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Wednesday, February 16, 2011

The President's Budget: No Spending Restraint, Higher Taxes

A dramatic shift in rhetoric emanating from the Obama White House occurred after the November elections. Before November 2010, anti-business talk and policies reigned. Since the elections, President Barack Obama has worked to shift the administration's tone towards business.

Unfortunately, as evident by the President's budget proposal, political talk turns out, once again, to be quite cheap in our nation's capital.

The 2012 budget plan does nothing substantive to reduce the size of government after unprecedented growth, and actually includes assorted tax increases that will hurt business and the economy.

On the spending side, after a historic increase in outlays of 40 percent over four years, the budget would provide a small one-year reduction (-2.4%) in spending during 2012, But then federal spending would quickly resume its growth.

As a share of the economy, spending would remain at unprecedented levels over an extended period of time - after hitting 25% of GDP in 2009 and 23.8% in 2010, federal outlays would equal 25.3% of GDP this year (the highest level since World War II), 23.6% in 2012, 22.5% in 2013, 22.4% in 2014, 22.3% in 2015, and then back up to 22.6% in 2016. This long, unprecedented period of high spending promises to loom as a big negative over the economy. By the way, during the late Clinton and early Bush years, outlays ranged between 18.2% and 19.7% of GDP.

Perhaps even more surprising than the budget's call for big spending are the tax increases. The following could be called "Obama's Dirty Dozen Tax Increases." However, keep in mind, that this is far from an exhaustive list in terms of measures that would increase tax bills and costs under the Obama budget...

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