The Budget is coming, the Budget is coming: Tax, Spend and Point the Finger

Details of the Administration’s tardy Budget for the next fiscal year are now being leaked through friendly press outlets. I read words like tough, cuts, balanced.  The Budget was due to be sent to Congress in February but for political reasons, and it is always for political reasons, it will not be sent to Congress until next week.

 

The federal deficit under the unwatchful eye of Mr. Obama has increased more than $6 trillion. Red ink has been over $1 trillion each year for the past 4 years and total federal debt is more than $16 trillion and will exceed $17 before the end of the year.

Dire economic consequences will result if this unsustainable trend continues. It is an absolute certainty. As I have written before, I am not sure the dreadful fiscal house has not already past the point of no return.

Mr. Obama has never shown any interest in anything other than increasing taxes and enlarging the size and scope of government.  As he states, the country does not have a spending problem.

So, what can be expected in this budget proposal? More taxes on upper incomes, a litany of suggestions to increase corporate taxes on out-of-favor industries such as oil and gas. More on this in a moment.

Reports indicate, there will be some proposals for a slight haircut of a few of the entitlement programs like the formula for benefits increases for Social Security and few Medicare changes. These are not new suggestions and have been discussed in the past, even as late as last year in the fiscal cliff debacle.  There will also be new spending initiatives like establishing a national kindergarten program (can not get them away from their parents fast enough, I guess), more job programs, more energy subsidies, extended benefits for this and that. I give the Administration credit for at least putting a few spending reductions out, which most Republicans will support.

The trade off for all of this is the reduction of the otherwise increases dictated by the sequester will disappear.

I do not want to go into the debt increase projections. Anytime crowing about projected deficit reduction is calculated by what is NOT going to be paid in future interest payments does not deserve the attention.

The real issue here is the tax portion. Mr. Obama keeps dangling some deficit reduction, some projected spending reduction, if the Republicans will only increase revenue. If the Republicans do not bite on this notion, then, they will continue to be branded as obstructionists. Mr. Obama seems to believe that he can persuade some Senate Republicans to this notion. I have no idea how he will convince members of the House.

It is highly unlikely Republicans will give in to the call for higher taxes this year-on anyone. First of all, Republicans believe Mr. Obama got his tax increases, some $600 billion in the last deal.  Secondly, Republicans want to change the tax code. Simpler, lower rates, based broadened. This is a difficult task on its own; it will be impossible if taxes are raised again before this process proceeds in earnest. Lastly, the Mitch factor. Senator Mitch McConnell is up for re-election and will oppose any kind of tax increase. His Republican Senate colleagues will not abandon him.

There are a few other things that will weaken the President as the year proceeds. The jobs numbers today show the economy is weak, very weak. The anemic increase does not even cover new people joining the work force. The fact the overall rate decreased a tick is due to people just giving up looking for work. 

Finally, I am not an expert on health care but it seems the Obamacare system going into effect soon will do some very unpopular things, such as increase insurance rates, overwhelm medical providers, cause companies to drop employee coverage, and add to the deficit, as it is clear that the original budget projections were grossly inaccurate. This disgruntlement will take a toll on those that supported this gigantic government monster now that it is a reality. People care more about the health care cost than gun background checks. 

Anyway, the Budget coming, the Budget is coming.  It is an important document and I will be very interested, amused and smug over reading the tax portions.