Mr. President, You Lie

I’m writing this in response to the President’s speech yesterday about his “new” budget plans, and why they are laughable from the start.

Then Senator Barack Obama (D-IL), debating Senator John McCain (R-AZ), October 2008:

But there is no doubt that we’ve been living beyond our means and we’re going to have to make some adjustments.

Now, what I’ve done throughout this campaign is to propose a net spending cut.

Reality:

President Barack Obama (D-USA) in 2011, State of the Union Address:

The health insurance law we passed last year will slow these rising costs.

Reality:

Employees' share of premiums for a family plan is up an average 14%, to $3,997, vs. just a 3% rise in the total bill, according to the Kaiser Family Foundation.

And it's not just premiums that are spiraling higher. You're also likely to be hit with higher deductibles and out-of-pocket maximums as well as bigger bills for doctor's visits and drugs.

"Increasingly, employees have to be thoughtful about not just the cost of the plan, but the cost of the services they use," says Michael Thompson, a principal with Pricewaterhouse-Coopers' human resources practice.

Obama, 2009:

That is why I have pledged that I will not sign health insurance reform that adds even one dime to our deficit over the next decade. And I mean it. We have estimated that two-thirds of the cost of reform to bring health care security to every American can be paid for by reallocating money that is simply being wasted in federal health care programs.

Reality:

CBO: Obamacare = at least $109 Billion in Deficit Spending Over 10 Years; UPDATE: Former CBO Director: Obamacare Deficit will be $562 Billion over 10 years

And that includes the double-counting of Medicare “savings”.

“There is an issue here on the budget because your own actuary has said you can’t double-count,” said Shimkus. “You can’t count — they’re attacking Medicare on the CR when their bill, your law, cut $500 billion from Medicare.”

He continued: “Then you’re also using the same $500 billion to what? Say your funding health care. Your own actuary says you can’t do both. […] What’s the $500 billion in cuts for? Preserving Medicare or funding the health-care law?

Sebelius’ reply? “Both.”

And it includes such wonderful budget gimmickry as collecting taxes for 10 years, but only running the program for 5. Sure, that’ll help the deficit numbers for the first ten years, but unless you’re only planning on running the program half the time from now on, you have a problem after the first ten years are up.

Another source of double-counted savings is the CLASS Act, which creates a new, federally run long-term care insurance program. Beneficiaries will begin paying premiums in 2011 but will not receive benefits for five years. This frontloads revenue and creates the illusion of $70 billion to pay for new spending under PPACA. In reality, premium payments from CLASS will be used to pay out benefits in later years.[8] Senator Kent Conrad (D–ND) called this “a Ponzi scheme of the first order, the kind of thing that Bernie Madoff would have been proud of.”[9]

Then Senator Obama, 2008:

"I can make a firm pledge," he said in Dover, N.H., on Sept. 12. "Under my plan, no family making less than $250,000 a year will see any form of tax increase. Not your income tax, not your payroll tax, not your capital gains taxes, not any of your taxes."

He repeatedly vowed "you will not see any of your taxes increase one single dime."

Reality:

Now in office, Obama, who stopped smoking but has admitted he slips now and then, signed a law raising the tobacco tax nearly 62 cents on a pack of cigarettes, to $1.01. Other tobacco products saw similarly steep increases.

And:

The health care law that Obama signed on March 23, 2010, raises taxes on some things regardless of income. Two taxes in particular stand out. A tax on indoor tanning services begins this year. And in 2014, people will have to pay a fine, levied through their income taxes, if they don't have health insurance. Neither of these taxes are pegged to income.

President Obama, 2011 SOTU:

We have to confront the fact that our government spends more than it takes in. That is not sustainable.

Reality of budget plan from one month later:

At no point in the president’s 10-year projection would the U.S. government spend less than it's taking in.

Obama, yesterday:

This is my approach to reduce the deficit by $4 trillion over the next twelve years. It’s an approach that achieves about $2 trillion in spending cuts across the budget. It will lower our interest payments on the debt by $1 trillion. It calls for tax reform to cut about $1 trillion in spending from the tax code. And it achieves these goals while protecting the middle class, our commitment to seniors, and our investments in the future.

Reality:

Called a “debt failsafe trigger,” Obama’s scheme would automatically raise taxes if politicians spend too much. According to the talking points distributed by the White House, the automatic tax increase would take effect “if, by 2014, the projected ratio of debt-to-GDP is not stabilized and declining toward the end of the decade.”

In other words, more tax increases coming your way.

Finally, it’s worth pointing out that even his new plan expects a tax revenue-to-GDP ratio of much higher than 20%. So, this graph should not be missed.

As you can see, the peak was just over 20% (20.9% to be precise). Some say that we can’t consistently beat 19% (this is known as “Hauser’s Law”). I don’t know whether that’s true or not, but I do know that it would be foolish to assume that we can, since we never have.

Over this period there have been more than 30 major changes in the tax code including personal income tax rates, corporate tax rates, capital gains taxes, dividend taxes, investment tax credits, depreciation schedules, Social Security taxes, and the number of tax brackets among others. Yet during this period, federal government tax collections as a share of GDP have moved within a narrow band of just under 19% of GDP.

Why? Higher taxes discourage the "animal spirits" of entrepreneurship. When tax rates are raised, taxpayers are encouraged to shift, hide and underreport income. Taxpayers divert their effort from pro-growth productive investments to seeking tax shelters, tax havens and tax exempt investments. This behavior tends to dampen economic growth and job creation. Lower taxes increase the incentives to work, produce, save and invest, thereby encouraging capital formation and jobs. Taxpayers have less incentive to shelter and shift income.

Really, based on his track record, anyone that believes Obama when it comes to any kind of dollar figures should be forced to wear a tattoo on his forehead that says “moron”.