I have no problem saying that Bush & Co. messed up big time, by allowing government spending to rise and by creating new government programs that will surely grow like topsy in the future. But Obama & Co. are doing their best to win the prize for outrageous abuse of the public purse. I think the market today is terrified of the prospect of a significant increase in the size of government and an attendant rise in tax burdens. "Cap and trade" promises to severely impact not only all energy-intensive industries, but our international competitiveness as well. Trade wars, such as the one just ignited today by Mexico's announcement of higher tariffs on 90 U.S. products in retaliation for U.S. restrictions on Mexican trucks, promise to escalate under cap and trade, since U.S. exports will suffer if carbon-based fuel costs rise here but not in other countries.
Brian Riedl of the Heritage Foundation has written an excellent summary of the details and consequences of Obama's budget proposals. Here are the main points, with a HT to Andrew Roth at the Club for Growth. Do read the whole thing.
During his presidential campaign, President Barack Obama promised the American people a "net spending cut." Instead, he signed a "stimulus" bill that spends $800 billion, and he has proposed a budget that would:These are the things that are depressing the market; this is the current source of the apparent crisis in the financial markets. If Congress can cut back on even just a few of these anti-growth, anti-free market and anti-capital measures, I think we would see a much faster resolution to our financial crisis.
• Increase spending by $1 trillion over the next decade;
• Include an additional $250 billion placeholder for another financial bailout;
• Likely lead to a 12 percent increase in discretion ary spending;
• Permanently expand the federal government by nearly 3 percent of gross domestic product (GDP) over pre-recession levels;
• Raise taxes on all Americans by $1.4 trillion over the next decade;
• Raise taxes for 3.2 million taxpayers by an average of $300,000 over the next decade;
• Call for a pay-as-you-go (PAYGO) law despite offering a budget that would violate it by $3.4 trillion;
• Assume a rosy economic scenario that few economists anticipate;
• Leave permanent deficits averaging $600 billion even after the economy recovers; and
• Double the publicly held national debt to over $15 trillion ($12.5 trillion after inflation).
• A new cap-and-trade energy tax that could devastate the manufacturing sector
For more on how, in his own words, Obama is anti-free market, see this article.