June 2009 marked an unpleasant milestone in U.S. history. For the first time, the Federal Budget deficit surpassed $1 trillion, and is on track to nearly double again by the end of the fiscal year. That puts the deficit at roughly 13% of GDP. (For comparison, President Reagan is still routinely slammed by liberal pundits for raising the deficit to 5.4% of GDP during his two terms in office1.) This historic increase should surprise no one who has paid attention to the Obama White House's spending policies over the last several months. The rising costs of social safety-net programs, coupled with Obama's poorly designed, poorly implemented stimulus package, should be blamed. Unfortunately, they won't be. If President Obama addresses the deficit at all over the next few weeks, expect him to frame it as a problem of revenue flow rather than one of undisciplined spending. He'll argue that in order to close the gap, the only solution will be to raise taxes. He's already unveiled a plan to tax American companies for earning profits overseas, the result of which will be to deliver a crippling blow to free trade and the global economy. John Castellani deftly summarizes the situation in his column "Higher Taxes Will Damage America's Ability to Compete," writing
"The Obama administration now wants to change the international tax rules in a way that will give foreign competitors an unfair advantage over U.S. companies in the global marketplace, allowing the foreign companies to reinvest more, expand faster, and sell products at lower prices. The administration claims it is protecting Americans against companies that export jobs; in reality, the proposal would put the U.S. increasingly out of sync with the rest of the world."
Once the revenue from suddenly-failing firms dries up, how long will it be before Obama decides that the average American isn't paying his fair share?
No one should waste his or her time hoping that Obama will cut the deficit through spending reductions. His domestic agenda emphasizes costly programs like single-payer health care and a cap-and-trade program under which job losses are so certain that "it includes a provision accommodating newly unemployed workers from the resulting dried-up energy sector, to the tune of $4.2 billion over eight years".2 If Obama hasn't backed off of this agenda already, no amount of skyrocketing debt will convince him to do so.
A $1 trillion deficit should be unacceptable. Instead, Obama is ready and willing to push it higher. The reasonable thing to do at this point is to begin severe spending reductions. Our Government continues to urge us to try to live within our means. Shouldn't we expect it to do the same?