‘The rich’ can’t bankroll Obama’s big-government plans

Finally, a top Democrat has revealed the cost of following Barack Obama’s plans for the size of the federal government. Unfortunately, his name is not Barack Obama.

Instead, it was Obama’s former top economic adviser, Lawrence Summers, who painted the picture in an op-ed published by the Financial Times.

Now, to be fair, “the cost of following Barack Obama’s plans” is not how Summers put it. Rather, he referred to the cost of “preserving the amount of government functions the U.S. had before the financial crisis,” and he argued this future was inevitable whoever is president come 2013.

The problem with his assertion of inevitable government growth is that Obama and Mitt Romney are not proposing the same things.

It is Obama, not Romney, who argues such a level of government will somehow remain affordable. It is Obama, not Romney, who would have you believe any changes will affect someone else — usually “the rich.”

Still, Summers’ outline of how government would expand if left on auto-pilot is instructive, because it makes clear how untenable Obama’s approach is.

In brief, Summers estimates three leading contributors to larger government in the coming years (he does not use the same time frame for each element) and how much of our gross domestic product their growth would consume:

  • Social Security, Medicare and other programs for retirees, 5.6 percent of GDP;
  • interest payments on the debt, at least 1.5 percent of GDP;
  • inflation in the prices of government-provided services such as health care and education, 3 percent of GDP.

That’s a total increase of 10.1 percent of GDP, or more than $1.5 trillion in the current economy.

Who will pay for such growth? The only answer we’ve heard from Obama and the Democrats is “the rich.”

Let’s go back to 2006 and 2007, the last two years when federal tax receipts as a share of GDP were slightly higher than, and spending as a share of GDP equal to, their post-World War II averages. (I know, I know: That’s not what Democrats would have you believe about Washington’s finances in the age of the Bush tax cuts and wars. But it’s true.) Those were also peak years in terms of earnings by households reporting income of at least $1 million. What better time to soak “the rich”?

Obama’s “Buffett Rule,” named for famed investor Warren Buffett, who likes to talk about paying more taxes but never contributes more voluntarily, would ensure $1 million earners paid at least 30 percent of their income in federal taxes. Using IRS data, we can calculate whether the rule would have paid for the government growth Obama wants.

In 2006 and 2007, taking 30 percent from the $1 million-plus households would have yielded an extra 0.75 percent of GDP compared to what really happened — nowhere near Summers’ 10.1 percent figure.

Taking half of these households’ annual income would have yielded about 2.7 percent of GDP. If Uncle Sam had taken every penny these Americans earned, he’d have gotten 7.4 percent of GDP.

Taking all of their earnings is, of course, completely unrealistic. Certainly, no one would ever again make the mistake of earning so much money. Heck, even Hollywood might — might — abandon Obama and the Democrats.

Still, if Obama somehow pulled it off, the Buffett Rule would barely cover the increase in spending on retirees and interest. He’d still have to get nearly half a trillion dollars more from the rest of us just to pay for health care and education.

This reality is why Romney’s choice of Paul Ryan to be his running mate is so important to the country’s future. With Ryan in the race, Obama can no longer merely talk about narrowing the current budget deficit (which, at more than 7 percent of GDP this year, doesn’t even figure into the above calculations) or putting entitlements on sound financial footing. He has to offer a plan that comes to grips with the truths Summers pointed out.

Five trillion dollars ago, simple “hope” was a glib but effective slogan. Now it has to compete with much trickier “math.”

– By Kyle Wingfield

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385 comments Add your comment

SBinF

August 23rd, 2012
7:13 am

Taxes are as low as they have been since WWII. Government spending as a percentage of GDP is more or less the same as it’s been for the last 60 years.

Please Kyle, stop. Just stop! I’m not sure how you can even determine what the Romney/Ryan plan will do. They refuse to talk about it until after they are elected!

SBinF

August 23rd, 2012
7:15 am

You know Kyle, for the last several days, I feel as though you’ve been trolling your own blog. You arrive at the most harebrained conclusions using the flimsiest of evidence. I enjoyed your blog for a differing opinion, but it seems you’re unraveling along with Romney’s chances at taking the presidency.

Verbal Kint

August 23rd, 2012
7:18 am

Math will torpedo this administration. Simply raising taxes on the top 10% doesn’t compute but it makes the left feel better.

