On Monday, February 2, President Obama presented his 2016 budget to Congress. In the proposal, President Obama called for a $3.99 trillion budget paid for by a bunch of new taxes. The new budget represents a 67.5 percent rise in spending from 2009 – when President Obama entered office. The President didn’t skimp on anything – calling for both more domestic and military spending and refusing to touch entitlements. Without reform, Social Security is basically going to run out of money by 2017, forcing senior citizen benefits to either be paid for out of general tax revenue or to be cut. A responsible budget should at least attempt to make our current programs viable so that the millions of people who depend on them are not left in the cold.
To his credit, President Obama does pay for this spending with $1.44 trillion in tax increases over the next ten years. He would raise the capital gains tax to 28 percent – it was 15 percent when he entered office making him responsible for almost doubling it. He would set the minimum individual tax rate to 30 percent. He would reduce or eliminate tax deductions for things such as retirement accounts, which is expected to raise $746 billion. The list continues with more taxes and rule changes designed to extract more money out of people and companies.
It is not all bad. U.S. companies currently have over $2 trillion of cash stored overseas; money on which they have already paid taxes. Right now, if they tried to bring that cash back to the United States, they would be forced to pay another 35 percent tax on it. The President proposed temporarily lowering it to 14 percent for current profits and 19 percent on future overseas profits and using this new money to finance infrastructure upgrades. This is a smart way to get companies to bring back money they say they want to invest domestically and to pay for needed upgrades to airports and bridges.
The biggest problem with the budget isn’t any of the proposals but the signal it sends to Republicans and the country. The President had to know that the Republicans who now control Congress were not going to respond well to this budget – and they haven’t. The President could have used this as an opportunity to reach out to the new Congress and show a willingness to work with them and actually get something done. Maybe even pass the so-called “Grand Bargain” that politicians have been talking about since the fall. Instead, the President took this time to show that he lacks the will to push any serious reform. He failed to address entitlements entirely – which will either keep eating a growing percentage of all tax revenue or start severely cutting programs. And he chose to send Republicans a budget proposal that he – and everyone else – knew would never have a chance of passing through Congress without being completely rewritten. Most likely, Congress is going to start over with a completely new budget plan and we will risk losing the good ideas with the bad.