by: Grant Phillips
[dropcap size=small]A[/dropcap]ccording to a Fox News report, President Obama will be proposing a whopping $4 trillion budget for fiscal year 2016. The new budget proposes $478 billion in transit spending for upgrades to the nation’s infrastructure. In order to pay for this lucrative program, Obama wants to tax U.S. companies’ overseas profits at a one-time rate of 14%, which would be followed by re-structuring the corporate tax code. While this meets only half the financing requirements, the other half will come from the federal Highway Trust Fund, which is financed by the gasoline tax and nearly insolvent as of June 2014.
Obama’s budget also proposes a $38 billion increase in Pentagon funding as well as expanded child care, middle-class tax breaks, and “free” community college. These massive spending appropriations will be funded by taxing the capital gains on couples making over $500,000 per year. It appears Obama has smartly given up on taxing 529 college-saving plans. If Obama wants “middle class tax breaks”, he should keep it simple and lower taxes.
The Obama White House claims that the proposed budget will cut the deficit by $1.8 trillion over the next ten years, which is an outright lie at best. I’m not sure how more spending and big government programs will reduce the deficit, especially with Social Security’s financial crisis looming.
The proposed budget only offers short sighted, politically convenient solutions that will likely exacerbate the problem. Our infrastructure is certainly in need of improvement, but is more spending the answer? President Obama’s spending increases would be easier to swallow if he would address the waste in the federal government. If spent frugally, investing in our infrastructure is certainly a productive use of capital. However, under this budget, all that happens is a massive spending increase with no offset in spending cuts.
These spending increases will likely hurt the middle class, regardless of what actually happens to the deficit. As economists have proven, increases in government size and spending leads to higher unemployment and slower growth. Government make-work programs do not help anyone. In fact, increasing spending almost certainly means increased public employment, and that will likely result in a net loss for job creation.
Capital gains taxes remove capital from the economy, creating another detriment to growth. Capital is the most valuable resource. Without it, businesses cannot grow and reinvest in their operations, which includes labor. Thus, taxing the source of capital can slow growth and increase unemployment. The American economy thrives on capital input and the resulting increases in productivity is a rising tide for all.
The Obama budget is a far cry from tolerable. It increases government scope and size while failing to address our runaway spending problem. Keeping in bureaucratic form, the solution to these supposed ills will make the problem even worse. It is one of numerous examples where government is the problem masquerading as a solution. If we want better roads and economic growth, then we should get the central planners out of the resource-allocation mindset because, frankly, they aren’t very good at it.
Obama’s budget won’t make it very far in the Republican-dominant legislature and we will continue to see political grid lock. The Republican budget will likely be smaller, though relative to a drop in the proverbial bucket. Our coming fiscal year will likely be chocked full of shutdowns and fiscal cliffs. Maybe for now, until a new president is elected, gridlock is for the best.
About the Author:
Grant Phillips blogs at The Modern Libertarian and spreads the word of freedom on his Facebook page. As a self-proclaimed libertarian thinker, Grant applies libertarian principles to modern day issues. He is a gun enthusiast, avid golfer, and freedom ninja.