JDW

August 23rd, 2012
7:21 am

@Kyle…perfect example of the problem with Republican thought. Why on earth would you model 2006 and 2007, they were a budget busting failure. Look at 1997 to 2001 there is your starting point.

Thomas Heyward Jr

August 23rd, 2012
7:21 am

‘The rich’ can’t bankroll Obama’s big-government plans nor can the middle-class bankroll the R&D party’s neo-con world empire.
.
See…………….history and/or read Ron Paul.

Verbal Kint

August 23rd, 2012
7:23 am

“It is a paradoxical truth that tax rates are too high today, and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the tax rates…. [A]n economy constrained by high tax rates will never produce enough revenue to balance the budget, just as it will never create enough jobs or enough profits.” —John F. Kennedy, 1963

Numbers-R-US

August 23rd, 2012
7:24 am

Kyle,

Did you hear the news. The poor can’t afford to bankroll any more tax cuts for the rich and they shouldn’t be asked to sacrifice what little they have left–social security and Medicare and unemployment benefits, etc.–to fund more tax cuts. If the job creators are ever going to create those promised jobs, let them do it with the tax cuts they have amassed over the decades. Or is 13.9% still asking too much in your opinion.

Verbal Kint

August 23rd, 2012
7:28 am

Get Me Rex Kramer

August 23rd, 2012
7:28 am

SBinF, Romney and Ryan are clearly proposing what is inevitable – spending cuts. Obama does not want to cut anything, he wants to spend more. As someone who Obama considers rich and is not paying my fair share, I would actually be OK with higher taxes if I knew serious spending cuts would be made. However, the dems will never agree to this. They would just spend the money on more government programs that don’t work, and cost 10 times more than they were supposed to.

bob

August 23rd, 2012
7:31 am

SBinF, lower for whom ? Some pay nothing and receive welfare. earned income tax credit and other benefits that were not around at the time of WW11. Social Security alone has been raised from about 2% to 10.4%.

Bill

August 23rd, 2012
7:32 am

Yeah, the usual hacks are not here today. I guess that even they had trouble with Kyle’s “journalistic precision”.

Regards,

Get Me Rex Kramer

August 23rd, 2012
7:33 am

JDW, why would you use 1997 – 2001. That was the dot com boom, which was an unprecedented time in our economic history. You should use average years, because that is what you can expect to see over the long run. This is why you end up running defects, because you expect these huge growth years to continue indefinately, which is completely unrealistic.

bob

August 23rd, 2012
7:33 am

Numbers, please tell us how the poor have bankrolled a tax cut for the rich, they pay no federal tax as it is.

Lil' Barry Bailout - Vote American

August 23rd, 2012
7:34 am

Government spending as a percentage of GDP is more or less the same as it’s been for the last 60 years.
————

Wrong. Government spending exploded to around 25% of GDP on Obozo’s watch. It had been around 20% since WW II.

You thought you wouldn’t get called on that? Lame.

JDW

August 23rd, 2012
7:35 am

@Verbal Kint…”It is a paradoxical truth that tax rates are too high today, and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the tax rates”

In 1963 that was the problem. Todays problem is we went too far…

From Politifact

* A person making $2,500 a year in 1963 was taxed at 22 percent. Today that would be $17,445, taxed at 15 percent.

* A person making $5,000 a year in 1963 was taxed at 26 percent. Today that would be $34,890, taxed at 25 percent.

* A person making $10,000 a year in 1963 was taxed at 34 percent. Today that would be $69,780, taxed at 25 percent.

* A person making $15,000 a year in 1963 was taxed at 47 percent. Today that would be $104,670, taxed at 28 percent.

* A person making $25,000 a year in 1963 was taxed at 59 percent. Today that would be $174,450, taxed at 33 percent.

http://www.politifact.com/truth-o-meter/statements/2008/may/02/hillary-clinton/rates-were-a-lot-higher-back-in-the-day/

Lil' Barry Bailout - Vote American

August 23rd, 2012
7:37 am

It’s not about the rich bankrolling Obozo’s spending problem. It’s about getting even with folks who are more successful than your run of the mill parasite Democrat.

JDW

August 23rd, 2012
7:39 am

@Get Me Rex Kramer…”You should use average years”

Why model failure…you remind me of a study I once saw on sales people.

