Why Obama’s speech was a flop
President Obama’s speech on the deficit on Wednesday was a flop. He proposed to end no wars, make no serious cuts to the military, REDUCE corporate taxes, tax no estates or investments, raise no taxes on any billionaires, and give an unelected commission the power to slash Medicare.
Obama began by blaming tax cuts, wars, and healthcare:
[A]fter Democrats and Republicans committed to fiscal discipline during the 1990s, we lost our way in the decade that followed. We increased spending dramatically for two wars and an expensive prescription drug program – but we didn’t pay for any of this new spending. Instead, we made the problem worse with trillions of dollars in unpaid-for tax cuts – tax cuts that went to every millionaire and billionaire in the country; tax cuts that will force us to borrow an average of $500 billion every year over the next decade. To give you an idea of how much damage this caused to our national checkbook, consider this: in the last decade, if we had simply found a way to pay for the tax cuts and the prescription drug benefit, our deficit would currently be at low historical levels in the coming years.
Notice that the possibility of ending wars got dropped from that last sentence. Obama then lumped the military (over half of discretionary spending) in with non-discretionary spending:
So here’s the truth. Around two-thirds of our budget is spent on Medicare, Medicaid, Social Security, and national security. Programs like unemployment insurance, student loans, veterans’ benefits, and tax credits for working families take up another 20%. What’s left, after interest on the debt, is just 12 percent for everything else. That’s 12 percent for all of our other national priorities like education and clean energy; medical research and transportation; food safety and keeping our air and water clean.
I don’t think discretionary means what he thinks it means. The wars and the military are discretionary. Medicare, Medicaid and Social Security are not.
Half of Obama’s speech was dedicated to laying out the Republicans’ vision:
One vision has been championed by Republicans in the House of Representatives and embraced by several of their party’s presidential candidates. It’s a plan that aims to reduce our deficit by $4 trillion over the next ten years, and one that addresses the challenge of Medicare and Medicaid in the years after that. Those are both worthy goals for us to achieve. But the way this plan achieves those goals would lead to a fundamentally different America than the one we’ve known throughout most of our history.
He detailed the Republicans’ plan. Then Obama, much more swiftly and vaguely, gave his own proposals. Step One: Cut everything and nothing from that 12%:
The first step in our approach is to keep annual domestic spending low by building on the savings that both parties agreed to last week – a step that will save us about $750 billion over twelve years. We will make the tough cuts necessary to achieve these savings, including in programs I care about, but I will not sacrifice the core investments we need to grow and create jobs. We’ll invest in medical research and clean energy technology. We’ll invest in new roads and airports and broadband access. We will invest in education and job training. We will do what we need to compete and we will win the future.
God forbid we shouldn’t win the future.
Step Two was worse. After early in his speech denouncing the idea of fixing waste and abuse as drastically insufficient, when it comes to the military, Obama proposes merely to fix waste and inefficiency. A pretty subtle distiniction, I’d say. Personally, I’d fix abuse before inefficiency, but whatever. He’s not ending any wars or following his deficit commission chair’s recommendation of major cuts and foreign base closures. Or at least he’s not mentioning any serious cuts in his big speech on the subject:
The second step in our approach is to find additional savings in our defense budget. As Commander-in-Chief, I have no greater responsibility than protecting our national security, and I will never accept cuts that compromise our ability to defend our homeland or America’s interests around the world. But as the Chairman of the Joint Chiefs, Admiral Mullen, has said, the greatest long-term threat to America’s national security is America’s debt. Just as we must find more savings in domestic programs, we must do the same in defense. Over the last two years, Secretary Gates has courageously taken on wasteful spending, saving $400 billion in current and future spending. I believe we can do that again. We need to not only eliminate waste and improve efficiency and effectiveness, but conduct a fundamental review of America’s missions, capabilities, and our role in a changing world. I intend to work with Secretary Gates and the Joint Chiefs on this review, and I will make specific decisions about spending after it’s complete.
Step number three is worse still. Obama now goes after Medicare:
The third step in our approach is to further reduce health care spending in our budget. Here, the difference with the House Republican plan could not be clearer: their plan lowers the government’s health care bills by asking seniors and poor families to pay them instead. Our approach lowers the government’s health care bills by reducing the cost of health care itself. Already, the reforms we passed in the health care law will reduce our deficit by $1 trillion. My approach would build on these reforms. We will reduce wasteful subsidies and erroneous payments. We will cut spending on prescription drugs by using Medicare’s purchasing power to drive greater efficiency and speed generic brands of medicine onto the market. We will work with governors of both parties to demand more efficiency and accountability from Medicaid. We will change the way we pay for health care – not by procedure or the number of days spent in a hospital, but with new incentives for doctors and hospitals to prevent injuries and improve results. And we will slow the growth of Medicare costs by strengthening an independent commission of doctors, nurses, medical experts and consumers who will look at all the evidence and recommend the best ways to reduce unnecessary spending while protecting access to the services seniors need. Now, we believe the reforms we’ve proposed to strengthen Medicare and Medicaid will enable us to keep these commitments to our citizens while saving us $500 billion by 2023, and an additional one trillion dollars in the decade after that. And if we’re wrong, and Medicare costs rise faster than we expect, this approach will give the independent commission the authority to make additional savings by further improving Medicare.
Read that last sentence again. Independent of what? Of voters of course.
And step four makes a promise that Obama has previously made and broken:
The fourth step in our approach is to reduce spending in the tax code. In December, I agreed to extend the tax cuts for the wealthiest Americans because it was the only way I could prevent a tax hike on middle-class Americans. But we cannot afford $1 trillion worth of tax cuts for every millionaire and billionaire in our society. And I refuse to renew them again.
Take THAT to the bank!
Or THIS if you’re a corporation:
“And as I called for in the State of the Union, we should reform our corporate tax code as well, to make our businesses and our economy more competitive.”
Here’s what Obama said in that State of the Union:
“So tonight, I’m asking Democrats and Republicans to simplify the system. Get rid of the loopholes. Level the playing field. And use the savings to lower the corporate tax rate for the first time in 25 years – without adding to our deficit.”
Bring on the change!