There has been a lot of chatter about Barack Obama's recent interview with CNBC's Maria Bartiromo in which he called for a near doubling of capital gains taxes. But I also thought this part was interesting, where Obama talked about possible spending cuts:
Oh, you know, there are probably some weapons programs that I think are not serving our national security interests that need to be examined, and we've got to do an audit there. There are reforms that need to be made in our purchasing processes, where—simple things, you know. If we actually made sure that every government employee had a single, you know, debit card or credit card, then negotiated with large purchasers to get the discounts that any other large purchaser would get, we could lop off 10 percent of some of our major purchases by the federal government. Our travel allowances and expenses are a major problem. We could save several billion dollars just in how we set up government travel. So there are a whole bunch of areas where we can make some significant savings.
My take: In a $3 trillion federal budget, that's it, that's all the fat—just defense and some procedural changes. How about limiting discretionary spending growth to inflation minus 1 percent or such? Oh, and on the subject of taxes, don't think Obama will wait until the 2001 and 2003 tax cuts expire in 2010. As this piece of political analysis from JPMorgan Chase points out:
Is it possible to repeal Bush tax cuts before 2011? Yes! The Democrats have not been able to touch the tax cuts as the Republicans have had two lines of defense. First the Republicans with 49 members of the Senate have more than enough votes to sustain a filibuster that can continue with as few as 41 Senators. Secondly, the President has the votes to sustain any veto should Congress pass a repeal of his tax cut initiatives. However, if there is a Democratic presidential victory this year, there is a way the cuts could be changed in 2009.... What if Obama or Clinton wins? Opposition to the Bush tax cuts, especially those favoring the wealthy, has been a linchpin in Democratic political rhetoric. Furthermore, both Democratic presidential candidates are committed to working with the Democratic Congress on large spending programs ranging from health insurance to infrastructure projects and education.... To fund some of these programs, I think the chances are very high that some of the revenue will come from a Reconciliation Bill that increases the top rate back to 40%, has the capital gains tax revert back to 20% and increases the current 15% rate on dividends.