The average purchasing agent buys from a new rep after 7 sales calls.
The average sales person gives up on a new prospect after 4 sales calls.

Average = Failure

Lil' Barry Bailout - Vote American

August 23rd, 2012
7:40 am

JDW, rates were higher, and so were deductions. No one paid effective tax rates like the ones you listed.

Nice try though.

GT

August 23rd, 2012
7:47 am

When you went to college some guys were on scholarship others paid full freight. The guys on scholarship didn’t sink the economic boat of the college, they usually were there like that because they couldn’t afford the ride unless someone helped. A lot were academic, many were athletic, but it was usually decided on some talent the student brought to the school.

Republicans want to run this system backwards. The poor and middle class pay full freight and the rich get the free ride. Wouldn’t even mind that if the country was prospering but it is not. And a lot of the reason it is not is because of these rich people not reinvesting or creating. They are allowed to sit on the side lines or even out of this country and watch the rest of us drown. Seems to me a little pain felt when the rest of us are feeling pain is not a bad idea. Particularly since a good argument could be made for the reason this country is in the condition it is in is because of bailing some of these people out anyway ,scholarship for bad decisions, not much talent.

Get Me Rex Kramer

August 23rd, 2012
7:48 am

JDW, spoken like someone who is clueless on how to manage money and budget. I am an experienced and successful sales person, and I would never budget for my future assuming every year will be as good as my very best year. That is how people get into financial trouble in the first place, and it is no different for the government.

Sbinf

August 23rd, 2012
7:50 am

I would say that 20% is close to 25%. Especially given the crying from the right about ballooning government. 5% is a pretty small balloon.

Lil' Barry Bailout - Vote American

August 23rd, 2012
7:50 am

Interesting how Politifact presented the tax rates, as if someone making $17,445 today pays 15% of that in income taxes. The ignore that the tax rat on the first $15,000 of that is taxed at 0%.

Politifact: No libtard bias there! And look who fell for it–JDW.

iggy

August 23rd, 2012
7:52 am

Barry hates individual success. He wants everyone to be in the poor house so he can administrate our lives.

Lil' Barry Bailout - Vote American

August 23rd, 2012
7:53 am

5% of GDP is “small”?

Laughable. It’s a 25% increase!

You got caught in a lie.

gm

August 23rd, 2012
7:58 am

Lets take a close look at the 5 trillion, two wars that were unfunded, auto had collaps, billions when in to save other Americans jobs, oh I forgot the Rep did not believe in saving other Americans where plants were on the verge of closing.

How many time did we hear about a budget under the last administration? GW had a free hand on destroying this economy, poor Obama actually thought by saving other Americans who life were destroyed he would be looked as a concern President, when he learn no matter what he has done to bring this country out the toliet 75% of white males will always be resentful of him.

What a sick country””””

Joel Edge

August 23rd, 2012
7:58 am

“They refuse to talk about it until after they are elected!”

You have to elect them before we find out what they’re going to do. If it worked for Pelosicare, it works here.

independent thinker

August 23rd, 2012
8:00 am

And the 716 billion dollar lie about Medicare continues on among the sheep and ignorant right wingers. How does 716 billion dollars in cost savings enacted by Obama in a program where the GOP gives away billions of dollars to buy votes in 2003 with free drugs become a theft from the elderly????Yeah keep those lies and medicscare coming. Show me how Mr. Romney will pay for nursing home care for the elderly baby boomers if he plans to cut back Medicaid besides throwing them on the street.What is the plan?

Liberal Pariah

August 23rd, 2012
8:05 am

The Bureau of Labor Statistics will report its August unemployment figures, the next-to-last report before the November election, on September 7th, about the time many people start giving the election serious thought. It’s been said that the campaign doesn’t start until after Labor Day. With Gallup reporting last Friday that 1 in 4 American workers are either unemployed or underemployed — not counting the millions of folks who’ve given up looking for work — how’s that hope and change workin for the guy who said he’d be a one-termer if he didn’t fix the economy. Or would be if it’s reported by the MSM who is shilling for him.
It’s about the economy stupid!!! And Obama has not only failed, Liberals can’t even tell you what his plan is.

