Introducing a budget outline that calls for nearly $1 trillion in tax increases over the next ten years, President Obama and his economic team today said the plan would restore fiscal discipline and "produce sustained growth and shared prosperity."
Titled "A New Era of Responsibility: Renewing America’s Promise," the 134-page document released today was an overview of the larger more-detailed document to be released in April.
Peter Orszag, director of the Office of Management & Budget, said without action, the country would accumulate $9 trillion in new debt over the next decade.
In a briefing for reporters, Orszag said the administration was "inheriting … a very significant budget deficit. Under current policies and without any policy intervention, our estimates suggest that we would face $9 trillion in budget deficits over the next decade. The first step in addressing this very deep fiscal hole is honesty. This budget will not play the games that are typically played, in which you assume that there will never again be a hurricane or disaster, that the Alternative Minimum Tax, which is a second tax system resting alongside the regular income tax, would be allowed to gradually take over the tax code, that the cost of the war in Iraq and Afghanistan will magically disappear overnight."
Orszag pointed out four ways the deficit will be reduced:
1- The recovery act and "normal business cycles" will cause the economy to eventually recover.
2- Allowing "high income tax provisions to expire when they are scheduled to expire, at the end of 2010" and closing tax loopholes.
3- "Winding down the war" in Iraq.
4- Making government more efficient.
The Bush administration’s tax cuts expire in the end of 2010, when Obama’s tax increases will take over. Among them, $636 billion in various tax increases over the next ten years from individuals making more than $250,000, and $353 billion in taxes to business.
The individual tax increases include a reduction in itemized deduction for charitable contributions. Orszag today defended that reduction, saying that the stimulus provides $100 million for charities and economic recovery will bounce contributions back.
Christina Romer, chairman of the President’s Council of Economic Advisors, predicted negative 1.2 percent GDP growth for 2009 but expected it to grow by 3.2 percent in 2010 and 4 percent in 2011. She also warned that unemployment could rise to more than 8 percent in 2009, but decline progressively over the next few years to 5.2 percent in 2013.
President Obama opened on a hopeful note as he made his remarks about the budget this morning. The president, touting the benefits of the stimulus package, reported good news.
“Starting today, the recently unemployed will benefit from a COBRA subsidy that will make health care affordable,” The president, said adding that 7 million more Americans who will be covered. “It is a direct result of the American Recovery and Reinvestment Act that I signed into law the other week.”
Pegging off his “good news” report President Obama — flanked by his economic team — acknowledged that in terms of his budget released today, that additions need made to the deficit in the short term to provide relief over the long run.
The president took a jab at budgets past by emphasizing that he believes his budget is an honest accounting document.
“For too long, our budget has not told the whole truth about how precious tax dollars are spent. Large sums have been left off the books, including the true cost of fighting in Iraq and Afghanistan,” Obama said, “We need to be honest with ourselves about what costs are being racked up, because that’s how we’ll come to grips with the hard choices that lie ahead.”
Obama promised that when the full budget is developed in the spring that the administration will “go through our books, page by page, line by line, to eliminate waste and inefficiency," and promised that no part of the budget will be free from scrutiny or untouched by reform.
Obama said that lowering the debt in the long-term would be the only approach to solving the country’s fiscal problems. He acknowledging that sacrifice is needed — while there are certain things that people care about, there are some things that the country simply cannot afford right now.
“I don’t think that we can continue on our current course. I work for the American people, and I’m determined to bring the change that the people voted for last November. And that means cutting what we don’t need to pay for what we do.”
Noting that it will not “sit well” with special interests and lobbyists in Washington, Obama said that billions of dollars will be saved by rolling back tax cuts for the wealthiest Americans, and giving a middle class tax cut to 95 percent of working families.
Obama noted investments in renewable energy to make America more competitive and break free of dependence on foreign oil.
“We’ll be working with Congress on legislation that places a market-based cap on carbon pollution and drives the production of more renewable energy. And to support this effort, we’ll invest $15 billion a year for 10 years to develop technologies like wind power and solar power and to build more efficient cars and trucks right here in America."
On health care, the president said that the budget makes a “historic commitment to comprehensive health care reform”and that such investment will in the long term help bring down the deficit.
And finally Obama mentioned the investment into education the budget will make, matching resources with reform.
“A budget is more than simply numbers on a page. It is a measure of how well we are living up to our obligations to ourselves and one another. It is a test for our commitment to making America what it was always meant to be: a place where all things are possible for all people. That is a commitment we are making in this, my first budget, and it is a commitment I will work every day to uphold in the months and years ahead.”
Obama — accompanied in the room by Vice President Biden, OMB director Orszag, OMB deputy director Rob Nabors, domestic policy advisor Melody Barnes, Chair of the Council of Economic Advisors Romer, and head of the National Economic Council Larry Summers — took no questions from the audience of reporters, despite being asked.
“No questions today,” he answered leaving the room with his economic heavyweights.
– Jake Tapper & Sunlen Miller