Forbes magazine explains why Obama’s plan doesn’t solve our long-term spending problem.
The President, while not presenting concrete proposals, has been quite clear on what he wants: to raise taxes on the top two percent, keep the Bush tax cuts for everyone else, offer only vague promises of future spending cuts, and gain the unprecedented authority to raise the debt limit without Congressional approval. He does not plan to reform the entitlements so dear to his heart and his base’s. Instead of less spending, he would like to spend more on “stimulus” and “investments.” Obama knows that physicians will desert Medicare if he cuts their compensation by the scheduled 26.5 percent. That is simply not going to happen.
Here are Obama’s desired alternative fiscal policies to avoid the fiscal cliff in order of their effect on the five-year budget as estimated by the CBO:
1. Preserve Bush tax cuts and other tax provisions for everyone except the top 2 percent: Raises the five-year deficit by $2.0 trillion.
2. Drop the fiscal-cliff sequestration of spending and expand discretionary spending by the rate of inflation: Raises the five-year deficit by another trillion dollars.
3. Raise the tax rate on the top 2 percent: Lowers the five-year deficit by $300 billion.
4. Extend enhanced unemployment benefits: Raises the five-year deficit by $200 billion.
5. Do not cut Medicare payment rates to physicians: Raises the five-year deficit by some $100.
Four of the five fiscal policies on Obama’s wish list raise the deficit. Only one – the vaunted tax on the rich on which he based his campaign – lowers the deficit, but only by a miniscule $300 billion ($60 billion per year). If Obama gets the tax and spending changes he wants, his 2017 successor will inherit a national debt in excess of $20 trillion.
A warning: The 2013-2017 budget deficits could be much higher. No one knows what the costs of Obama Care will be. By 2017, the federal government will be spending more on health care than on social security. The CBO projection assumes that the costs of Obama Care come in on target. If Obama Care cannot contain health care costs, we could easily see a five-year deficit well in excess of $5 trillion, for an annual deficit of more than a trillion dollars. The CBO also uses a historically low rate of increase of discretionary non-defense spending equal to the rate of inflation. If we return to “business as usual” in Washington, the discretionary spending figure could also be blasted out of the water.
Obama based his re-election campaign on “the rich should pay their fair share” and “I killed Osama.” Well before the election, it was clear from the government’s own figures that taxing the top two percent would make only a tiny contribution to solving our deficit problems.
Why was this not pointed out by the media, who played along with the “tax the rich” fairy tale? Why was this not the central theme of the Republican campaign?
I think that point I highlighted in bold deserves emphasis. Obama ran up over $6 trillion in new debt – pushing us to a $16.5 trillion dollar debt. His “balanced approach” will generate a measly $60 billion a year in “new revenues”, assuming that “the rich” don’t just curtail their productive activities and shift their operations elsewhere (Canada). If you generate $60 billion in revenues, there is NO WAY that this is going to pay for a trillion dollars a year in new debt. So we are on track to hit over $20 trillion in national debt in Obama’s second term, taking us into Greece-like territory.
And that is according to the official CBO numbers.