An Observer

August 23rd, 2012
8:06 am

The economy is terrible. Let’s just go ahead and kill it to put it out of its misery.

ktbl

August 23rd, 2012
8:10 am

There is a few things that all of our elected officials already know. First, they sit and watch the economy grows right under their nose; but their pay can support them and their family. Secondly, you and I have to struggle to ensure our bills and families responsibilities are taken care of on the small amount we are paid; Third, when you have rich…..looking to get rich and paying no taxes, we foot those bills because they get everything free and it is much better on our dime. Fourth, we are paying for everybody else mistakes regardless if you know that or know, it is just like parking on the streets, the law says that you have to park somewhere so the streets is the place. Now to comment on everyone else opinions, it do not matter who win the office of the President, because already it said that our current President has not done enough for this economy, he fail in so many areas; Romney will repeal everything include healthcare so we would be right back where we started; then, we are killing ourselves, we make things so expensive and put them out of reach for so many until people merely sit on their hard earn cash; we are fighting gas prices which we should not but you don’t see anyone stepping in to change things; as I said, we are our own worse enemy because we know our own government whom we pay taxes to don’t step in to help you nor me so why are we making bad opinions or statements about those in offcie when we elect them back into it over and over again! I am not stupid knowing that when we can’t even purchase food here in america when we have so much of it……I look at the greed that is behind it, we are paying to much to live here in America when it should have to be that way. New York, California, Virginia etc., where people are pay8ing so much to live……and when the businesses you are employed with fire, lay you off or cut back, that say’s a lot about the America way of life we live in. It is all about being rich and the greed that cause us to hurt ourselves especially in the direction we are living in. I don’t blame anyone for being the way they are; we have been tricked over and over again about our state and federal government; they only want to take from us and rather then give back or help……..we have not gotten that at all but a continuation of our taxes that they tries to always take form us! No matter who you want to take office, I think you better start thinking how you and your family are going to make it; because its going to get worse before it get better and if it is all about money; spending while those who are elected into office, that too, kills the notion that we are moving forward………someone has to repay that money back and its going to be us!

SBinF

August 23rd, 2012
8:10 am

“5% of GDP is “small”?

Laughable. It’s a 25% increase!

You got caught in a lie.”

Over 70 years….really?

Liberal Pariah

August 23rd, 2012
8:10 am

Every time Obama mentions Bain it just reminds people that Romney has actual fiscal experience. Maybe if Obama had spend some time at Bain instead of organizing the community, he might have an idea of how to fix things. And by the way, he did not save the auto industry, he saved the unions that supported him. GM is still in big financial trouble and the US will lose around $25 billion on Barry’s big save.

SBinF

August 23rd, 2012
8:12 am

Ryan might have a bit more credibility if he had not voted for all of the things that increased the deficit. Where was this “deficit hawk” during the Bush administration? It seems the only time Republicans care about spending is when there is a Democrat in the White House.

Still waiting on Ryan’s plans. How will he overhaul the tax system? What deductions does he plan to scrap? It’s anyone’s guess….he refuses to answer these questions before the election. We should simply trust him. Yeah, fat chance….

Liberal Pariah

August 23rd, 2012
8:14 am

Obama has refused to give us a plan OR A BUDGET for 4 years now. Where’s the Liberal outrage??????

I Report (-: You Whine )-: mmm, mmmm, mmmmm! Just sayin...

August 23rd, 2012
8:15 am

Aahhh, yes, but the fatal condition will be

A president who mismanages the federal budget the way Obama does cannot be expected to manage his campaign budget much better. Lavish spending, it turns out, is a way of life for the community organizer who became our 44th president. Lavish spending on Campaign 2012 will be looked back on and seen as one of the campaign’s greatest weaknesses. He can spend the money, but my guess is he will not be able to raise it.- AmSpec

No, he won’t, but he’ll steal it from the Treasury. You might want to check out what I’m sayin before all the money is gone.

Liberal Pariah

August 23rd, 2012
8:16 am

If you voted for Obama to prove you’re not a racist in 2008, you’d better vote for Romney in 2012 to prove you’re not an idiot”

Verbal Kint

August 23rd, 2012
8:16 am

Why are you waiting on “Ryan’s Plans”? Is he running for President? That’s like me asking where is Biden’s plan (other than opening his mouth and sticking his foot in it)

gm

August 23rd, 2012
8:19 am

Help me to understand this? if I am between the ages 40-55 and have been paying in to medicaid all my life, when I reach 67 you are going to give me a vocher thats only worth around $1500 and I am responsible for the rest, but yet I have paid thousands in the program over 20 years.

