Obama's Budget Speech

http://www.futureofcapitalism.com/2011/04/obama-budget-speech

President Obama began his remarks at George Washington University by striking an odd note for a president fighting to defend Pell Grants. "I wanted to make sure that all of you could have one more excuse to skip class. You're welcome," he joked.

Then he went on to strike an odd note for a president aiming to actually get a deficit reduction deal through Congress. He acknowledged Vice President Biden, Secretary Geithner, and White House aides Jacob Lew and Gene Sperling by name, but did not name the members of the legislative branch, referring only to the presence of "a number of members of Congress here."

It went pretty much downhill from there.

As in past speeches, he made a nod to "free markets and free enterprise" as the engine of American growth, along with "self-reliant" Americans having "a healthy skepticism of too much government." But it was only a nod, a prelude to a long list of government programs — "public schools and universities," "railroads," "highways," Medicare, Social Security, unemployment insurance, and Medicaid. "We would not be a great country without those commitments," he said.

Does the president really think we wouldn't be a great country without unemployment insurance? Was America something less than a great country before 1965, when Medicare was enacted? Mr. Obama does not say.

Then Mr. Obama went into partisan mode, blaming the deficits and debt on Reagan and George W. Bush, but not on President Clinton. The country was "amassing debts" "as far back as the 1980s," Mr. Obama said. Yet "three times" during the 1990s, politicians "forged historic agreements that required tough decisions." As a result, he said, "America's finances were in great shape by the year 2000."

By "historic agreements that required tough decisions," it seems clear that Mr. Obama means George H.W. Bush's decision to break his "read my lips" pledge and raise the top income tax rate to 31% from the 28% it had been left at by President Reagan. That decision cost Mr. Bush re-election. He also means President Clinton's decision to break his own campaign promise of a middle-class tax cut and instead raise the top federal income tax rate to 39.6% from the 31% it had been left at by George W. Bush. That decision, along with Hillary Clinton's health care plan, cost the Democrats control of Congress in the 1994 election.

Mr. Obama proceeded to an attack on his predecessor, attributing the nation's current fiscal problems to "two wars and an expensive prescription drug benefit" along with "un-paid-for tax cuts to every millionaire and billionaire in the country."

After a brief description of the federal budget, which would have been much livelier with some charts or graphs, Mr. Obama proceeded to an attack on the budget plan put forth by the House Republicans. The president studiously avoided any mention of Rep. Paul Ryan or his "Path to Prosperity," but it was nonetheless clear that this is what he was really there to do — to knock down that plan in the eyes of the public. He warned that it "would lead to a fundamentally different America" than we have seen before in our nation's history. "A 70% cut in clean energy," he intoned, implicitly equating government spending on subsidies of clean energy with clean energy itself. "A 25% cut in education," he intoned, ignoring the fact that federal education spending grew by far more than that amount during the George W. Bush administration, so that such education cuts would just get education spending back closer to Clinton-era levels, the way that Mr. Obama wants to get tax rates back to Clinton-era levels.

"It paints a vision of our future that is deeply pessimistic," Mr. Obama claimed. Amazing how something called a "Path to Prosperity" can become, according to Mr. Obama, "deeply pessimistic."

The real vicious criticism, though, came when Mr. Obama accused the House Republicans of "changing the basic social compact in America" by making cuts in Medicaid and Medicare and "spending a trillion dollars on tax cuts for millionaires and billionaires."

By Mr. Obama's terminology, all the money belongs to the government, so it's government "spending" to allow people to keep the money that they earned.

Mr. Obama then made the extraordinary claim that the Medicare and Medicaid cuts would come at the expense of those "who don't have any clout on Capitol Hill." As if the AARP, the American Medical Association, and the pharmaceutical industry don't have any clout on Capitol Hill? Come on.

Finally, Mr. Obama offers his own wan deficit reduction proposal, a "balanced approach," in four parts, promising "$4 trillion in deficit reduction over 12 years." Mr. Obama doesn't explain why he uses the 12 year time frame rather than, say, a decade, or the end of his second term.

Part one is "keep annual domestic spending low." The "keep" part only applies if you buy that annual domestic spending is low now. Mr. Obama reckons this will save $750 billion over 12 years.

