Thursday, March 13, 2008

Obama's List of Goodies Too Audacious for Senate

Senator Barack Obama has promised, if elected president, to give so many new government entitlements that his audiences literally swoon in anticipation. Tonight, however, senators from both parties gagged at the price tag -- $ 300 billion a year in new taxes.

Republican Senator Wayne Allard, who is retiring, called Obama's bluff by offering an amendment to raise enough taxes to pay for everything that Obama has promised. The Allard amendment, according to Politico,

includes $1.4 trillion in spending over five years by proposing Obama's universal health care program ($65 billion a year), expanding the Army ($6.6 billion a year) and eliminating income taxes on lower income seniors ($10 billion a year).

The Senate rejected the Allard amendment 97-0; even Obama voted against it.

The proposed amendment calculated that it would cost $ 300 billion a year to pay for just 111 of Obama's new proposals. But that just scratches the surface: While campaigning, Obama has offered 188 new spending proposals -- 77 of which can't yet be quantified, but will likely add billions to the $300 billion price tag.

The numbers become surreal. In comparison, Obama's $300 billion extra in annual spending would cost more than the combined budgets of 42 states.

And Obama certainly leaves the Clinton administration in the dust. President Clinton increased taxes in 1993 by $240.6 billion over five years. At the time, the late Senator Daniel Patrick Moynihan -- an old school liberal -- called it "the largest tax increase in the history of public finance in the United States or the world." Obama, however, would spend more in one year than Clinton did in five.

The real point of the Allard amendment was to show who would pay for Obama's proposals. The short answer: just about everyone. The notion that Obama could raise taxes just on the top one percent of Americans is, as Bill Clinton might put it, a "fairy tale."

The only way Obama could fund his proposals on the backs of the top one percent of taxpayers is to raise their taxes by 57 percent. That's a $40,300 increase for a taxpayer who makes $365,000. The effect on our economy would be devastating, particularly if the country is in the midst of a recession.

A 57 percent tax hike, on anyone, is not realistic. Consequently, Congress would have to spread the cost of Obama's largess over a broader pool of taxpayers.

For example, Congress could raise taxes on the top five percent of taxpayers by 38 percent. Or it could increase the tax load of the top 10 percent by 32 percent. Or those taxpayers in the top quartile could see their taxes increase by 26 percent. Alternatively, Congress could raise taxes on the top 50 percent of taxpayers by 23 percent. Note that a taxpayer only needs to make $31,000 a year in adjusted gross income to fall into the top 5o percent.

Absent enormous spending cuts (which Obama has not suggested), therefore, Congress would have to raise taxes on middle class families and small businesses -- or else run up the deficit even further.

Moreover, the taxes needed to support an Obama spending spree wouldn't be applied in a vacuum; the new taxes would be in addition to what taxpayers will pay if the Bush tax cuts are allowed to expire. (Democrats oppose extending the tax cuts, which amounts to a tax increase.)

All 97 senators who voted tonight understood that the Allard amendment was a rhetorical device. Yet it served a purpose that was long over due. Talk is cheap, and hope is free. But government handouts -- on the scale Obama promises -- will break us.

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