Only a spoil rich bratt like Paul Ryan can come up with this, poor, middle class whites on the right can not be this naive, I would not care if Obama was green, I am backing who is protecting my interest””””’

Verbal Kint

August 23rd, 2012
8:21 am

“Spoil Rich Brat like Paul Ryan” – Really? Did you know that 7 out of the top 10 richest people in Congress are……Gasp….Democrats?

Numbers-R-US

August 23rd, 2012
8:21 am

Numbers, please tell us how the poor have bankrolled a tax cut for the rich, they pay no federal tax as it is.

Through all the taxes they pay in those jobs that the job creators have created thanks to those Bush tax cuts. DUH!

SBinF

August 23rd, 2012
8:22 am

“Why are you waiting on “Ryan’s Plans”?”

Romney picked the guy. He chose to make this an issue. Romney’s plan is Ryan’s plan. The two are inextricably linked.

I Report (-: You Whine )-: mmm, mmmm, mmmmm! Just sayin...

August 23rd, 2012
8:23 am

The money quote -

Mr. Obama is casting his net for the moron vote. I do not believe that there are enough morons out there to reelect him. – AmSpec

Tax the rich, war on women, grandma over the cliff, here moron-moron-moron, gotchya!

SBinF

August 23rd, 2012
8:24 am

The war on women….lol.

Todd Akin is a democrat plant…is that what you’re arguing?

UIC

August 23rd, 2012
8:24 am

What right wing organization is paying you to write this stuff? If you cannot advance the discussion with a reasoned article, don’t bother. If I wanted to hear the opinion of fox news, I’d turn on the TV.

George P. Burdell

August 23rd, 2012
8:25 am

The idea that government spending has stayed the same since WWII is ridiculous. Since 1949, which is when spending got back to normal following the WWII buildup, government spending has increased by a factor of 90. GDP has increased by a factor of 57. If government spending had stayed at the same level, it would currently be at about 2.3 trillion, not 3.5 trillion. Now why does that 1.2 trillion number seem so familiar when we are talking about deficits?

MiltonMan

August 23rd, 2012
8:26 am

“Republicans want to run this system backwards. The poor and middle class pay full freight and the rich get the free ride.”

Good God. GT is in full ignorance mode. Majority of college scholarships today are need-based and not merit-based. This does not include the “poor” (i.e., APS educated) who show up at college doorsteps and can barely read, write or conduct simple math problems – therefore needing remedial training.

kayaker 71

August 23rd, 2012
8:26 am

Bozo’s economic recovery is a joke. We are still at over 8% unemployment and have been for 42 straight months. Our growth rate is stalled at an astounding 1.5%. We have accumulated a debt of over 5T dollars in the last 4 years. More homes underwater, more foreclosures,,,,,,, does this sound like recovery to you? The only ones stupid enough to believe him are his Democratic sheep. It ain’t working, libs. It never has.

SBinF

August 23rd, 2012
8:27 am

And why call people with whom you disagree morons?

Obama carries the college educated vote by a hefty margin. I guess all that book learnin’ and those folks with undergraduate and advanced degrees are morons?

Why not just disagree without hurling insults? I’m hardly a moron, and I plan to vote for Obama. I graduated from a tier I research university, and am currently pursuing an advanced degree. Am I still a moron? I work a job (and another on the side), pay taxes, and contribute to society…yet my support for Obama makes me a moron intrinsically?

independent thinker

August 23rd, 2012
8:31 am

In 2005 the cost for the Medicare Part D give away passed by the GOP and Bush was estimated to cost over 1.2 trillion dollars in ten years. There was no funding source. Guess how mr. Deficit Cutter from Wisconsin voted?
http://www.washingtonpost.com/wp-dyn/articles/A9328-2005Feb8.html
Please explain how this is Obama’s fault.???????????????????

Liberal Pariah

August 23rd, 2012
8:32 am

Must be the indoctrination factor for the college educated cited here. It is not education but ignorance that would allow someone to support the epic failure that this President has been.