Site for Free Markets and Free People

Friday, February 27, 2009

There's a Reason the Budget Sounds So Scary

As the WSJ explains, the Obama budget is very very very scary. As the graph illustrates, federal spending as a percentage of GDP will be higher than any time in history apart from World War II mobilization efforts. Even after the economy recovers with an all-too-rosy expected 3-4% GDP growth for the next several years, spending is still several points higher than the last few decades. And that's also assuming that many of the spending increases (ie. new employee hires, salary increases for federal employees, etc.) are all eliminated after next year. (How many of you think that is likely?)

The budget also assumes that all the families currently making over $200,000 will not change their behavior at all and will gladly just fork over the 60% marginal rates to the government. It assumes that Obama can convince Congress to drastically reduce farm subsidies to farmers. It assumes that the government-run health care program will only cost $634 billion, which even as Obama says, is simply a "down payment." Finally, it already includes a dramatic 2% of GDP reduction in defense spending. (This cut I can believe.) The end result? The WSJ puts it best:

Americans are only beginning to understand the magnitude of Mr. Obama's ambitions, and how much of their own income will be required to fulfill them. Republicans have an obligation to insist on a long and considerable debate on all of this, lest Americans discover in a year or two that they live in a very different country.

The optimist in me says that perhaps Obama is stuffing the budget so far beyond belief that he can remove small parts of it and say that he is "cutting the budget" or some other rhetorical nonsense that he has playing recently. But the realist in me tells me this is Obama.