National Tax Payers Union Tells C-Suite Insider—Price Tag of State of The Union: $21.349 Billion
President Obama laid out his agenda on aggressively cutting spending and measures on to grow the economy in his State of the Union Tuesday night.
The President praised the American worker and delivered these encouraging words," We know what it takes to compete for the jobs and industries of our time. We need to out-innovate, out-educate, and out-build the rest of the world." But what's price tag attached to this?
I decided to ask that question to Pete Sepp, Executive Vice President of the moderate, conservative group, the National Taxpayers Union who did a line by line cost analysis on how much the proposals included in this address would cost the American Taxpayer.
The National Taxpayers Union Foundation, (NTUF) the research affiliate of the National Taxpayers Union, broke down the numbers exclusively for C-Suite Insider. The NTUF uses the accounting database called BillTally, which reports the “net annual agenda cost” for each Member of Congress based on sponsorships and cosponsorships of pending legislation. The NTUF matched Obama’s State of the Union proposals with those in the BillTally system in White House documents and other third-party sources.
LL: The President is calling for fiscal reform, how much will the President's proposals cost the taxpayer?
PS: After reviewing line by line the total we calculated was $21.349 billion dollars.
LL: Based on your line by line analysis, how many proposals will boost spending?
PS: What I can tell you is out of the 15 proposals, five will increase spending, three will decrease it, and seven has indeterminate impacts. The single largest item Obama mentioned was increased “investment” in transportation infrastructure, which could amount to $50 billion in additional outlays. Other large initiatives included $1.35 billion in possible higher spending for the “Race to the Top” educational program. Some elements he offered last year such as the extension of a domestic discretionary spending freeze ($15.0 billion) and medical tort reform ($2.06 billion) could yield budgetary reductions for taxpayers.
LL: How many of these programs have a positive impact on job creation?
PS: Based on the overinflated expectations and underwhelming results of the stimulus package, it's highly unlikely that the new spending will have a long-term job creation benefit. Some of the cost-saving proposals, however, might help to stabilize federal finances and with it an economy that might be able nurse itself back to health.
The real job-creation potential is on the tax side, but here again the President is sending mixed messages. If done right, corporate tax reform has tremendous stimulus potential by unlocking tens of billions of dollars wasted on tax-filing costs, all of it without borrowing more money. On the other hand, his call for raising taxes on many small and medium-sized businesses in the top brackets could wipe out some or all of those job gains. This is made all the worse by the White House's continued attacks on energy producers, who would once again be punished by discriminatory tax hikes.
LL: Energy was also touched in the address. What are you expecting to see unfold as the budget is delivered?
PS: We're likely to see a contrast in the Administration's approach to energy policy (punish oil and gas with huge tax hikes, subsidize alternatives) compared to the House's (more market-based mechanisms. Look for major showdowns between both ends of Pennsylvania Avenue on this issue
LL: Based on your analysis, do any of the proposals delivered in the State of the Union- would they outweigh any savings on the freezing-cutting measures might provide?
PS: That $21 billion includes both the increase and decreases. But in the end, it is still a $21 billion dollar increase. We do include the freeze proposal in the numbers which translates into $15 billion dollars in savings a year.
To explain the spending freeze: the Administration is claiming $400 billion total in savings over ten years by first having frozen spending and then keeping it in place longer. We are counting the extension only as new savings, scoring it in a ten-year window, and then annualizing it. One interesting point the President made in the address was the remark he made about the defense cuts.
The savings is actually larger than what he said. The cuts save $15.6 billion. That shows you right there if you don't look at military spending as well, you won't get a good deficit reduction number. You need to look at defense spending as well.
LL: The NTUF has been tracking Presidential addresses since 1999. Which President has had the lowest track record?
PS: The lowest recorded total was President George W. Bush’s address in 2006, which came in at under $1 billion in new spending; the highest was President Clinton’s 1999 speech, which proposed $305 billion in new outlays. Bush’s first State of the Union speech, in 2002, racked up $106 billion in higher expenditures.
LL: Normally does the analysis of the Address and the reality of what happens hold true in terms of what is spent? Is the total tax dollars spent normally more or less?
PS: The trend among spending-increase proposals has been difficult to peg. During the first few years of our study, Bill Clinton rarely saw wholesale enactment of the laundry lists he recited to Congress. George W. Bush's spending-hike plans met with somewhat more success in the early part of his term, especially the spending was military and homeland-security related.
President Obama received some of the additional spending he wanted, but the major defeat for him was the failure of cap-and-trade, which would have meant more than $50 billion in higher expenditures. The trend for spending cuts has been somewhat easier to track—narrow interests among both parties in Congress often succeed in concentrating their pressure on just right points of the legislative process to thwart much of the savings Presidents propose. To give just one example, tort reform, which Obama mentioned last night, was a regular fixture of Bush's agenda.
LL: What did you think of the GOP response?
PS: There were certainly a lot more specifics in the GOP Response but there still remains a lot of open-ended questions on how aggressive the House will pursue defense reductions and are they willing to do entitlement changes. We saw that in the response which was encouraging but the real debate will come in two weeks when the budget comes out.
From what I have been told, the House budget document which will be released sometime after the President's, will be the most detailed and give an honest look at the accounting of the deficit problem as well as provide solutions.
It will be the most detailed budget coming out of the House in years. Taxpayers need to look beyond the words and look at the numbers when the White House releases its budget blueprint in a couple of weeks.
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A Senior Talent Producer at CNBC, and author of "Thriving in the New Economy:Lessons from Today's Top Business Minds."