CBO Announces Staggering New Deficit Numbers; Bernanke Warns New Taxes Could Be Needed To Close Gap

Today, the CBO released its Monthly Budget Review for February and announced that “[t]he federal government incurred a budget deficit of $714 billion in the first six months of fiscal year 2010 . . . .” The deficit for February alone was $221 billion. For context, Democrats sold their health care bill partially on the premise that it would supposedly save $130 billion over the next ten years. But with the current pace of spending, that savings would cover only one month on average of the deficits being racked up by this administration.

Clearly this irresponsible fiscal situation is unsustainable. The Washington Post reports today, “Federal Reserve Chairman Ben S. Bernanke warned Wednesday that Americans may have to accept higher taxes or changes in cherished entitlements such as Medicare and Social Security if the nation is to avoid staggering budget deficits that threaten to choke off economic growth.” Bernanke said, “These choices are difficult, and it always seems easier to put them off -- until the day they cannot be put off anymore. . . . But unless we as a nation demonstrate a strong commitment to fiscal responsibility, in the longer run we will have neither financial stability nor healthy economic growth.”

Bernanke also said, “To avoid large and ultimately unsustainable budget deficits, the nation will ultimately have to choose among higher taxes, modifications to entitlement programs such as Social Security and Medicare, less spending on everything else from education to defense, or some combination of the above.” The Fed Chair’s speech comes just a day after former chairman and current Obama economic advisor Paul Volker said that “[t]he United States should consider raising taxes to help bring deficits under control and may need to consider a European-style value-added tax,” according to Reuters.

And taxes are already going up on many Americans to pay for Obama’s $26 trillion health care takeover, as the Los Angeles Times reports today. The LAT points out, “[F]or upper-income taxpayers, the tab for healthcare is just the beginning. Families earning more than $250,000 and individuals making more than $200,000 will not only pay new healthcare-related taxes, but also face the likely expiration of upper-income tax cuts enacted under President George W. Bush. As a result, these Americans could be tapped for about $650 billion in additional taxes over the next 10 years . . . .”

And yet the most significant proposals coming from the Obama administration and Democrats in Congress seem to be ways to tax even more, instead of finding ways to spend less. Many Democrats continue to call for passage of a carbon cap-and-trade bill, which would amount to an energy tax on almost every American.

The spending and deficits are out of control, but at a time of nearly 10% unemployment, raising taxes is the wrong idea. Stunningly, even The New York Times editorial page understands why more tax hikes hurt economic recovery: “As states try to close their deficits with tax increases, consumers cut back on their spending, which harms businesses and hiring.”

As Senate Republican Leader Mitch McConnell said in February, “The American people are deeply concerned by the amount of money politicians in Washington have been spending and they want us to get a handle on spending without raising taxes. After trillions in new and proposed spending, Americans know our problem is not that we tax too little, but that Washington spends too much . . . .”

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TAGS: CBO, Deficit, Ben Bernanke, new taxes
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