By Michael Tanner
Wednesday, March 06, 2013
As the sequester took effect last Friday (and the world
as we know it began to end), President Obama and his spokesmen took to the
airwaves to insist that they had a fairer and more balanced alternative.
At his press conference on Friday, the president said,
“I’ve put forward a plan that calls for serious spending cuts, serious
entitlement reforms, goes right at the problem that is at the heart of our
long-term deficit problem. I’ve offered negotiations around that kind of
balanced approach.”
Over the weekend, Gene Sperling, the White House’s top
economic adviser, appeared on the Sunday shows to argue that “the real answer
to eliminating this harmful sequester for the next ten years is exactly the
type of balanced agreement that the president has called for, [and] has still
kept on the table.”
Picking up on the White House talking points, David
Gregory confronted House speaker John Boehner on Meet the Press, insisting,
“[The administration] made it very clear, as the president just did, that he
has a plan that he’s put forward that involves entitlement cuts, that involves
spending cuts.”
But has he? Let’s look at what the president has actually
been offering.
The president’s plan would replace those sequester cuts
with an even larger deficit-reduction package, supposedly split almost 2:1 in
favor of spending cuts. The president’s alternative would reduce spending by
$930 billion, we are told, while also raising some taxes by $680 billion.
Adding in $200 billion in interest savings, the president claims $1.8 trillion
in deficit reduction, even more than will be cut if the sequester remains in
place.
But the president’s plan is far less “balanced” than he
would have you believe.
First, the spending cuts are, as usual, maddeningly
vague. For example, the president calls for $200 billion in
discretionary-spending cuts through 2021, split equally between defense and
domestic spending. Such a cut would amount to a pathetic one-half of 1 percent
of federal spending over that time period. But equally important, those cuts
are completely unspecified — there is no hint as to what they might be, besides
evenly spread between defense spending and domestic programs.
For entitlement reform, the president would agree to a
GOP proposal for “chained CPI,” which would reduce cost-of-living increases for
Social Security recipients. But beyond that concession, he offers little.
The president does propose $400 billion in savings from
government health-care programs, which will affect the trajectory of
entitlement programs. However, for the most part, the plan says little about
how those savings would be found, except for vague promises such as
“encouraging efficient care after hospital stay” and the ever popular “other
health savings.”
Second, and perhaps more significantly, much of what the
president calls spending cuts are actually new revenues in disguise. Take the
largest savings item in the president’s plan, $140 billion in “reduced payments
to drug companies.” Those reduced payments are in fact rebates that President
Obama wants drug makers to pay the government.
Similarly, under spending cuts, the president’s plan
calls for “strengthen[ing] the unemployment insurance trust fund,” to the tune
of $50 billion. In actuality, it is an increase in unemployment-insurance
taxes. It also claims $40 billion in “savings” from TSA and postal-service
reform, but a large portion of that comes from new fees.
Means-testing Medicare benefits for upper-income
taxpayers may well be a wise policy. But the president doesn’t propose to
reduce their benefits, but to increase their premiums. That is a revenue
increase, not a spending reduction. The president’s plan to “reform federal
retirement programs” also involves boosting government employees’ contributions
— a good idea, but not necessarily a spending cut.
And, as in a dozen or so earlier budget plans, the
president would sell parts of the telecommunication spectrum and charge
additional fees for spectrum access. Somehow, this too gets classified as a
spending cut.
That is not to say that there are no good ideas in the
president’s plan. There are. But it is misleading in the extreme, particularly
in classifying tax hikes as spending cuts.
It is also important to recall that the fiscal-cliff deal
in December raised taxes by $600 billion over the next ten years. In addition,
Obamacare will impose roughly $1 trillion in new or increased taxes over that
same period, with most beginning this year. That’s a total of $1.6 trillion in
tax hikes. At the same time, the sequester imposes $965 billion in spending
cuts through 2021 (not counting interest savings). Combining these means that
the baseline measures this year yield $1.65 in tax hikes to $1 in spending
cuts.
Therefore, repealing the sequester cuts and substituting
the president’s plan would actually result in a total of $2.6 trillion in new
taxes or other revenues, and just $600 billion in true spending cuts (excluding
interest savings and disguised revenue increases), nearly all of which are
unspecified. In other words, the president’s “balanced” approach would raise
taxes and revenues by $4.30 for every $1 in spending cuts.
The president’s proposal shows the danger of focusing
solely on debt and deficits. There is no doubt that fiscal insolvency is a
serious threat to our economy and an unfair burden on future generations. But
debt is just a symptom of a larger disease, an ever growing government. Simply
balancing the books without reducing the size, cost, and intrusiveness of
government would not solve the bigger problem.
The president’s proposals might treat some of our
symptoms by slowing the growth of future debt. But the patient is still dying.
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