HOW OBAMA WOULD GET FROM HERE TO THERE…. OK, so President Obama offered a deeply satisfying rejection of Paul Ryan’s radical Republican budget plan, and delivered a stirring defense of progressive governance. But the point of the address was to present the White House’s vision for long-term debt reduction — which, of course, is more important than the rhetoric.
There was, of course, yesterday’s freak-out that the president would embrace the Simpson-Bowles plan as his agenda. Those of us who urged caution, and said it was highly unlikely Obama would actually do this, were right.
Obama’s plan — reducing the deficit by roughly $4 trillion over the next 12 years — basically has four parts. The first is the worst: unspecified domestic cuts.
“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 deeply about, but I will not sacrifice the core investments we need to grow and create jobs. We will invest in medical research and clean energy technology. We will 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.”
The second is to find real savings in the massive, bloated Pentagon budget.
“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.”
The third is to pursue savings in health care spending, built on the existing savings found in the Affordable Care Act.
“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.”
And the fourth part has to do with taxes, including the president saying he will “refuse” to extend Bush-era tax breaks for the wealthy beyond next year.
“My budget calls for limiting itemized deductions for the wealthiest 2% of Americans — a reform that would reduce the deficit by $320 billion over ten years. But to reduce the deficit, I believe we should go further. That’s why I’m calling on Congress to reform our individual tax code so that it is fair and simple — so that the amount of taxes you pay isn’t determined by what kind of accountant you can afford. I believe reform should protect the middle class, promote economic growth, and build on the Fiscal Commission’s model of reducing tax expenditures so that there is enough savings to both lower rates and lower the deficit. 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.”
In terms of the larger ratio, the White House considers this a 2 to 1 to 1 breakdown — $2 trillion in spending cuts, $1 trillion in savings on interest payments, and $1 trillion in increased revenue.
I’ll have more on this in the coming days and weeks, but at this point, I’d consider this approach pretty reasonable. It’s not the agenda I’d present were I president, but I could live with it if it became U.S. policy. The problem, of course, is that if the “compromise” between Obama’s vision and Paul Ryan’s is what we end up with, that’d be a disaster — so the White House is going to have to fight for this approach.
Paul Krugman, who hasn’t exactly been impressed with Obama’s approach thus far, characterized the substance as “much better than many of us feared,” adding, “I can live with this.” Krugman soon after said the president’s plan “is wonk-tested” and the numbers add up — which is more than can be said for the Paul Ryan plan the media loves so much.
