No, I am not asking whether President Obama is trying to sell his old Senate seat. What I am talking about is former Governor Blagojevich’s fiscal irresponsibility. When Rod Blagojevich ran for governor of Illinois in 2002, and then for re-election in 2006, he promised he would not raise the state income tax or the state sales tax. And he didn’t. He opposed all attempts to raise either one of them. The only problem (well, not the only problem) was that the fact he wouldn’t approve an increase in these taxes did not stop him from proposing all kinds of new programs – and spending money like a drunken sailor.
The way Mr. Blagojevich was able to do this, was to take an old Illinois trick and carry it further than it had ever been taken before. It was actually very simple. He’d establish new programs or expand old ones, get people to perform services for the state, and then not pay them for a long, long time. In effect, the state was borrowing money from the people who performed services for the state, like doctors who took care of Medicaid patients, social service agencies who helped the poor and needy, and hospital emergency rooms who served poor people without insurance. They’d perform the services, but the State would not pay them for months and months.
Of course, this had been done before in Illinois, especially in bad economic times. But former Governor Blagojevich turned it into an art form – and he did it during the good times of 2003-2007. It was appalling. But it didn’t seem to bother him. He just kept spending and spending – and then delayed and delayed payments, figuring, I guess, that he would get the credit for both the new programs and not raising taxes – and his successors would pay the bills.
That is like what is happening in Washington. We are already spending a lot of money (and tax collections are down) because of our financial and economic problems, but it is not stopping President Obama from proposing even more spending. (It is not the stimulus program and programs to save the financial system I am talking about here. I am not sure the stimulus program or things like "cash for clunkers" are good ideas, but that is a different question, not for this post.) What I am talking about is all of the new programs that President Obama is proposing.
What President Obama is doing in Washington is a lot like what former Governor Blagojevich did in Springfield. As I said, former Governor Blagojevich promised he wouldn’t raise the income tax or sales tax, which meant he was very limited in how he could raise the revenue to pay for his programs. He did propose a gross receipts tax, but it was rejected in the legislature almost immediately. But the fact he couldn’t find the revenue, didn’t stop former Governor Blagojevich from continuing to push for more and more spending.
Which is very similar to what President Obama is doing. He made a big campaign promise that he would not raise taxes on 95% of the people, sort of like former Governor Blagojevich’s promise not to raise the income tax or sales tax. The Obama administration did come up with a couple of ideas to raise revenue. Their cap-and-trade program for CO2 emissions was going to sell permits to emit CO2. That would have raised lots of money. Also, they proposed limiting the amount that the "rich" could deduct for charitable deductions. The only problem was, just like former Governor Blagojevich’s gross receipts tax, both of these ideas went down in flames. In order to get the cap-and-trade bill passed, the House had to give away permits to emit CO2 instead of selling them. And the Senate shot down the President’s idea to limit deductions on charitable contributions.
There was one idea that would generate a substantial amount of taxes and would actually be a step in the right direction of reforming health care. The idea was to put a tax on really expensive health care plans. If your health care program was one of those gold-plated plans that covered everything and, in effect, encouraged people to overuse health services because they did not have to pay for anything, then, to the extent that the plan cost your employer more than an fair, average plan, the extra cost would count as income and you would have to pay tax on the extra.
This idea makes economic sense and it furthers reform (by making people take some responsibility for their health care spending), but during the campaign then-Senator Obama claimed that a program John McCain had suggested, which had some of these features in it, was a tax increase on the middle class. That was just not true, but President Obama can’t support this idea now because it would look like he was going back on a campaign promise.
So, there will be no new revenue (or at least not nearly enough), but has that stopped the President’s ideas for new programs? No. He keeps plugging away on them anyway. And he can do this because he can do one thing that former Governor Blagojevich could not do. President Obama can borrow money on the credit of the United States government – or even print it, if necessary.
And if you look at the recent projections the White House has issued for future deficits, that is exactly what he is doing. According to an article in The Washington Post late last month:
"As a result, government spending on social programs will continue to soar while tax collections lag behind previous expectations. Deficits are likely to remain elevated even after the economy recovers, averaging more than $800 billion a year through 2019, when the White House forecasts that the annual gap between spending and revenue will be $917 billion.
All told, the White House predicts that the nation will have to borrow an additional $9 trillion over the next decade to finance the annual deficits, driving the accumulated national debt to nearly $23 trillion in 2019 -- or 76.5 percent of gross domestic product, the highest since 1950."*
Spend and spend, even though you can’t or won’t raise taxes to pay for the spending; and let your successors worry about the future. Sounds like Rod Blagojevich; sounds like Barack Obama.
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* The language in the link I show here is somewhat different than what I quoted. The link is to a later version of the article. I have a printed copy showing what I quoted.
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