Obama: Not Raising Taxes Is a Form of Government Spending

By Fred Lucas | February 13, 2012 | 4:01 PM EST

President Obama speaks about his 2013 budget proposals and the "Community College to Career Fund" at Northern Virginia Community College in Annandale, Va. on Monday, Feb. 13, 2012 (AP Photo/Susan Walsh)

(CNSNews.com) – Announcing his budget plans for fiscal year 2013 in an address at Northern Virginia Community College in Annandale, Va., President Barack Obama characterized the current income tax rates--signed into law by President Bush a decade ago--as a form of government spending.

Essentially, the president said that the federal government "spends" when it does not raise taxes.

“Right now, we’re scheduled to spend more than $1 trillion more on what was intended to be a temporary tax cut for the wealthiest two percent of Americans,” Obama said. “We’ve already spent about that much. Now we’re expected to spend another $1 trillion. Keep in mind, a quarter of all millionaires pay lower tax rates than millions of middle class households. You’ve heard me say it: Warren Buffett pays a lower tax rate than his secretary.”

Despite the bankruptcies of three green energy companies that received heavy doses of federal tax dollars, Obama also pledged Monday to “double down on clean energy.”

The budget proposal faces an uncertain future on Capitol Hill. Democrats, who control the Senate, have said it is not necessary to vote on a budget for next year. Republicans, who control the House, have criticized the Obama budget, saying it contains too many tax hikes and not enough spending cuts.

Obama said his tax and spending plan would save $4 trillion by 2022. However, the budget proposal for the fiscal year beginning Oct. 1, projects a $1.33 trillion deficit, marking a fourth consecutive year of trillion-dollar deficits. The president’s plan projects that the deficit would drop to $901 billion in 2013, and to $575 billion by 2018.

Obama told the college audience that trimming the deficit was important, but stressed that “investments” was important as well. He focused the bulk of the speech on an $8 billion program to establish a partnership with community colleges and businesses.

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“An economy built to last demands that we keep doing everything we can to help students learn the skills that businesses are looking for,” Obama said. “It means we have to keep strengthening American manufacturing.”

If approved, the “Community College to Career Fund” would be co-administered by the Department of Labor and the Department of Education. The fund is designed to establish an alliance between community colleges and businesses to train workers and entrepreneurs for industries offering the most opportunities.

Obama’s budget proposal would raise an estimated $41 billion over 10 years by eliminating tax breaks for oil, gas and coal companies. He pledged to put more money instead into energy sources which critics note have a more mixed record.

“It means we’ve got to keep on investing in American energy. We’ve got to double down on the clean energy that is creating jobs. But, it also means we’ve got to renew the American values of fair play and shared responsibility.”

Elsewhere in the speech, Obama reiterated the point: “We need to reduce our dependence on foreign oil by ending the subsidies for oil companies, and doubling down on clean energy that generates jobs and strengthens our security.”

In the past year, three firms that received federal loans or grants filed for Chapter 11 bankruptcy after getting grants or loans from the American Recovery and Reinvestment Act, also known as the Stimulus.

In January, Indiana-based Ener1, which makes batteries for electric vehicles, announced it had filed for Chapter 11 bankruptcy protection. The company had been awarded a $118.5 million from the Energy Department.

The Obama administration has been under fire for a $535 million stimulus-funded loan it made to California-based solar panel company Solyndra, which filed for Chapter 11 bankruptcy protection last fall before being raided by the FBI. Also late last fall, the Massachusetts-based Beacon Power, a green energy storage plant that received $43 million in stimulus funds, filed for Chapter 11 bankruptcy protection.

‘Buffett Rule’

The president’s budget also calls for ending the Bush tax-cuts for households earning more than $250,000 per year and individuals earning $200,000 annually.

“The budget that we are releasing today is a reflection of shared responsibility,” Obama said. “It says that if we’re serious about investing in our future, investing in community colleges, investing in new energy technology, investing in basic research, we’ll, we’ve got to pay for it. That means we’ve got to make some choices.”

The budget includes $1.5 trillion in new tax hikes. Obama’s budget would seek to implement what he calls the “Buffett Rule,” to make sure households making more than $1 million annually pay at least 30 percent of their income in taxes.

“Right now, we’re scheduled to spend more than $1 trillion more on what was intended to be a temporary tax cut for the wealthiest two percent of Americans,” he said. “We’ve already spent about that much. Now we’re expected to spend another $1 trillion. Keep in mind, a quarter of all millionaires pay lower tax rates than millions of middle class households. You’ve heard me say it: Warren Buffett pays a lower tax rate than his secretary.”

Obama has referred in the past to “spending in the tax code” – equating raising taxes with cutting spending. In this case, the $1 trillion the president was referring to was not actual government expenditures, but rather an estimate of what the government would have raised in revenue had the tax cuts not been in place.

Obama also proposes to levy a new $61 billion tax over 10 years on big banks aimed at recovering the costs of the financial bailout and providing money to help homeowners facing foreclosure on their homes.

He wants another $476 billion in increased spending on transportation to including inner-city rail services; $30 billion to modernize at least 35,000 schools and $30 billion to help states hire teachers and fire, police and rescue personnel.

The Peter G. Peterson Foundation, a non-partisan group focused on raising awareness about the country’s fiscal problems, said the budget proposal does not go far enough in address the real problems of entitlement spending and tax reform that are driving up the national debt.

“Unfortunately, these measures are not sufficient to put America on a sustainable long-term fiscal path,” the vice chairman Michael A. Peterson said in a statement.

“Even under optimistic assumptions, the president's own numbers show debt rising rapidly after 2022 and reaching levels that would put the economy at risk. The true test of any fiscal plan is whether or not it stabilizes the federal debt as a percentage of the economy,” he said.

“Making minor changes to the tax system and focusing on cuts to short-term discretionary spending will simply not get the job done. We must address the structural drivers of our long-term debt, including entitlement growth and our inefficient tax system.”

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