Obama’s Deficit Reduction Plan Is a License to Increase Spending

Right From the Start

President Barack Obama introduced his plan to reduce the deficit by $3 Trillion over the next ten years.  Mr. Obama declared that “it isn’t class warfare – it’s math.”  If I didn’t know better I would swear that Mr. Obama was a product of the Portland Public Schools – he’s failing math too.


Here’s the real math.  Of the $3 Trillion dollars, one-half or $1.5 Trillion comes from tax increases, $1 Trillion comes from eliminating our presence in Iraq and Afghanistan, and $580 Billion comes from reductions in Medicaid and Medicare.  If it were that simple even a community organizer could tackle the deficit.


But there are some real problems with Mr. Obama’s plan and he is hoping that engaging in the class war rhetoric of “taxing millionaires and billionaires” will distract people from the realities of his plan.  So let’s do the numbers.


First of all this isn’t a reduction of $3 Trillion.  Mr. Obama has already set forth his plan to increase spending on his Stimulus II plan by $447 Billion for his new jobs plan – a plan, which like its $1 Trillion predecessor, will neither create nor save any significant number of jobs.  Thus the $3 Trillion cut is really a $2.5 Trillion deficit reduction plan.  Still, if it were true, it would be a significant plan.  Unfortunately it isn’t true.


Of the $2.5 Trillion, $1.5 Trillion is a tax increase – not a reduction in spending.  History has taught us that the only way to recover from a deficit is to reduce spending or grow the economy at a rate greater than spending increases.  That same history has taught us that if you give the federal government more money in the form of tax increases, the government spends it.  If Mr. Obama were actually serious about his proposed tax increase being used specifically to reduce the deficit he would agree to cap spending and isolate the $1.5Trillion dollars to retire the debt – basically retire the bonds sold toChina. 


One Trillion dollars of Mr. Obama’s plan comes from assuming that the conflicts inIraqandAfghanistanwould continue at current levels for the next ten years.  Mr. Obama has already set a timetable for withdrawing from those conflicts that makes that assumption void.  Only in Mr. Obama’s world of economics – and perhaps the Portland Public Schools – can you claim a savings from something that you were never going to do.


That leaves us with the $580 Billion in reductions in Medicare and Medicaid.  To understand the absurdity of this proposal you have to view it along side Mr. Obama’s proposed tax increases.  Mr. Obama’s proposed tax increases begin almost immediately.  The reductions in Medicare and Medicaid occur out in the future – well past the 2012 election and closer to the expiration of a second term if Mr. Obama were so lucky.  This is a trick that Mr. Obama used to sell Obamacare as “revenue neutral” – there are slightly over $500 Billion in Medicare reductions in Obamacare which do not occur until after the 2012 elections and then only if Congress approves – an approval that history suggests in unlikely.  Trading current tax increases for the promise of future spending reductions is a scam that Americans are well on to and that is why it is never going to pass either house of Congress.


But Mr. Obama cannot even be straight about the $1.5 Trillion in tax increases.  He continues to posture this as a tax on millionaires and billionaires when he knows damn well the bulk of it falls primarily on small business people – the very people who created jobs, who create opportunity and who provide the path out for those in poverty. 


Mr. Obama has enlisted the support of Warren Buffet who dutifully tells the world that he pays taxes at a marginal rate less than his secretary.  Bullshit!  Mr. Obama knows it and so does Mr. Buffet.  The money that Mr. Buffet receives in the form of stock dividends and capital gains is money upon which the corporate income taxes have already been paid.  The actual analogy is that Mr. Buffet pays a fifteen percent surcharge on income – the actual corporate tax rate plus another fifteen percent for dividend payments.  But then again if you have amassed a fortune in excess of $40 Billion dollars you probably don’t notice – in terms of your life style – what you paid in taxes.  Also if you gifted tens of billions of dollars to Bill Gates charitable foundation you are probably receiving charitable deductions on your income taxes that exceed any taxes you might pay anyway.  (You will notice that Mr. Buffet neither took advantage of the federal law that permits you to pay more income taxes than is required, nor gave any of his billions to the federal government to assist in reducing the national debt – and for good reason.  Mr. Buffet is no fool; he knows that the federal government is the most inefficient and wasteful entity ever created and he damn well wants his hard earned money spent in a manner that is likely to actually benefit those in need.) 


Mr. Obama would have been better served to have spent his time with Mr. Buffet learning about what actually creates economic growth than convincing him to shill for another hare brained Keynesian economic scam.  Thank God that neither the House nor the Senate want to have anything to do with Mr. Obama’s proposals.