On Monday, President Obama submitted his budget proposal for 2012. It is the beginning of a process that will surely run up to the beginning of the 2012 fiscal year, which begins in October.
With the GOP controlling the House of Representatives, the President’s budget proposal might as well have been submitted via e-mail, saving the printing cost, as it has virtually no chance of passing Republican review.
In fact, House Republicans have already made it clear the budget proposal has no hope, calling it a massive failure, and rolling out the typical GOP standard lines of it spends too much and it taxes too much. As usual, the conservatives are predictable, but vocal and consistent. Every conservative legislator and pundit repeated the same message from almost the moment the budget proposal was released.
Knowing this, you have to wonder why the President wasn’t more aggressive with his proposal.
Obviously, he is establishing his hopes with this proposal. The Republicans will submit their proposal within six weeks of the President’s, meaning somewhere around March 28 we will see the Republican answer to the economic crisis we are in. Based on their response to the President’s proposal, it will be cuts in all programs and more tax cuts for the wealthy, because they are the ones who stimulate job growth.
Last year, if you recall, the republicans submitted a budget that had no numbers in it, a strange ploy, even for them.
The New York Times released a nice breakdown of each department and how it is impacted by the president’s proposal. You can see it here. Overall, the total expenditures went down about 110 billion dollars, while revenue is projected to go up about 450 billion dollars. That equals a net gain of about 560 billion dollars to the bottom line.
Unfortunately, it still leaves a budget deficit of 1.1 trillion dollars.
So how does this budget proposal help our current economic situation? If the President’s proposal were to pass as written, does it stimulate growth, reduce the debt, or even better allocate our resources where they could do the most benefit?
The answer is a resounding NO.
I have spent years creating and implementing budgets for companies, and although there are tough decisions to be made, it is by no means rocket science. When you draft a budget that shows a deficit, you have three choices to resolve that problem. You can raise revenue, decrease costs, or a combination of both.
It also must be understood that there are times in any business where deficit spending must be done to advance the business in one fashion or another. But doing it year after year means you are operating your business with fundamental flaws that must be corrected.
As the largest single employer in the country, cuts to departments will inevitably mean layoffs, since government programs are non-profit, meaning that the budget cuts aren’t simply affecting a profit margin. This creates concerns when you have an unemployment rate of 9% officially, but probably closer to 15% when you factor in the dramatically underemployed and those who have dropped off the unemployment roster, either by choice or by force.
The largest single expenditure lies in our military, with a total of approximately 700 billion dollars a year. It could easily be argued that aside from the toll of human life, the greatest impact of the “War on Terrorism” has been on our economy. You could also argue this was exactly what the terrorists anticipated and hoped for.
It is time to end the war and bring our troops home. It is time to stop funding corrupt governments who have no intention of changing how they operate, and have no incentive to see the war end, because when the war ends, so does our endless flow of money.
It is time we back away from our self imposed role as the world’s police and stay out of other people’s affairs. When you declare war on a tyrant, you only end up killing the victims of the tyrant. Howard Zinn made that statement, and they over 100,000 civilians killed in Iraq would validate that statement. Sure, Saddam Hussein is dead, and nobody is mourning, but to kill 100,000 people in order to eliminate one tyrant is a horrible ratio, not to mention that over 4,000 American soldiers gave their lives, and countless thousands more will live the rest of their lives with significant injury and/or emotional problems.
The Bush Era tax cuts, and specifically those on people who make more than $250,000 a year, cost us almost $400 billion dollars a year in revenue. It was easy to make these cuts at the beginning of the decade when we had a budget surplus and we were recovering from the attacks on 9/11. But the quickest way to create severe budget problems is to decrease your revenue and increase your expenditures.
From 1998 to 2001, the budget surplus totaled almost 560 billion dollars. From 2002 to 2008, the budget deficit was almost 1.7 trillion dollars. What changed so drastically?
Two wars, tax cuts that were not paid for, a reduction in tax revenue due to the economic crisis late in the decade, and the medicare drug plan, which wasn’t paid for and ultimately ineffective.
2009 and 2010 saw budget deficits of 2.7 trillion as we faced the same lack of tax revenue and two ongoing wars, but now we had to bailout the banks, the auto industry and the housing market, as well as make a remarkable investment in infrastructure to keep a recession from becoming a depression.
Republicans will almost certainly propose significant cuts to Social Security and Medicare/Medicaid, as well as assistance programs that help provide food, housing, and child care for the needy. The programs impact the people in our country most in need, and most unable to afford cuts to their programs.
At the same time, there will unquestionably be proposals to decrease the corporate tax rate, the capital gains tax rate, and a push for making permanent the changes to the estate taxes and the Bush tax cuts. These proposals would benefit those least in need of additional benefits.
Cutting the business tax rate for the company I manage will not push me to hire a single employee. It will simply improve my bottom line. It will not motivate me to buy new equipment for our company, or expand our advertising. All that will happen is it will increase our profit margin.
For corporations, this means bigger bonuses for executives and better returns for shareholders. It will not mean more jobs, or better value for the products they offer.
For any business, the single motivation to hire more employees is more customers. If people are buying more of my product or service, I hire more people to accommodate the need. If I am selling less, I hire less, or I may even reduce the hours of my current staff. If my tax rate goes up and my customer base stays the same, I maintain my staffing levels, as customers, not my tax rate, affects my hiring.
Lowering the corporate tax rate will not create an incentive for companies to return their manufacturing operations to the United States. The manufacturing operations were not moved because of tax rates. They were moved because labor can be exploited and standards can be lowered without penalty, making the product cheaper to make and increasing profit margins, which satisfies shareholders.
An American corporation can be located here without manufacturing a single thing in this country. A lower corporate tax rate just improves their bottom line.
When will progressives in Congress, or our President, stop caving in to the conservative trickle down rhetoric and make a stand for the people in this nation? If the President’s proposal is his starting point, and it will only be compromised further by conservatives who will do a far better job of selling their rhetoric to a naïve audience, how bad will the budget actually look when they are done with it?