Under the proposed budget, spending at Congress's discretion would decline, from $1.4trillion to $1.38 trillion. But with rising interest, Social Security, Medicare and Medicaid costs, total government spending would rise by $85 billion, to $3.76 trillion, reports WSJ.
The costs of war in Afghanistan and Iraq—budgeted as "overseas contingency operations"—are projected to increase by $46 billion over 2010-2011, above expectations contained in last year's budget.
In all, the president's budget would add $8.5 trillion to the federal debt through 2020, pushing the debt as a percentage of GDP to 77%, up from 53%. This is nosebleed levels. WSJ reports:
Kenneth Rogoff, a Harvard University economist who has studied other countries' experiences, says that level could push the U.S. toward a tipping point where interest rates could soar, the value of the dollar could plunge and the economy could face another crisis.This growth in debt is despite Obama calling for higher taxes in his budget.
"We will hit a point where it comes on us very quickly, and you don't want to edge up to that point," Mr. Rogoff said. "Going beyond 80%, you're taking a real chance."
The budget plan calls for nearly $1 trillion in tax increases on upper-income families—largely through allowing Bush tax cuts to expire. Banks, bankers and multinational corporations would face new fees and levies. And oil companies would lose $39 billion in tax breaks, according to WSJ.
The two top income-tax brackets would rise to 36% and 39.6% from 33% and 35%. For families earning at least $250,000, capital-gains and dividend tax rates would rise to 20% from 15%.
Not even Keynesians call for tax increases during a recession. This is simply a big government budget that uses the heft of big government to step on the body of anyone who is successful and drains a little more blood to grow the government beast.