Part two is "additional savings in our defense budget." No price tag here.

Part three is "further reduce health care spending in our budget." Mr. Obama makes the absurd claim that ObamaCare already includes $1 trillion in health care cost savings. On top of that, he promises that an "independent commission" — that's the death panel — along with using the "purchasing power" of Medicare to negotiate lower prices on prescription drugs — that's price controls that will kill miracle-drug-producing innovation — will bring another $500 billion in savings by 2023 and $1 trillion in "the decade after that." Does Mr. Obama really think he can make calculations with any degree of reliable accuracy about what his actions this year will mean for health care costs between 2023 and 2033?

Part four is "reduce spending in the tax code, so-called tax expenditures." It quickly becomes clear that what the president is really talking about isn't reducing tax expenditures but old-fashioned raising tax rates. "We cannot afford $1 trillion worth of tax cuts for every millionaire and billionaire," he said. "I refuse to renew them again." Since Mr. Obama already renewed the Bush tax cuts once for a two-year period as part of his December tax deal with the incoming Republicans, his claim that next time around he won't do it is a little hollow. In case it doesn't work, he offers up a proposal that he couldn't even get through a Democratic Congress, "limiting itemized deductions" for the top 2% of earners. He says that would raise $320 billion over ten years.

The president made a nod to reforming the individual tax code in a way that would "lower rates and lower the deficit," thereby entwining the worthy goal of tax simplification with the more debatable goal of increasing federal revenues. Unlike Mr. Ryan, he didn't mention any specific rates. He made the same nod at corporate tax reform, with similar lack of specificity.

Finally, Mr. Obama made one last rhetorical pitch for a tax increase on the "rich." "The tax burden on the wealthy is at its lowest level in half a century," he claimed. There may be some construct under which this is true, but the share of income tax paid by the top percentages of earners is at recent highs.

"I don't need another tax cut. Warren Buffett doesn't need another tax cut," the president said. "Most wealthy Americans would agree with me." This claim contradicts what Mr. Obama said earlier in the speech: "Without looking at a single poll, my finely honed political instincts tell me almost nobody believes they should be paying higher taxes."

Also, no one is preventing any wealthy Americans from voluntarily paying more to the government. The issue is forcing those who don't to do so. If Mr. Obama wanted to test the issue, it would be very easy to add a line to the tax form giving upper-income taxpayers the choice of paying tax under the old Clinton rates or under the lower Bush rates. Mr. Obama and Mr. Buffett (who hardly pays any income tax anyway because most of his wealth is in accumulated capital gains of stock he is giving to charity) can choose to pay the higher rates, while those who don't can choose the lower rates. It'd be a test of which of Mr. Obama's two conflicting claims are correct, 1. "Most wealthy Americans would agree with me" or 2. "almost nobody believes they should be paying higher taxes."

Mr. Obama said Vice President Biden would begin regular meetings with both parties on a deficit reduction deal in early May, with an aim to "get it done by the end of June."

The "larger debate about the size and role of government has been with us since our founding days," the president said, urging Americans, "We can't just think about ourselves," as individuals, but rather "the country," and "the community."

"It's patriotism," he insisted. It's not exactly clear what the president was describing as patriotic. Is it patriotic for the top 1% or 2% of earners to pay more taxes so that the politicians can keep distributing more and more of their money to everyone else with no significant changes? Or is it patriotic for the bottom 98% or 99% of earners to insist on no significant changes to their entitlement programs while demanding more money from the top 1% and 2% to pay for them? Neither one strikes me as particularly patriotic, but this is a president who has an amazing capacity to say embarrassing things without being embarrassed by them. He can joke with college students about skipping class while demonizing Republicans for cutting Pell Grants, claim the constituencies for the Medicare and Medicaid programs "don't have any clout on Capitol Hill," and accuse taxpayers who don't want more money taken from them to pay for his spending binge of somehow being unpatriotic. What a performance. What a president.

by Ira Stoll  |  Apr 13, 2011 at 3:49 pm Related Topics:  Education, Government Spending, Health Care, Politics, President Obama, Taxes receive the latest by email: subscribe to the free futureofcapitalism.com mailing list