The real issue that Obama hardly ever talked about during the election is spending. Raising income taxes on “the richest of the rich,” or even on those making over $250k, would raise about $42 billion per year according to my rough estimate. Let’s assume that increasing capital gains tax rates will add another $80 billion in revenue per year. With a deficit of $1.3 trillion, that’s just under 10% of our spending. Not exactly a drop in the bucket, but also nothing close to an effective solution. In fact, if Congress would have to double the income tax on every single American to come close to making up the current budget deficit.
Many will also say that ending the wars will decrease the deficit. Well, Obama ended the war in Iraq, and what happened to the deficit? It stayed exactly the same. Why? Because he simply used those funds elsewhere. And that’s his plan for Afghanistan, too. In his own words, he plans to bring our soldiers home from Afghanistan and use the money “to do some nation-building here at home.”
So what’s going to give? What needs to happen? The answer is simple: spending needs to be cut. Unfortunately, I don’t think anyone is confident that it’s going to happen under Obama.