Obama’s Fiscal Commission Unveils Real Tax Increases and Fake Spending Cuts
by Dan MitchellI have many pet peeves, but one that causes me endless frustration is the Washington “spending cut” scam. This happens when politicians increase spending, but claim that they’re cutting spending because they previously had planned to make government even bigger.
The proposal unveiled yesterday by the Co-Chairman of President Obama’s Fiscal Commission is a good example. If you read through their report, it sounds like there are lots of spending cuts. But they never explain that these supposed cuts are really just reductions in previously-planned increases.
Here’s the bottom line. As shown in the graph, it is quite simple to balance the budget (and permanently extend all of the 2001 and 2003 tax cuts) if politicians simply limit spending growth. You can balance the budget within a few years with an overall cap on spending at current-year levels. But if you prefer a more moderate approach, you can let spending increase 2 percent each year and balance the budget by the end of the decade.
The proposal from the Fiscal Commission, incidentally, does not balance the budget – even though they have a big tax increase (which they assume will have zero negative impact on economic performance).
So what does this mean?
Well, we know that the budget can be balanced (with the 2001 and 2003 tax cuts) if spending grows two percent each year. And we also know that the Fiscal Commission increases the tax burden, yet still doesn’t achieve fiscal balance. So this means that they must be letting spending grow much faster than 2 percent each year. I’m guessing 4-5 percent annual spending growth.
In other words, the Fiscal Commission is asking us to pay higher taxes so that government spending can grow at twice the rate of inflation. That’s not a good deal.
Moreover, that’s almost certainly a ridiculously naive best-case scenario. If past behavior is any indication (and it is), politicians will spend any additional tax revenue. Whenever there’s a budget summit, the folks who want higher taxes make all sorts of empty promises about spending discipline. And when the other side caves in on taxes, they grab the money and have a party.
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58 Comments
Good article Mr. Mitchell.
"In other words, the Fiscal Commission is asking us to pay higher taxes so that government spending can grow at twice the rate of inflation. That’s not a good deal."
The three card monte dealers are down to a game of two cards, but they are still dealing from the bottom of the deck. It is appalling.
Everything about the Obama Regime ends the same way, it's a lie.
Obama giving the shuck and jive a bad name since 2009.
Send a few Congressmen to Leavenworth for their fiscal shenanigans and see how quickly the rest fall in line…
They seem to repeatedly forget exactly who they work for. And I for one would literally like to hold their feet to [a] fire.
I don't trust anything that the Obama Administration says or does!
Can't wait for the new Congress!
Thank you Mr. Mitchell! This sort of double talk in the government must be exposed and explained. Most people don't have the time or the interest to dissect and digest the circles of deception and creative accounting our "leaders" concoct for us. Good doctors don't leave a little cancer in you when they operate, they take it all and even some of the good cells too in the process. We need leaders who are willing to operate even if it means it's the only operation they perform. Our politicians don't think we can take it, or in reality, that their careers can take it if the real cuts are made. Where are the people who put country before self? So far, not in Washington. Hopefully the new blood will be different. The drumbeat needs to be constant. Keep it up Mr. Mitchell!
http://audacitea.blogspot.com/
If you like communism, vote Democrat. If you like Freedom, prosperity and Justice, vote Republican!
The democrats are just bloviating.
Remember the new congress doesn't start until Jan. 5. When it does the smoke and mirror show will end as we take back our country.
We have been damaged by these progressives. But I have to believe that rank and file citizens belonging to the democrat party are starting to see that. I would hope that they would link arms with other like minded citizens (of both parties) and get us moving in the right direction.
We as a nation have our faults. But compared to the rest of the world, I'll stay here and work to get it right.
They are as a child, continually testing their limits.
They WILL NOT stop until they are stopped by someone.
We must demand they limit the spending of our money and punish corruption and waste with real punishment, meaning prison.
Do not watch the bouncing ball folks, these Washington statist have simply moved the baseline up to include Barrycare, and other such statist horsecrap. We must demand real cuts, government must be brought down to a base minimum. Growth at twice the rate of inflation is obscene. Come on 2012, we need another cleansing purge.
Thank you for the article.
Look, lets make it simple. The government is pointing a gun (taxes) at a person (us). This debt commision is just giving us the option of getting shot in the leg/arm/chest/face/foot/hand.
NO ONE is asking, "Can we just get rid of the gun?"
The biggest entitlement mindset is government anticipting, expecting us to pay outrageous taxes. Until that stops, nothing will change.
"…prison" mm mm mm, but when was the last time a demoCRAP got jailtime? That is reserved for the
crooked Republicans only, it seems…
.
Yep, they think they can still play us for fools.
If the choice is between reducing the deficit or spending, democracies will always choose spending. This is the curse that has killed every single failed democracy over the 2,500 year history of democracies on planet Earth. The system we are using is over 3,000 years old and it is completely antiquated and obsolete. Taxation is a limited revenue source and fiscal spending isn't. We have over $107 trillion in unfunded liabilities that give lie to the statement that we can balance our budgets and pay off our debts. This is a scam that comes at a terrible cost. Would it not be better to have a system that not only supports all the fiscal spending we need, but also pays off our national debt without anyone suffering want to make it happen?
