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Defense "Savings" Mask $20.7 Billion in
New Domestic Spending, Analysis of President's Speech Shows

In yet another speech laden with "cost unknowns," President Obama proposed $20.7 billion in new spending, a price tag that could only be offset by substantial defense reductions and major tax hikes – that's the conclusion from the National Taxpayers Union Foundation's (NTUF's) line-by-line analysis of the 2012 State of the Union Address. NTUF has been conducting these in-depth studies since 1999.

"President Obama laid out an agenda that was more about ‘soldiers to subsidies' than ‘swords to plowshares,'" said NTUF Senior Policy Analyst Demian Brady. "Even as he reaps fiscal rewards from completed military missions – such as fewer borrowing obligations going forward – the President's domestic proposals continue to grow in their budgetary cost and burden on everyday economic activity."

Although the NTUF project focuses on federal spending in the President's speech, Americans will also be on the lookout for new taxes, including a 30 percent "Buffett Rule" tax, a minimum tax on multinational firms, and (yet again) repeal of commonly-used business tax provisions for only certain oil and gas companies. All could have serious consequences for the very same job creation, tax simplification, and international competitiveness efforts the Administration is touting. 

Among the findings of NTUF's study:

• President Obama proposed 18 items with a potential impact on federal expenditures: 3 that would reduce the federal budget, 8 that would increase it, and 7 whose effect was too vague to be estimated.

• The largest single cost was the President's infrastructure proposal. Based on his plans outlined in the American Jobs Act, the projects contained in this initiative would amount to over $11.07 billion annually.

• The President's defense plans would save $48.7 billion per year, a result of both conscious policy choices about the size of the military and windfalls from reduced involvement in Iraq and Afghanistan. This dwarfs the $380 million per year he offered in non-military savings. In short, for every dollar he hopes to save in domestic programs, Obama is counting on saving 128 dollars in defense.

• All told, the items mentioned in the President's speech would, if enacted at once, result in a net decrease of federal outlays amounting to $27.99 billion per year (again, attributable mostly to military program changes). 

• The President continued his trend of offering many proposals whose cost impact could not be sufficiently quantified. One example is his proposed "Financial Crimes Unit," which could mean significant long-lasting (but currently unknown) costs for taxpayers depending upon its structure. 

• Obama's request this year for "the authority to consolidate the federal bureaucracy" sounds much like his call in last year's speech to "merge, consolidate, and reorganize the federal government."

Prior to last night, the lowest total NTUF had recorded since it began the analysis project was President George W. Bush's address in 2006, coming in at under $1 billion in new spending. The highest was President Clinton's 1999 speech, which proposed $327 billion in higher outlays. Last year Obama's speech contained an annualized total of $21.35 billion in net new spending.

Brady concluded: "The ramping down of overseas military operations naturally leads to reduced expenditures, but the fact that these actions were mostly financed through debt, combined with the President's insistence on continuing to increase domestic spending, means taxpayers could see less in the way of traditional ‘peace dividends.' To answer this question more fully, taxpayers will have to see something else: whether the President's delayed 2013 budget will attempt to contain spending growth beyond the Pentagon."

Since 1991, NTUF has tracked the fiscal impact of proposed legislation through BillTally, an accounting database that reports the "net annual agenda cost" for each Member of Congress based on sponsorships and co-sponsorships of pending legislation. For this analysis, NTUF matched Obama's proposals with those in the BillTally system and in White House documents.

NTUF is the research affiliate of the 362,000-member National Taxpayers Union, a non-profit taxpayer advocacy group founded in 1969. Note: The line-byline analysis of President Obama's State of the Union proposal is available HERE.

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