COP: Prescription for Poverty

Ben Johnson
FrontPageMagazine.com | 3/25/2009

Barack Obama’s press conference last night claimed economic recovery is “inseparable” from a proposed budget that offers charity for none, malice toward many, and debt for generations to come.

In a conference replete with bad ideas, his most egregious proposal is reducing tax deductions for charitable donations. Currently, those in the top two tax brackets can deduct 33 and 35 percent of charity, respectively. Obama’s plan would reduce this to 28 percent, raising little more revenue than the AIG bonuses his Treasury team made possible. More than 40 percent of all philanthropy comes from those in the top tax bracket – the “one percent of the American people” Obama targets. One left-leaning think tank estimates the deduction reduction will reduce annual philanthropy by $9 billion.

When asked if his plan will reduce giving, Obama responded with a sermonette that, “If it's really a charitable contribution, I'm assuming that that shouldn't be the determining factor as to whether you're giving that $100 to the homeless shelter down the street.” But to let the naïf-in-chief in on a secret, sometimes the wealthy give to charity to reduce their tax burden.

The Bank of America found the wealthier a family is, the more income tax deductions affect their total philanthropy. It added in a December 2007 report, that 52.7 percent of “high net worth households” would give more to charity “if they felt more financially secure.”

Obama will not induce this feeling while selling the charity deduction as a piece of class warfare. Obama added that under the current system, if someone with an annual income of $50,000 gives money to charity, “he gets to write off 28 percent; I get to write off 39 percent. [Not quite. – Ed.] I don’t think that’s fair.” If that is his motivation, a more, well, charitable plan might call for increasing the bottom rate, rather than grinding the classes to the lowest common denominator. His logic serves as an eloquent call for a flat tax: if it is unfair for some Americans to get a larger percentage write-off than others based on income, certainly it is equally unfair for them to pay a greater burden?

Common sense proves an increase in demand for charitable services caused by the recession, plus an increase in the tax burden for those most likely to finance charities, combined with a disincentive to make contributions, will assure fewer private dollars are more finely spread over a larger clientele.

His is a prescription for poverty. It virtually seems designed to bankrupt charities and replace them with the dole.

Experts in the field have another proposal. The Non-Profit Times quotes two experts on giving stating, “when wealth is created, giving increases. If the president’s plan generates more wealth for Americans, then giving will go up.” There is a name for this economic principle: trickle-down economics. And President Obama has lambasted the concept for years, stating in a fall commercial, “Instead of prosperity trickling down, pain has trickled up.”

Obama’s Robin Hood economic plan will halt all economic progress downward to a trickle. He is squeezing the rich to “provide a tax cut to 95 percent of all working families,” albeit they are largely non-taxpayers. This largesse tops out at a whopping $400 per individual (with an adjusted gross income of less than $75,000) or $800 per family (with an AGI of $150,000) and will be carved into weekly allotments of $13, or $65 a month. By 2010, this drops to a piddling $7.70 a week, at which point Senate Democrats are content to let it die. By that time, Sasha and Malia can expect to receive higher weekly allowances, and the American people can expect to have nothing to show but greater indebtedness.

After touting his stunningly inept mortgage reform, he vowed to raise federal revenues by increasing the amount Americans must pay to stay in their homes. In the midst of a foreclosure epidemic, the president wants to reduce the mortgage deduction for the wealthiest Americans – the ones most likely to purchase one or more expensive homes. Some on the Right have argued the measure will no effect on future sales, but it negatively impacts those making payments on existing mortgages, contracted while the rules were different.

Although President Obama urged taxpayers to make “investments” in big government, he plans to find “savings” by capping deductions on business investment expenses and has called for hiking capital gains taxes, anti-business measures in an already adverse market.

…An adverse market made worse by his nonsensical cap-and-trade proposal. Although he showed flexibility about signing a budget without the measure, he told Jake Tapper, “I think cap-and-trade is the best [plan]…because what it does is it starts pricing the pollution that’s being sent into the atmosphere.” Such is a rationale long championed by his science adviser, John Holdren, and Holdren’s longtime collaborators, Paul and Anne Ehrlich. But who will pay that price? According to a recent report from the Tax Foundation, carbon taxes hit the bottom 20 percent of wage-earners three times as hard as most Americans, and five times harder than the wealthiest quintile. That is not news to Obama, who told the San Francisco Chronicle last year, “under my plan of a cap and trade system, electricity rates would necessarily skyrocket.” He acknowledged “That will cost money…they will pass that money on to the consumers.”

Although he promises “clean-energy jobs” will produce “broad economic growth,” the myth of green jobs is growing.

Obama trades in legends most explicitly when pledging to “cut the deficit in half by the end of my first term.” Since he is “inheriting a $1.3 trillion deficit” from Republicans, he apparently feels his adding another $9.3 trillion to the national debt over ten years is irrelevant. Obama’s $1.2 trillion deficit is nearly as large as the entire federal budgets submitted by his exemplar of fiscal discipline, Bill Clinton. Incredibly, Obama sold this plan as “moving from an era of borrow-and-spend to one where we save and invest.” After quadrupling the budget deficit this year, he plans to halve the deficit within four years – as have his last three predecessors – leaving us by his estimates with a budget deficit that is larger than any in pre-Obama history. (For perspective, last July Bloomberg News reported, “The U.S. budget deficit will widen to a record of about $490 billion next year.”)

Even this relies on overly rosy economic forecasts, fails to account for “temporary” spending (a Beltway oxymoron if ever there were one), and assumes no expansion of any program. All this is undermined by the fact that previous Congresses have had no luck in controlling future spending limits. And despite a nod to “reducing non-Defense discretionary spending,” he has proposed an 11 percent increase in non-defense spending.

His estimates also assume the $634 billion “health care reserve” will not increase by one dollar, a blatantly disingenuous move. When he announced the initiative, an administration official called it “a very substantial down payment” toward federalizing health care, adding, “We aim to get to universal coverage.” Obama is the Teddy Roosevelt of socialized medicine, sending the Navy halfway to its destination and daring Congress to cut its funding.

This budget is but a series of budget gimmicks. Correcting for these, federal budgets will consume a quarter of GDP within a decade, even with trillion dollar deficits. Sen. Judd Gregg noted Kent Conrad’s budget (which would phase out Obama’s $13/week tax cut) is similarly “a lot of gimmicks,” short on genuine savings.

This is particularly troubling, as Obama sang the praises of “an efficient health-care system that controls costs,” warned against “fattening defense contractors” (a favorite bogeyman of the Left) and concluded his prepared remarks with the collectivist exhortation: “when each of us looks beyond our own short-term interest to the wider set of obligations we have towards each other, that’s when we succeed.”

The president faced more serious questions than this author expected. Jennifer Loven of AP got the first question (fulfilling Michelle Malkin’s prophecy from October), which asked why he should be trusted with the power to seize firms like AIG.

But the award for strangest question goes to Kevin Chappell, Senior Editor of EBONY magazine, for asking: “With shelters at full capacity, tent cities are sprouting up across the country. In passing your stimulus package, you said that help was on the way, but what would you say to these families, especially children, who are sleeping under bridges and in tents across the country?”

He could always tell them, Don’t worry – I am working round the clock to make sure the wealthy will not get a disproportionate tax break if they contribute to your homeless shelter. Ben Johnson is Managing Editor of FrontPage Magazine and co-author, with David Horowitz, of the book Party of Defeat. He is also the author of the book 57 Varieties of Radical Causes: Teresa Heinz Kerry's Charitable Giving.