It seems that shortly after the adoption of th Constitution the debate in Congress has always been about money. Between 1792 and 1800 the battle in Congress was between Alexander Hamilton's Federalist Party and Thomas Jefferson's Democrat-Republican Party. The primary issue between Hamilton and Jefferson was the establishment of the First Bank of The United States. which Jefferson opposed.
Later, Jefferson's' party would lose control over the Senate due to their opposition to the Jay's Treaty with England. Jefferson believed that the treaty would benefit the Federalist party financially, which it did.
Central banks, foreign money benefiting a political party and finally an income tax and it is no wonder that present day Congressmen feel it is their duty to go to Washington to spend our money.
Except nowadays, Federalists are called Democrats.
Figures do not lie, but the liars in DC continue to try and figure.
How truly sad that government is not subject to the same rules as businesses. Maybe it's time to do just that very thing. Send them all back to school to learn accounting, economics(not kenesian), and the four principles of management – organization, planning, directing, and controling.
The march of the socialist Democrats will never stop. Pelosi is still ramming in her Dictatorial way. Obama is still ramming in his anti-American way, and Reid is still ramming in his deceitful way.
They are all backed by zealous socialists whose goal is to Redistribute our wealth, kill prosperity and the American Dream. They are trying to destroy The Constitution. What they don't realize is that they themselves will be destroyed!
The only antidote is to Prosecute. We demand justice for these crimes!
AUDIT the entire past two years of the Obama Administration using an independent agency. The Obama Administration will fall immediately!
All this b.s. about the deficit. It's really easy to solve all these problems. Hopefully the new Congress will make it happen. I can fix the ecomony before noon and still have time left over to flece George Soro by lunch.
1. $420 B still left in stimulas funds-use every nickle to buy back our T-bills on same spending schedule as currently planned. This is planned to release over next 2 years to help dems win re-election in 2012.
2. All federal budgets and staff levels go to 2000 levels, with additional 10% staff and budget cut in Jan 2012.
3. Proscute and DEPORT anyone who has stolen $1M in any government corruption scam, with a twist..if evidence is solid then deport them before their trail make them fight it not on US soil…but from abroad. Frezze all their accounts.
4. Deport any illegal within 24 hours of capture…so real Americans can have jobs. Set goals to capture and deport all illegeals by 2014.
5. Stop welfare, social security disability, and medicade scams. 3 year life time usage limit before retirement age.
Budget balanced, dollar restored, soros burned, defict reduced, employment increased dramatically. No what do I do with all the extra time on my hands! It's just not that hard.
The ballot box is the ultimate sanitizer. After all you can't reform corruptocrats, but you can vote them out. – Michelle Malkin. 2012 vote the rest of the liars out!
If Mr. Issa and the oversight committee are prevented from getting to the bottom of the crimes of the Obama Admin., I think that the TeaParty type Constitutionalists in Congress will hire an outside agency to expose the crimes:
Robbery of the U.S. Treasury and failure to account for that money,
Dereliction of Duty, Abuse of Power, Failure to enforce Federal Immigration Law to keep U.S. safe,
Failure to uphold their OATH of office to The Constitution, and passing the incomplete Legislation of ObamaCare using illegal methods and means. Also passing ObamaCare despite the televised protests of the majority of America!
Appeal to the New Congress: No more keeping Congress in session for 16 hours straight unless there is a National Emergency. It increases the odds of those in power to pressure and manipulate the Congressional members due to fatigue.
Also no more passing Legislation on known American Holidays. This is also Abuse of Power. America will not stand for any further Dictatorial show of force that Pelosi/Obama/Reid, displayed!
Thanks for pointing this out. Our local talk radio guy seemed to think this wasn't a bad proposal which immediately raised my hackles.
Did you see that 7 of 10 of the richest counties in the nation surround Washington DC. Also a panel is going to look for fraud in the Stimulus (Porkulus) bill at a Ritz-Carlton getaway. This crap needs to change and damned fast…the bastards!
This is why a simple "balanced budget" amendment is not enough. The amendment must state (1) ALL federal expenditures (including entitlements) in the budget may not exceed the total revenue collected for the previous fiscal year (2) the practice of "baselining" which is what Mr. Mitchell describes in this article, is abolished (3) the practice of diverting revenues that were designated for a specific purpose is abolished, and (4) the money supply may not grow more than 4% per year.
This would go a long way towards getting government spending under control. And it would force politicians to make the tough choices.
Speaking of fiscal issues. How many Billions of America tax payer dollars is it costing America to harbor Illegal Aliens? – -
besides the fact that it is blatantly Illegal,i.e., against our Federal Immigration Law and has cost American bloodshed! this issue is fiscally, morally, and legally an Emergency!
I'm waiting for the courageous politician to step up and do a clean sweep and bring America back to safety and to legal standing under The Constitution.
Anyone who wants to make a name for themselves should take up this cause! It is an expanding issue that is destroying the U.S!
