My reactions to President Obama’s proposal for reducing the deficit were very much along the lines of those of the editors of the Washington Post:
The president is right, of course, that credible debt reduction requires a combination of tax increases and spending cuts, and it is unfortunate that Republicans have been unwilling to accept that fact. But a more fundamental sweep through the tangled underbrush of the tax code, as envisioned by the Simpson-Bowles report, would be an even better approach.
The other essential element of credible debt reduction is tackling the biggest driver of long-term deficits — federal health spending, particularly Medicare. Here Mr. Obama backed away from some of the entitlement reforms he entertained in his closed-door discussions with House Speaker John Boehner, including raising the eligibility age for Medicare and changing the way that Social Security benefits are indexed for inflation. Mr. Obama left Social Security entirely out of Monday’s proposal, and his Medicare savings ($248 billion over 10 years) once again primarily target providers. A White House fact sheet on the proposal brags that 90 percent of the savings come from “reducing overpayments” and that changes affecting beneficiaries do not begin until 2017 — after a second Obama term, if he is reelected.
The two point summary is that
- It isn’t big enough.
- It gives every impression of intentionallly DOA, political posturing.
We are presently, this very day, paying in interest on the debt about half of total revenue. In order to stabilize our deficit situation, i.e. merely maintain the debt at its present unacceptably high level, we need to cut about $6 trillion from the budget over ten years, AKA a half trillion per year. As an example of just how laughable the president’s strategy with respect to Medicare is, he’s proposing just over $40 billion a year in cuts from a program that’s growing by double that every year. We need to run twice as fast as that just to stay in the same place.
I’ll have more to say about taxes in a later post.
Keith Hennessey dissects the proposal even farther:
You could be forgiven for thinking that the President is claiming that his new proposals are balanced, and that “the larger plan that’s balanced” is what he has proposed this month, consisting of equal-sized spending cuts and tax increases. That is the incorrect conclusion to which you are led, but technically the President is not claiming that. The “larger plan that’s balanced” is one that includes spending cuts enacted over the past six months. The “among the biggest cuts in spending in our history” are not those newly proposed, but those previously enacted.
They are playing a word game to fool you, and if you listen carefully you’ll hear it repeated over the next few weeks. Team Obama knows they’d never win the public debate if they admitted that the President is now proposing massive tax increases to “balance” previously enacted spending cuts, so they’re engaging in a little misdirection.
In his introductory speech for the proposal the president said This is not class war, this is math.. I agree with the former and disagree with the latter.
It’s the assumptions, stupid.
Those assumptions are keeping our economy in the doldrums and pushing us to the verge of insolvency.