax. Therefore the 16th Amendment’s grant of power to Congress to assess an income tax does not apply. The Constitution does allow Congress to assess a capitation tax, but that requires the tax be assessed evenly based op population. That is not how the Obamacare mandate works. It exempts and carves out far too many exceptions to past muster as a capitation tax. The Obamacare mandate is still unprecedented and unconstitutional.
But perhaps more importantly, what does the episode say about the integrity of the White House? The President went on national television and insisted in unequivocal terms that his individual mandate was not a tax. Now his administration is saying the exact opposite. At what point do the American people lose all faith in this President’s word?