When is a deal not a deal? When it’s with Barack Obama. On Monday, President Obama announced his fiscal 2016 budget with a whopping 7 percent increase in federal spending. That breaks a deal he signed with Congress back in 2011. In exchange for permission to hike federal borrowing by a whopping $2.1 trillion — the biggest ever debt ceiling hike in history — Obama agreed to automatic limits on federal spending. Now Obama’s had enough of “mindless austerity” and wants to “undo these arbitrary across-the-board cuts” known as “sequestration.”
Reneging is Obama’s middle name. He’s repeatedly promised never to raise taxes on families making less than $250,000. But his budget would skewer them. Obama says he wants to “eliminate the trust fund loophole” and “make sure everyone pays their fair share.” What he calls a loophole is the increased value of your mom-and-pop business or that three-bedroom colonial you bought 30 years ago for $80,000 that’s now worth many times that.
When you die, Obama proposes taxing the appreciation and then taxing it again under a heavier federal estate tax — a double whammy that roughly adds up to a 60 percent tax, making it impossible for your family to keep it. Obama calls this “middle-class economics,” but it’s really Fidel Castro redistribution.
Though this tax hike is dead on arrival in the Republican-controlled Congress, the risk is that lawmakers will abandon the sequester’s spending limits.
The president says he wants to end “manufactured crises,” but his budget is meant to manufacture another one. Congress and the president must agree on spending measures to keep the government running past October 1 and agree to hike the debt limit, already at an astounding $18.2 trillion. It’s a showdown, possibly a shutdown, in the making. And it’s Obama who’s moving the goal posts.
Though he later tried to deny it, the “sequester” was the brainchild of the Obama White House. During Obama’s first three years in office, federal spending and debt soared. Obama could see that the mounting debt was a toxic issue. Generally, presidents ask Congress once or twice a year for a debt ceiling hike. But Obama wanted to keep the issue out of the news as the 2012 election neared. So in August 2011, he asked Congress for an unprecedented $2.1 trillion, enough to take him past the election.
To get it, he agreed that starting in 2013, federal spending would be capped automatically until 2021. Accumulated “savings” would offset the $2.1 trillion already borrowed and put the nation on the road to fiscal responsibility.
In 2012, he denied the sequester was his idea during a televised debate with rival Mitt Romney — a fib that earned him four Pinocchios from The Washington Post.
In 2013, Obama got cold feet and demanded a delay. Now he’s reneging entirely.
It’s like a couple who takes out a loan to pay off their credit cards, swearing they’ll stick to a budget in the future. Then one of them keeps on spending. Obama wants to spend on free community college and other domestic giveaways, infrastructure projects, and even tripling foreign aid to Central America, of all places.
Standard and Poor’s saw it coming. In August 2011, when Obama and Congress were striking their deal, the rating agency downgraded the nation’s debt, citing “political brinksmanship.” It was the first downgrade in the nation’s history. The agency said it was more about the nation’s politicians than its finances.
It’s not just Democrats who want to ditch the sequester. Senate Armed Services Committee Chairman John McCain said last week, “If we continue with these arbitrary defense cuts, we will harm our military’s ability to keep us safe.” That’s unlikely. Troop deployments are exempt, and there is plenty of waste at the Pentagon. But Obama promises to match spending hikes on domestic programs with spending increases on defense — a gambit designed to drive a wedge in the GOP.
The risk is that spendaholics in both parties will abandon the sequester. Trillion-dollar annual deficits and a $22.3 trillion debt face us in just five years. As the S and P downgrade indicated, the real deficit in Washington is character.
Betsy McCaughey, Ph.D., is chairman of the Committee to Reduce Infection Deaths and a senior fellow at the London Center for Policy Research.