Will the Obama over-spending blueprint mean trillions of dollars needed for years to come?
*The Wall Street Journal, by Jonathan Weisman, February 23, 2009
“Starting from a budget deficit that will shatter U.S. peace-time records, President Barack Obama will propose a budget blueprint Thursday that foresees cutting the red ink in half in four years, a senior administration official said Saturday.
Even before passage of his $787 billion stimulus plan, the president’s budget writers foresaw an inherited deficit of $1.3 trillion, equivalent to 9% of the nation’s gross domestic product. With the stimulus and Mr. Obama’s proposed housing rescue, the deficit is likely to be well in excess of $1.5 trillion and possibly as wide as $1.9 trillion, according to private forecasts.
Mr. Obama will promise that he can shrink that total to $533 billion, or 3% of GDP, by 2013, primarily through savings from withdrawing combat forces from Iraq and allowing George W. Bush’s tax cuts for families earning more than $250,000 to lapse in 2011.
The forecast for a sharp narrowing of the deficit will also rest on the assumption that the economy recovers from the current slump. The official declined to say how any additional spending on economic stimulus or bailouts of the financial or other sectors — actions many economists consider inevitable — would affect the upbeat deficit projection.
The budget also will detail some of the federal programs Mr. Obama will propose to eliminate or streamline, with more details to come in the spring, the administration official said.
After unveiling an economic rescue program with a cost likely to exceed a trillion dollars, the president is now eager to emphasize his commitment to fiscal rectitude over the long term. Monday, the White House convenes a summit on fiscal discipline, to begin tackling the burgeoning costs of entitlements such as Social Security and Medicare, address the tax code and look at budget rules to force austerity.
Tuesday night, an address to a joint session of Congress will focus on the shared sacrifices needed to tame a national debt that is nearing $11 trillion, counting the $4.3 trillion in borrowed funds from Social Security. And Thursday, Mr. Obama will unveil the budget blueprint that tips his hand on long-term tax, entitlement, energy and health-care policies.
The $533 billion deficit in 2013 would include anticipated costs for his plan to offer near-universal health care. It also would include revenue from a planned greenhouse-gas-reduction effort in which businesses would have to purchase permits from the government to emit carbon dioxide and other emissions contributing to global warming. Subsidies for Medicare-managed care plans, known as Medicare Advantage, would be eliminated. Hedge-fund and private-equity managers would see their fees taxed as income, at 35% next year, not at the 15% capital-gains rate.
But some of the tax proposals that Mr. Obama campaigned on last year, such as immediately taxing the overseas earnings of U.S. companies, are drawing resistance from business. The offshore tax proposal alone could raise about $50 billion over 10 years.”
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