Wednesday, October 5, 2011

Obama's budget plan - FAIL

Obama unveiled his job plan with a great rhetorical performance on Sept. 8, and promised a deficit reduction plan for Sept. 19. The job plan didn't live up to its roll-out, and neither does the deficit reduction plan.

Now, I have to admit my bias, in case you haven't figured it out from my blog so far. I'd like to see a balanced budget within ten years, so I'm going to be critical on anything substantially less than that. I'm going to be on the lookout for funny numbers. Obama's plan triggers some of my alarms.

Obama has debt maxing out at 77% of GDP. That's odd, because I thought it was 100% already and heading higher. He counts only public debt, not what government owes to itself (SS and Medicare funds, probably federal reserve money too).

Cuts are modest at best:
  • $257 billion from mandatory spending, mostly cuts in agricultural subsidies
  • $248 billion from Medicare
  • $73 billion from Medicaid
  • Various other small cuts: post office, federal pension contributions, raising certain fees
  • $1 trillion savings from not having wars
  • Total $1.5 trillion above the $1 trillion in the August debt deal
These are ten year numbers. Divide everything by 10, then tell me that cutting $25 billion per year from Medicare is going to be enough savings.

Even the best part of the plan, tax reform, is less than it appears. Obama plans to let Bush cuts expire for >$200,000 people and reduce deductions for them. That will bring in about $1.1 trillion. The plan also closes various other loopholes for a total of $1.5 trillion.

The reform plan includes talk about "measures to broaden the tax base." This is a current Republican talking point. Perhaps Obama is trying to defuse it, but his use is somewhat misleading. A few more households may be taxed due to closing loopholes in personal income tax. Most of the broadening will be from cutting business tax loopholes. Not a bad idea, and actually a good critique on "broadening the tax base."

This plan will appeal of the left wing of the party, but probably not many others. Having even more people heading to the edge of a party isn't a good prescription for the country, and I doubt that it'll save Obama's reelection prospects. I don't see signs that his "Pass the bill" demands appeal to moderates or independents. It looks like Democrat grandstanding, which is no more charming than Republican grandstanding.

That's too bad, since both the jobs bill and this plan have some good, specific ideas. It's too bad Obama felt he had to go big, but didn't have enough high-quality options to offer.

I can add this budget plans to the other ones I didn't like, such as Rand Paul's and Paul Ryan's. This is better than those, but not as good as Simpson-Bowles, which is the best I've seen so far.


Anonymous said...

All "plans" depend on assumptions, which can be right or wrong, but almost always taken to place the plan in the best light possible.

If we suddenly discover some new technology that dramatically lowers energy costs, we can balance any budget, probably without any detriment.

Of course, we could also tax the uber-wealthy back to being just super-wealthy, and the super-wealthy back to just filthy rich, and balance the budegt that way. Take them down one more step and we'd eliminate the debt, too.

Does that plan satisfy you?

ModeratePoli said...


If we were at war or our survival as a nation required it, I'd have no problem taxing the wealthy heavily. But that's not the case. We actually have squandered a lot of money, and we aren't close to fixing that yet. So we can soak the rich now, keep spending too much, tax them a lot more again, and still not fix the underlying problem.

As for how much money we'll need to get from the rich, you should do some research. How much would we have to tax the rich to eliminate our deficit? You suggested it, so back it up with some numbers!

I think taxing the rich at 50% is unfairly high, 40% is very high. You also have to answer the question about our increasing budgets, and whether the solution is always going to be to increase the taxes on the rich some more. At some point, that isn't going to work.

In my opinion, the time to substantially increase taxes on the rich is when as a nation we have a plan to get our budgets under control, we've made progress toward that goal, but we find that we need substantially more money, and the rich aren't the only people carrying the burden.

So no, your plan doesn't satisfy me, and doesn't even qualify as a plan until you put some numbers to it. Maybe that sounds harsh, but I like something that can be measured and calculated. People who accept less get taken to the cleaners, or at best have a bunch of empty promises and pocketfuls of disappointment.

ModeratePoli said...

Yuck. I actually wrote the "pocketfuls of disappointment." What was I thinking?