Every dollar of debt he runs up means that future taxes must be $1 higher in present-value terms. Mr. Obama is going to leave a discounted present-value legacy of $6.5 trillion of additional future taxes, unless he dramatically cuts spending. (With interest the future tax hikes would be much larger later on.) Call it a stealth tax increase or ticking tax time-bomb.
What does $6.5 trillion of additional debt imply for the typical family? If spread evenly over all those paying income taxes (which under Mr. Obama's plan would shrink to a little over 50% of the population), every income-tax paying family would get a tax bill for $163,000. (In ten years, interest would bring the total to well over $200,000, if paid all at once. If paid annually over the succeeding ten years, the tax hike per year would average almost $26,000.) That's in addition to his explicit tax hikes. While the future tax time-bomb is pushed beyond Mr. Obama's budget horizon, and future presidents and Congresses will decide how it will be paid, it is likely to be paid by future income tax hikes as these are general fund deficits.
We can get a rough idea of who is likely to pay them by distributing this $6.5 trillion of future taxes according to the most recent distribution of income-tax burdens. We know the top 1% or 5% of income-taxpayers pay vastly disproportionate shares of taxes, and much larger shares than their shares of income. But it also turns out that Mr. Obama's massive additional debt implies a tax hike, if paid today, of well over $100,000 for people with incomes of $150,000, far below Mr. Obama's tax-hike cut-off of $250,000 (over $130,000 in ten years and over $16,000 a year if paid annually over the following ten years). In other words, a middle-aged two-career couple in New York or California could get a future tax bill as big as their mortgage.
Feelin' all hopeychangey???
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