The radical implications of Obama’s budget proposal

Commentators on the evolving Obama presidency:
Charles Krauthammer: Obama proposes a European U.S.

Not a great speech, but extremely consequential. If Barack Obama succeeds, his joint address to Congress will be seen as historic — indeed as the foundational document of Obamaism. As it stands, it constitutes the boldest social democratic manifesto ever issued by a U.S. president…
…The economic crisis is to Obama a technocratic puzzle that needs to be solved because otherwise he loses all popular support.
Unlike most presidents, however, he doesn’t covet popular support for its own sake. Some men become president to be someone, others to do something. This is what separates, say, a Ronald Reagan from a Bill Clinton. Obama, who once noted that Reagan altered the trajectory of America as Clinton had not, sees himself a Reagan.
…Obama made clear Tuesday night that he intends to be equally transformative. His three goals: universal health care, universal education, and a new green energy economy highly funded and regulated by government.
(1) Obama wants to be to universal health care what Lyndon Johnson was to Medicare…
…Obama will create the middle step that will lead ultimately and inevitably to single-payer. The way to do it is to establish a reformed system that retains a private health-insurance sector but offers a new government-run plan (based on benefits open to members of Congress) so relatively attractive that people voluntarily move out of the private sector, thereby starving it. The ultimate result is a system of fully socialized medicine. This will likely not happen until long after Obama leaves office. But he will be rightly recognized as its father.
(2) Beyond cradle-to-grave health care, Obama wants cradle-to-cubicle education. He wants far more government grants, tax credits and other financial guarantees for college education — another way station to another universal federal entitlement…
(3) Obama wants to be to green energy what John Kennedy was to the moon shot, its visionary and creator. It starts with the establishment of a government-guided, government-funded green energy sector into which the administration will pour billions of dollars from the stimulus package and billions more from budgets to come.
But just picking winners and losers is hardly sufficient for a president who sees himself as world-historical. Hence the carbon cap-and-trade system he proposed Tuesday night that will massively restructure American industry and create a highly regulated energy sector.
These revolutions in health care, education and energy are not just abstract hopes. They have already taken life in Obama’s massive $787 billion stimulus package, a huge expansion of social spending constituting a down payment on Obama’s plan for remaking the American social contract.
Obama sees the current economic crisis as an opportunity. He has said so openly. And now we know what opportunity he wants to seize. Just as the Depression created the political and psychological conditions for Franklin Roosevelt’s transformation of America from laissez-faireism to the beginnings of the welfare state, the current crisis gives Obama the political space to move the still (relatively) modest American welfare state toward European-style social democracy…
Conservatives take a dim view of the regulation-bound, economically sclerotic, socially stagnant, nanny state that is the European Union. Nonetheless, Obama is ascendant and has the personal mandate to take the country where he wishes. He has laid out boldly the Brussels-bound path he wants to take.
Let the debate begin.

Power Line on Clarity

We shouldn’t be surprised by the radicalism of Obama’s domestic agenda. He was, after all, the most liberal member of the Senate. And he found congenial both the preaching of Rev. Wright and the educational agenda of William Ayers…
Obama’s unwillingness, as a formal matter, to take Republican views on domestic issues seriously should not be surprising either. There is no room for meaningful discussion between radicals and non-radicals…
But Obama no longer needs Harvard conservatives or Illinois Republicans to vouch for his “reasonableness.” Moreover, he is now engaged in an enterprise that requires a greater single-mindedness — the transformation of the American economic system…
Under the circumstances, conservatives should be grateful for the clarity of the situation. It is better that battle lines be drawn in sharp relief than that Republicans have the opportunity to pull off this or that legislative tweak…Economic radicalism cannot be tweaked into something palatable.
We now know for certain that Obama is an out-and-out statist bent on redistributing income and clamping down on free markets. He desires, as Charles Krauthammer has shown, to convert our free and vibrant economy into a European-style nanny state.
Conservatives must be equally single-minded in the defense of our country’s way of life. There is no cooperating with Obama on domestic issues, and to the extent that Republican Senators like Arlen Specter cooperate, conservatives must do whatever we can to end their public careers.

