Budget Blow Out

Obama's publicized his budget plan this morning. If left unchanged, it would send the deficit to $1.56 trillion. His economists used a 5.7% increase for the current budget year and forecast that spending would rise another 3% in 2011 to $3.83trillion. I'm not suprised that Obama still believes that we can spend our way out of this recession, but I didn't think he would propose raising taxes before we were out of the woods, as he and his advisers have repeatedly said they would not do. So, what's in this brick of a budget exactly? His budget proposed tax cuts for small businesses, including a $5,000 tax credit for hiring new workers this year. This seems to provide a tangible incentive for small businesses to hire. However, on the flip side, his budget contains a provision to allow the Bush tax cuts to expire on the wealthiest Americans, or those making more than $200,000 (individuals) and $250,000 (couples) annually. Since small business owners generally fall into these categories, any hiring credit will be dwarfed by the increase in taxes small business owners must pay, which will cause them to abstain from hiring. Obama's budget also factors in the nationalized healthcare system he so desperately lobbied for last year. There are rumors that Obama is pushing Pelosi to ram it through the House by promising members that the Senate will vote for changes later through reconcilation, but all of this seems unlikely now, despite his persistence. I would imagine we'll see this stripped from the budget at some point, which would have to reduce the amount of bloat significantly. Obama also included a proposal to levy a fee on the country's biggest banks to raise $90 billion to recover losses from the government's $700 billion financial rescue fund. Of course, this won't cause banks to hand out smaller bonuses. It will cause them to levy higher and more fees to customers.