“A man younger than 30 who’s not a liberal has no heart and a man older than 30 who’s not a conservative has no brain” – Winston Churchill.
Spending his formative years in Paris and then returning to complete college and graduate school at the American University of Paris, my son became deeply steeped in French cradle-to -grave socialism, never failing to extol its virtues. A self proclaimed “caviar socialist”, my caviar – his socialism, lamented how hardened we fiscally conservative “old people” had become to the wishes of the “people”. The mean spirited American ideal of education, hard work and opportunity for all was just a bromide invented by the American bourgeoisie in a nefarious plot to stifle the true wishes of the “people”.
“Ah, for those carefree days, when my motto was “C’est Mon Pere Qui Paie” – it’s my father who pays – how have they gone by so quickly and weren’t they sweet… but alas, a return to New York and the reality of having to earn a living. An $80,000 starting salary, a fortune by French socialist standards, I will soon be king of the “Big Apple” and dining on caviar and champagne. WHAT! An incremental federal tax of 25%, state tax of 6.85%, city tax of 3.65%, my half of social security 6.2% and don’t forget 1.45% for Medicare – what’s left for me, only 57% and I have to pay $2,000 for a studio apartment. C’mon Pops you can help out with the rent? Oh, I’m a little short this week, you think you can give me a couple of hundred?”
The crotchety old man dispenses his words of wisdom: “Don’t worry my son work hard and you can join the wealthy 1-2% of top earners with over $250,000/annum, then President Obama and Governor Paterson will give you the pleasure of paying an additional 15% on your incremental income – they will get 52% and you will be the lucky recipient of 48%. Count your blessings kid, you don’t have to kick in the 6.2% for social security above $106,800…. yet. And with that tidy sum maybe some day, if you scrimp and save, you can afford to buy a one-bedroom apartment, probably not in the best neighborhood. You rich people have it so good.”
Reality, it has a way of humbling us all. “Ah, did I forget to tell you my son, President Obama, has big plans for you successful young men and women. You get to pay for his great new American social experiment. To tell you the truth, I would prefer democratic evolution to social revolution but you young people have your opportunity to show us old fogies how clever you are. ”
Perhaps the fiscal 2009 deficit of $1.75 trillion should be viewed as an anomaly since it’s the direct result of the $700 billion Bush TARP plan and the $800 billion Obama Stimulus Plan, both implemented to ameliorate the effects of the financial crisis and recession. But how can you justify an average deficit of $700 billion annually from 2010 to 20019, which, according to the Obama budget, will be boom times? GDP will likely rise to an eye-popping $23 trillion in 2019 based on the Obama budget. However, expenses will grow to nearly $5.2 trillion and “taxing the rich” will not pay for it.
Is this “A New Era of Responsibility”? If we take the administration’s rosy recovery scenario at face value, fiscal 2010 GDP will grow by a very healthy 3.4% and federal outlays will be a breathtaking $3.6 trillion, or 24.1% of the projected $14.7 trillion GDP. Since federal receipts will only be $2.4 trillion, a deficit of $1.2 trillion will be incurred in fiscal 2010. This is only the beginning of a recurrent pattern: rosy growth projections for GDP, increased spending and unprecedented deficits as far as the eye can see. Deficits dip from 2012 to 2015 and then continue merrily higher for the rest of the decade without respite. In fact, the projected deficit in the Obama Budget is $7.0 trillion for the decade 2010 to 2019. That’s the good news!
The Congressional Budget Office (CBO) has concluded that, if the Obama budget were approved, the federal government would actually run even larger deficits averaging nearly $1 trillion a year over the next decade. The cumulative deficit from 2010-19 would be $9.3 trillion, according to the report – $2.3 trillion more than the administration’s forecast. The main reason for the difference in budget estimates is a difference in economic growth, with congressional views of long-term growth less optimistic than those of the White House.
I fear the Obamanomics road to national insolvency is paved with red ink. “But don’t worry my son, work a little harder and you can pay off the annual $1 trillion Obama deficit and with what’s left over you can buy a slice of pizza.”