Thursday, February 26, 2009


GlobeandMail - President Barack Obama's plans to tax the rich and dirty energy to bankroll universal health care ignited a furious budget battle with Congressional conservatives yesterday.

“The era of big government is back, and Democrats are asking you to pay for it,” said John Boehner, an Ohio Republican and the minority leader in the House of Representatives.


Mr. Obama's $3.55-trillion budget – really only the opening shot in a Capital Hill battle that will takes months of wrangling before its over - projects the deficit will soar this year to $1.75-trillion, a staggering 12-per cent share of the national output and a level not seen since the end of the Second World War. With hundreds of billions committed to a stimulus, the deficit is now projected to be more than three times last year's $455-billion.

Mr. Obama's first budget was immediately - and predictably - denounced by leading Republicans as a wrong-headed, tax-and-spend remedy that would wreck an already-reeling economy and cripple generations with staggering debts.

“We've just got to admit it,” Mr. Boehner said. “We're broke, and we can't continue to pile debt on the backs of our kids and grandkids.” The White House insisted otherwise, claiming that only the richest five per cent of Americans - roughly considered to be households making more than one-quarter of a million dollars or more annually - would pay more taxes while the other 95-per cent would pay less.

“What the president has enumerated in his budget today is precisely the blueprint and series of promises that he made over the course of two years in a campaign and that the – the American people voted for,” said White House spokesman Robert Gibbs.

With solid majorities in both houses of Congress, the president will likely have little trouble rolling back Bush tax breaks. But bitter fight can be expected over efforts to cut such entrenched spending as agricultural subsidies.

And Republicans in both the Senate and the House of Representatives were already painting Mr. Obama has another ‘tax, spend and borrow' liberal.

The president want “hardworking American families and job creators turn over more of their hard-earned money to the government to pay for unprecedented spending increases,” said Mitch McConnell the Republican leader in the Senate.

PhotobucketMr. Obama's budget also heralded what may be a new era in American tax policy that has seen the gap between rich and poor widen steadily. After three decades of overall tax-cutting, dating back to former president Ronald Reagan, the Obama budget proposed steep increases in tax loads for the rich matched by tax cuts for everyone else. The tax cuts for middle-income and poorer Americans would be bigger than those introduced by George W. Bush or Bill Clinton while the tax hikes on the rich would be far larger than the modest increases Mr. Clinton imposed.

The White House said it planned to shift the “tax code so the wealthiest pay more.” Mr. Obama said “we'll save billions of dollars by rolling back tax cuts for the wealthiest Americans, while giving a middle class tax cut to 95 per cent of hard-working families.”

While the president also promised to cut wasteful government spending – a promise often heard and rarely delivered in Washington – the other huge shift will be Mr. Obama's plan to collect billions weaning America off coal and other fossil fuels.

It was clear a battle was brewing over the massive revenues Mr.

Obama's expects from a cap-and-trade on carbon emissions.

Conservatives lampooned Mr. Obama's claim that his tax changes would only hurt the richest Americans.

“Let's just be honest and call it a carbon tax that will increase taxes on all Americans who drive a car, who have a job, who turn on a light switch, pure and simple,” Mr. Boehner said. “They use this carbon tax as a way to fund all of their big government ideas.” The president said America's “future depends on our ability to break free from oil that's controlled by foreign dictators.” The budget projects hundreds of billions will flow into federal coffers from fees on carbon emissions over the next decade.

Canadian oil, including heavy oil from carbon-laden tar sands, not oil from Middle Eastern authoritarian states, are the largest single source of U.S. oil imports.

The massive and growing revenue stream - mostly collected from corporations - on carbon levies, will help fund healthcare coverage for everyone. Currently an estimated 50-million Americans have little or no healthcare insurance.

Mr. Obama stressed it was a priority to “give every single American quality, affordable healthcare” although there is no plan for a single-payer, government-run, system like Canada's.

The budget sets spending at 3.6-trillion for 2010 - the fiscal year begins Oct 1. Yesterday's package amounted to a 140-page summary of the Obama administration spending and revenue plans with details to be fleshed out over the next two months.

He also claimed that his budget would usher in a new era of honesty and transparency in government spending.

“For too long, our budget has not told the whole truth about how precious tax dollars are spent,” Mr. Obama said. “Large sums have been left off the books, including the true cost of fighting in Iraq and Afghanistan. And that kind of dishonest accounting is not how you run your family budgets at home; it's not how your government should run its budgets either.” Healthcare remains the centerpiece of Mr. Obama's budget, just as it was the fundamental plank of his domestic political platform during he election campaign.

“We are making a historic commitment to comprehensive health care reform,” he said. “It's a step that will not only make families healthier and companies more competitive, but over the long term, it will also help us bring down our deficit.”