The Obama Administrations 2010 budget includes in its header on every page the phrase, “A NEW ERA OF RESPONSIBILITY.” What they consider responsible is clearly up for much debate. I won’t go through each line of the budget, but there were a few lines that stood out to me that should be discussed.
On the last page of the budget summary (found here on the Whitehouse website) is a line item titled “Debt issued by Treasury.” This line item includes the cumulative debt outstanding that has been issued by the Treasury. That is, when the United States Government needs to borrow money it issues bonds via the Treasury. Anybody can buy these bonds and by doing so are lending the United States money. In 2008 this figure stood at just below $10 trillion. This amount grows to over $14 trillion in 2010 and over $19 trillion in 2015. The debt officially doubles the 2008 figure in 2016 with a figure of just under $20 trillion. By 2019 the Obama Administration estimates that the United States debt will be above $23 trillion. What is scary is that the Administration has an incentive to underestimate these figures, so these may be on the light side. To give you an idea of just how much this is, the United States GDP for 2008 was just above $14 trillion and total tax revenues for the federal government were under $3 trillion. This means that the United States Government is incredibly leveraged (has a high amount of debt relative to its revenues). What is scarier is that the United States Government itself expects that debt to grow at an outrageous rate. From 2009 to 2014 (a five year period), the Obama Administration is anticipating that the outstanding debt will grow by an average annual rate of 7.33% and a median annual rate of 6.04%. To pay off this debt the government will either have to raise taxes or print more money.
In an effort to pay for all of this spending the Obama Administration has enacted many new taxes, not just increased income taxes. Those new taxes, as shown on the Obama 2010 Budget, include reinstating Superfund taxes, taxing carried interest as ordinary income, repealing the LIFO accounting practice, requiring information reporting for rent payments, implementing international enforcement, reform deferral, and other tax reform policies. For those of you that have knowledge of accounting and finance these may have some importance to you, as well they should.
One set of new taxes that I found particularly interesting are the numerous new taxes and removal of tax credits for oil and gas companies. In aggregate, the Obama Administration plans to tax oil and gas companies an additional $353 billion from 2010 to 2019. This after Obama stated on the campaign trail, “I will set a clear goal as president: in ten years we will finally end our dependence on oil in the Middle East,” (source). He plans to end our dependence on oil from the Middle East within ten years by taxing domestic oil producers an extra $31 billion.
Another line item that stood out to me was the $15 billion in tax revenue that the government will bring in as a result of changes that are “dedicated to climate policy.” For those of you that wonder why the government tells us every week that we are all in danger of certain death by global warming now you know one of the many reasons. The debate on global warming is for another time, but I did find it interesting that the Obama Administrations plans on bringing in that amount of money annually.
One item that I found humorous in a dark sort of way is the line item titled, “Disaster costs.” The Obama Administration believes that disaster costs (earth quakes, hurricanes, etc.) will increase from $4 billion in 2009 to $30 billion in 2019. So, in their eyes there will be 7.5 times the number of “disasters” in 2019 than in 2009. Bunker down, everyone.
Perhaps the most outlandish part of all of this is the Administration’s estimates of how the United States economy will perform. In order to justify their absurd levels of spending (I didn’t go into this much because it would take up volumes), the Administration has set some ridiculous GDP goals. Between 2009 and 2014 the Administration suggests that the United States economy will grow, yes grow, at an average annual rate of 5.25% (remember that our debt grew at 7.33% per year over that time period). For comparison’s sake, as comparison is very necessary here, the United States economy has grown at an average annual rate of 3.47% since 1929. Don’t want to include the Great Depression? Since World War II, the United States economy has grown at an average annual rate of 3.06%. To keep beating a dead horse, 2.78% average annual growth rate over the last twenty years, 2.55% over the last ten years, and 2.50% over the last five years. In fact, over the past twenty years the United States economy has NEVER grown at an annual rate above 4.50%. To find the last year that the economy did grow at the rate the Obama Administration is suggesting it will you have to go back to 1984 under President Reagan. The Obama Administration, however, is telling us that the economy will grow at an average annual rate of 5.25% over the next five years, then 4.45% ever year after that. So, for those of you that are worried about losing your job, don’t worry any longer – we are about to experience the biggest economic boom in recent history!