We can get that kind of accountability another way. I would ask that you read my white paper on the Consumption Banking System and then decide. Here's the link: http://www.rainmakermarketing.com/The-Consumption...
We could save a lot by eliminating useless federal spending like the DoJ, Homeland Security, the FBI and the Capitol Police. None of them are essential services this junta needs.
They do more than that. They lie, spend and then lie about that. Go figure!
Yeah, but we do have a choice in this now, CCL. Here's a white paper I wrote on a new kind of banking system that combines central banking policies (monetary policy operations) with the commercial banking system and a fiscal appropriations "engine" that completely replaces taxation on Day 1. Prepare yourself for multiple "V-8 moments".
http://www.rainmakermarketing.com/The-Consumption...
If we thought that Bell Cal. was a fiscal scandal, look at the Obama Administration! Independent Audit desperately needed! Most of our problems will stop right then and there. Off to jail they go.
Balanced budget in a decade…hmmmm.
This assumes no National Emergencies what-so-ever. No Thank You. I`ll take your two percent increase and lower you four.
Don't be surprised if no one goes to jail…
>>Remember the new congress doesn't start until Jan. 5. When it does the smoke and mirror show will end as we take back our country. >>
If only it were that simple. As long as we have a media 80% dominated by progressives, the smoke and mirror show will continue. Don't forget, at least 50% of the GOP in power are still progressives and 100% of the Dems are. The fight has only just begun.
Interesting. I'll have to take the time and give it a more thorough read.
Thanks.
Great graphic Mr. Mitchell,
Just hold spending and taxes and we are home free. We need to drive this point home over and over and over…
As usual, the Dems scream about spending "cuts"–but it's really just about reducing the automatic increases the've managed to institutionalize in Government.
"… politicians increase spending, but claim that they’re cutting spending because they previously had planned to make government even bigger."
Can you imagine trying this in your own life? "Well, I was planning on buying 50 cases of beer tonight, but I think I'll be frugal and only buy 25 instead. SPENDING CUT!!!"
My God, these people are idiots.
Democrats have been doing this for 30 years (at least) – ask for, say, a12% increase in spending, settle for7%, then accuse the other side of "spending cuts" that are hurting someone. And then blame the deficit on them because they won't raise taxes. It happens on all levels of gov't, with the media doing the public relations work.
We need some chainsaws in gov't – cut the spending, cut the size of gov't, cut the lies.
Chainsaws.
Great article. It is about spending! Cut the size of government and there is absolutely no need for tax increases. Have you ever seen a graph of government revenue over time? It has been on a steady increase. Start funding the necessary requirements of government (i.e. defense, department of state, etc) and cut everywhere else – no more COLA's period.
Shrink…I didn't say it was simple. Far from it. the progs will kick, scream, threghten, possibly even riot, as we tear the mask off.
They took decades to compromise us it will take years to remove them from our government and return it to what the founding fathers gave us.
Don't let them go to DC at all…!
Vote and do their work from their home districts, period…
And tie it all to GDP…
This will force the Congress to grow the private sector to expand the financial pool…more growth in the GNP, the more money under the percentages thy can have…
You want to control spending…learn to say "No"…
Watch how Jersey is doing it…and write it large…
And for all of you in that commission…thanks for identifying yourselves as targets to throw out of office in 2012…
http://420.thrashbarg.net/fiscal_conservative_def...
I have seen the positive balance budgeting effects of just cutting spending across the board of 1% or 2% and yet it never happens. But on the other hand, when big tax increases are proposed, we are accused of being greedy for resisting.
Why would taxpayers agree to tax increases when congress can't cut 1 or 2 percent?
The first(and only)maxim of government, "The bureaucracy exists to serve and protect the bureaucracy."
MyKu:
Shell game used to work
until D.C. nimrods switched
the pea for a bomb.
Arsonists…every damn one of them INCLUDING Alan Simpson. Every crook on this "blue ribbon" panel lit the matches over the years. The house is ablaze and now these SOB's want to join the Fire Department and fight the fire.
I don't think so!!!
I demand $3 in 'real' spending cuts for every $1 of tax increases — or else.
Reduce the national debt authorization to $10T, initially, and prohibit the Treasury from issuing bonds. That ought to do it.
Excellent post. Well said!
The independent agency should be the Coalition of Frugal Grandmas. They'll be more merciless than a herd of professional auditors!
The state of Colorado spends about $1 Billion/year on illegals. I'm sure states like Texas and AZ spend much more.
That'll never happen. They'd find a way to get around their end of the deal. Spending cuts, period. No tax increase.
Good article. If politicians are handed one $1 of increased revenue do we honestly expect them to pay down debt or simply go buy something?
forgive me for asking, but isn't federal spending around 4.0 trillion. That line for spending seems to have been set about a half trillion too low.
Walter Hanson
Minneapolis, MN
This is wonderful! Why has no one in the media (even Fox) pointed out that the Commission is basing their recommendations on CONTINUED INCREASED GOVERNMENT SPENDING? This is a very important point and one that everyone should be made aware of as soon as possible. I hope everyone emails this article to as many people as they can so the word gets out ASAP! Thank you Dan Mitchell!
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