Budget Shenanigans

Barack Obama has announced that he wants Congress to mandate across-the-board cuts in spending to offset any new spending programs or tax cuts.

Sounds like touch fiscal discipline? Think again.

Unlike a common sense approach to budgeting, the federal government's budget includes many programs that automatically increase each year due to inflation, demographic changes or rules. Obama is not saying that any increase in spending would be offset by automatic spending cuts - just any new spending program or tax cut. So the budget will balloon due to the automatic growth in Social Security and Medicare, for example, without triggering the spending cuts.

Moreover, note that Obama proposes this after securing passage of the biggest budget busting bill in history, our "stimulus" bill. So the baseline budget is now higher, so much easier to promise spending restraint after this spending spree.

Last, the plan would also mean tax cuts will never happen to any meaningful degree or without offsetting tax increases. Just as spending grows automatically, tax revenues are also on auto pilot to increase faster than inflation and growth in the economy due to their steeply progressive nature.

Since taxes and spending will continue to rise significantly even with no new programs, Obama's "get tough" approach on the budget is mostly about PR and laying the groundwork for tax increases.