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Obama's Spending Plans - Can He Pay for 'Change'?

By Andrew B. Einhorn Feb 22 2008, 12:43 PM

Obama's big policy changes promised:

(1) $15 billion annual program to "establish a green energy sector,"

(2) $6 billion annual budget for a "National Infrastructure Reinvestment Bank,"

(3) Nearly universal health care plan (whose annual price tag he low-balls at $50 to $65 billion despite the fact Medicare and Medicaid costs nearly $600 billion annually) 

(4) A host of refundable tax credits ranging from $4,000 per year for college students to a tripling of the Earned Income Tax Credit for minimum-wage workers ($18 billion)

(5) $85 billion in middle-class tax cuts

(6) $25 billion increase in foreign aid

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TOTAL                          $214 billion

To finance these plans, Obama intends to: 

(1) End the war in Iraq ($100 billion annually)

(2) Permit the Bush tax cuts to expire for households earning more than $250,000 ($117 billion annually according to the Brookings Institution)

(3) "Change our tax code," which "has been rigged by lobbyists with page after page of loopholes that benefit big corporations and the wealthiest few." (Obscure plan of unknown value and unknown overall economic effect.) 

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TOTAL                        $ 217 billion (+/-)


Assuming that revoking tax cuts on the nation's employers won't push the economy deeper into recession and decrease tax revenues; and assuming Obama makes good on his pledge to bring the troops home immediately from Iraq, it looks like he can pay for his own plan.  However, even if the Iraq War is ended, it's highly doubtful a philanthropist like Obama would leave the Iraqis without a lifeline.  After all, the U.S. destroyed a good part of the infrastructure with smart bombs that we're now paying to reconstruct.  Why stop paying for our own damage just because out troops aren't there anymore?

It's likely Obama -- if elected President -- would provide $10-25 billion a year to the Iraqi government to pay for training and equipping Iraqi soldiers and police officers and rebuilding the country.  But the expenditure leaves a $10-25 billion financing gap. 

There may also be an economic ripple effect from ending the war.  After all, corporate revenues are high in the defense sector and that makes tax revenues in the sector boom.   If war spending decreases, corporate tax revenues will decrease in tandem.  Huge layoffs are also likely in government contracting firms, following an Iraqi pullout.  The layoffs could further erode consumer confidence and decrease stats and federal income tax revenues. 

So it appears he may be able to come close to paying for his plan; but what's to be done about the current $410 billion budget deficit or that pesky $9.6 trillion debt?  Not much, it seems.  

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COMMENT

concerned taxpayer
February 22, 2008 2:00 PM

This is complicated math. Don't muck it up by comparing apples and oranges - entitlement programs like Medicare and Medicaid are different beasts than a plan that merely subsidizes private insurance policies. I'm curious to know which candidate OhMyGov thinks would best serve its core readership - the federal employee?

 

         

 

 

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