Budget

Commentary: Obama’s Deficit Reduction Speech Illustrates Fundamental Misunderstanding of America’s Fiscal Woes

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Obama reveals tin ear towards the root causes of our deficit and its necessary solutions

No longer able to elude growing public pressure regarding our nation’s monumental deficit, President Obama provided a speech this Wednesday which reiterated his profound misunderstanding of America’s fiscal problems – not to mention an utter bankruptcy of ideas for undoing this damage.

After Republicans revealed not one but two long-term budget plans that would reduce the deficit, Obama had little choice but to respond with an alternative plan. Regrettably, his “vision” offered more partisan rabble-rousing than concrete details on how he would actually reduce the staggering deficits that undermine American prosperity.

The President’s proposal is a four-pronged plan to eliminate $4 trillion from the deficit over 12 years. This number itself is hardly exceptional, considering that in February his budget for 2012 was $3.7 trillion. Moreover, 12 year time-stamp is an attempt to make the cuts appear larger than they really are in the typical 10-year window.

The first prong, building off of the superficial cuts from this week’s budget agreement, is to keep annual spending “low” over 12 years, which would save a relatively meager $750 billion. Secondly, the President aims to target waste in the defense budget and in the Pentagon, although he gave little indication of what exactly that entails.

Thirdly, the President wants to reduce health care spending by deferring to yet another commission to identify waste. In the absence of any actual entitlement reform to the programs which are most heavily burdening our future, the President instead resorted to vilifying Rep. Ryan (R – Wisc.) for proposing to throw seniors and the poor out into the wilderness.

Lastly, the President wants to reform the tax code, which means, of course, that he wants to raise taxes.

The President’s lack of specifics for remedying government health care spending illustrate just how oblivious he is to the necessity of whole scale entitlement reform. Despite unfunded liabilities hovering around $100 trillion, the President proposes another commission, as well as implementing even more price controls on pharmaceuticals and prescription drugs. This amounts to more bureaucratic intrusion into what is already a heavily regulated and convoluted industry in America.

Obama has shirked his own complicity in the country’s spending quagmire by blaming Bush tax cuts as responsible for our fiscal morass. To compensate for this, he stated his intentions to basically tax our way into prosperity by not renewing these tax cuts to the highest bracket, and then raising their taxes. He also spoke of closing existing tax exemptions, the profits of which will be used for investing in infrastructure and green technology – spending which will immediately negate what should be savings.

The most alarming proposition he made in this regard is a “failsafe,” which will be enacted if the debt is not declining as a share of the economy by 2014. This will result in more emergency tax raises, while Social Security, Medicare, and Medicaid are explicitly excluded from consideration. This flies in the face of his last appointed commission on the budget, which urged him against any further tax raises.

In his speech, the President addressed an urgent issue by repeatedly shifting the blame to political opponents while distorting the facts of their budget proposals. Demagoguery aside, the concrete points he did convey will fail to resuscitate the economy or reduce the deficit. In fact, they will prolong our misery. As long as Social Security, Medicare, and Medicaid remain intact, our national debt will be perilous. Additionally, any recovery strategy predicated on tax hikes and increased spending will be a failed one.

This does not mean, however, that conservatives are resigned to seeing such a horrific plan implemented. Congressional Republicans must vigorously insist on a balanced budget amendment before even considering a vote on raising the debt ceiling. The silver lining in this affair is that the President is clearly on the defensive. Public and political pressure coerced him into finally addressing the deficit he is largely responsible for.  With the President backing into a corner, he will not be able to execute his policies without compromising on key points.

Jamison Beuerman is a contributing writer at the Pelican Institute for Public Policy. He can be reached at jbeuerman@pelicaninstitute.org or followed on Twitter @jbeuerman.

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