Irwin Stelzer on Big spender Obama sets the red ink flowing

…This should be of interest not only to Americans, but to the rest of the world, which cannot but be affected by a big change in the structure of the American economy.
The most notable feature of the budget is its fundamental reordering of the role of government. In the fiscal year starting in October. Obama wants to spend a 10-year total of $630 billion for a downpayment on a government takeover of the healthcare system, green the nation’s energy economy, make college education an entitlement and otherwise heavily involve the federal government in an education system that until now has been under the control of local and state governments.
That is why spending aimed at getting the economy out of its rut is the least significant aspect of this budget. The president dismisses the notion that we are in the grip of a normal downturn in the business cycle: “We arrived at this point as a result of an era of profound irresponsibility that engulfed both private and public institutions from some of our largest companies’ executive suites to the seats of power in Washington, DC.” Which is why Obama titled the budget document, “A New Era of Responsibility.” What is responsible about a budget that projects deficits rising from $459 billion to $1,752 billion in the first year of Obama’s budget, and remaining at $712 billion as far ahead as 2019, when the economy will be growing, is not clear.
This flow of red ink will persist despite a huge increase in taxes — $1.4 trillion over 10 years. The bulk of that increase is to come from two sources: the rich, and polluters. Those the president calls “the wealthy and well-connected,” a group he feels received too large a portion of the nation’s income and wealth during the boom years, will pay more.
In fact, a taxpayer does not have to be either wealthy or well-connected to serve as Obama’s cash machine. Single people earning $200,000 a year, and couples earning $250,000 will lose the benefits of the Bush tax cuts: top marginal rates will go from 35% to 39.6%, which will hit small firms that are taxed at individuals’ rates. Deductions for charitable contributions and mortgage-interest payments will decline, better-off pensioners will pay more for Medicare prescription drugs, estate taxes will rise, and the profits of hedge-fund managers will be taxed as ordinary income (39.6%) rather than as capital gains (15%).
Economists are debating the effect of these increases, with conservatives arguing they will reduce incentives to start new businesses. But economic arguments matter less to Obama than his own notions of fairness, of the need to tackle what he calls “a growing imbalance of accumulating wealth and closing doors to the middle class”. This is why he favours raising capital-gains tax even if that results in a decline in tax revenues, and why he is calling for a big transfer of wealth from upper- and not-so-upper income families and firms to what he calls 95% of Americans, whose taxes he claims will be lowered and whose benefits will be increased.
But even those lower earners will be hit by new taxes, but taxes that are in the long tradition of the stealthiness…The proposed cap-and-trade system, aimed at reducing greenhouse gas emissions, will require businesses to pay some $645 billion for pollution permits in 2012-19. That cost will for the most part be passed on to consumers, most of them not rich, in the form of higher prices — for which they will blame their utilities and other companies, rather than the president.
A final feature worth noting is that this budget brings out of retirement that old favourite, Rosy Scenario. The revenue estimates assume that the economy, which the government reported on Friday had declined at an annual rate of 6.2% in the final quarter of last year, will grow at a rate of 3.2% next year and more than 4% in 2011, 2012 and 2013. It assumes…military spending can be cut without imperilling national security. Most crucially, it assumes that a spendthrift Congress will change its ways to please the president.
Even more important, the underlying assumption of this budget is that the world will be willing to buy a flood of Treasury IOUs…
…the more radical features of Obama’s plan: spending at levels previously thought unimaginable, deficits as far ahead as the eye can see, a significant redistribution of the nation’s income from wealth creators to dependants on the state, government takeovers of significant sectors of the economy, more regulation of almost every business.
RIP the notion that Obama, who campaigned on the left, would govern from the centre.

Lawrence Kudlow on Obama Declares War on Investors, Entrepreneurs, Businesses, And More

…He is declaring war on investors, entrepreneurs, small businesses, large corporations, and private-equity and venture-capital funds.
That is the meaning of his anti-growth tax-hike proposals, which make absolutely no sense at all — either for this recession or from the standpoint of expanding our economy’s long-run potential to grow.
Raising the marginal tax rate on successful earners, capital, dividends, and all the private funds is a function of Obama’s left-wing social vision, and a repudiation of his economic-recovery statements. Ditto for his sweeping government-planning-and-spending program, which will wind up raising federal outlays as a share of GDP to at least 30 percent, if not more, over the next 10 years.
This is nearly double the government-spending low-point reached during the late 1990s by the Gingrich Congress and the Clinton administration. While not quite as high as spending levels in Western Europe, we regrettably will be gaining on this statist-planning approach.
Study after study over the past several decades has shown how countries that spend more produce less, while nations that tax less produce more. Obama is doing it wrong on both counts.
And as far as middle-class tax cuts are concerned, Obama’s cap-and-trade program will be a huge across-the-board tax increase on blue-collar workers, including unionized workers. Industrial production is plunging, but new carbon taxes will prevent production from ever recovering. While the country wants more fuel and power, cap-and-trade will deliver less.
The tax hikes will generate lower growth and fewer revenues. Yes, the economy will recover. But Obama’s rosy scenario of 4 percent recovery growth in the out years of his budget is not likely to occur. The combination of easy money from the Fed and below-potential economic growth is a prescription for stagflation. That’s one of the messages of the falling stock market.
Essentially, the Obama economic policies represent a major Democratic party relapse into Great Society social spending and taxing. It is a return to the LBJ/Nixon era, and a move away from the Reagan/Clinton period. House Republicans, fortunately, are 90 days sober, as they are putting up a valiant fight to stop the big-government onslaught and move the GOP back to first principles.
Noteworthy up here on Wall Street, a great many Obama supporters — especially hedge-fund types who voted for “change” — are becoming disillusioned with the performances of Obama and Treasury man Geithner.
There is a growing sense of buyer’s remorse….

The Wall Street Journal Editorial Report has a vibrant video discussion about these economic issues.
Victor Davis Hanson pounds on conservatives and Republicans for enabling this disaster and then discusses the likely consequences of Obama’s economic policies.
Yep, unfortunately, none of this is a surprise.
Justin’s subsequent post led me to dig up this link.
And then there are always comparisons with prior comments and other relevant concerns like found here, here, here, and here.

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Tom W
Tom W
14 years ago

We are fast approaching the stage of the ultimate inversion: the stage where the government is free to do anything it pleases, while the citizens may act only by permission; which is the stage of the darkest periods of human history, the stage of rule by brute force.” – Ayn Rand

14 years ago

I really have to take issue with the constant harping on this board about “European style socialism”.
Have any of you actually BEEN to Europe?
I spent several years there. I’ve been to Moscow, Lisbon and everything in between.
While there is universal health coverage (a no-brainer for a modern, industrialized society) they actually spend LESS money per capita then the US and are healthier. Doctors have to confine themselves to vacationing on islands-not buying them. Pharmecuticals, insurers and the whole health-care industrial complex are not allowed to endlessly gorge on the citizenry.
Otherwise, I hate to disillusion people, Europe is almost universally governed by right-wing anti immigrant coalitions. Even the so called Social Democratic parties have gotten into the act since they have realized they can’t win otherwise-hence “New Labor”.
Everywhere, even England, the pro-immigrant socialistic parties are on the run. Contrast that with the US where both parties are de facto open borders.

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