The President's so called fiscal policy

This week President Obama decided to finally attempt to get serious about reducing the staggering US federal budget deficit and debt. After his ridiculous, insincere FY 2012 budget proposal this past February that was panned by basically everyone, the President gave a speech at George Washington University where he was to reveal his plan for reducing the deficit and debt.

Why did the President give the speech? Maybe because every credible political consultant and media organization had basically dismissed his original proposal as a farce and that Republican Representative Paul Ryan had produced a significant budget proposal that would reduce the deficit by $6.2 trillion over the next ten years. The Ryan plan begins to look at entitlement programs that are one of the biggest contributors to both the current deficit and debt but also to the long term debt the country faces. The Ryan plan does not impact anyone currently receiving retirement benefits, or for that matter those close to retirement, those 55 and older. By taking the courageous step of at least looking at ways to reform entitlement spending, Rep. Ryan has put the President on the defensive and made him debate the issue on the Republicans terms.

The speech that the President gave, turned out to be basically just the President’s kickoff speech for his 2012 campaign. It demonized the Republicans for basically wanting to kill any senior and to give huge tax breaks to only the rich in this country. There were a few really important issues with the President’s speech that need to be examined if people are going to take the President seriously.

First, the President’s proposal reduces the federal deficit by $4.2 trillion over the next twelve years. Why does the President’s plan cover twelve years as opposed to the Ryan plan that reduces the deficit by $6.2 trillion over ten years? Basically the answer is that it delays most of the cuts so far into the future that no one voting today will likely be impacted by his proposal, at least for a longer term. By delaying any significant cuts, the President can also demonize the Republican plan by stating that they want to take away benefits from our parents and grandparents. By extending the time period for implementing his proposed “cuts”, the President believes that it will lessen the pain anyone feels.

However, most of the President’s so called cuts are actually tax increases or assumptions that are unlikely to occur. First, the President continues to believe that ObamaCare will reduce the deficit by $1 trillion. No one outside the Obama Administration actually believes this, but he is continuing the charade. The President stated that another pillar of his plan, “is to reduce spending in the tax code, so-called tax expenditures.” So now tax reductions are actually tax expenditures. Basically, what this means is that the President believes that it is not our money we earn by going to work each day, but rather it is the government’s money and we are only able to keep a small part of it. By increasing tax rates, the government is going to be able to “save” money because it won’t be paying us as much. Another big part of the President’s plan is based upon the assumption that the economy will grow at an increased rate from what we have seen the past few years. Estimates of growth in excess of five percent are the baseline projections for the President’s plan. What happens if, as is likely, the economy doesn’t grow that fast?

Rep. Ryan’s plan was passed earlier today in basically a straight party line vote. The bill now heads to the Senate where it likely won’t move forward. Will Senate Majority Leader Harry Reid actually pass a budget this year? It is likely that just like last year, he won’t move anything forward. The President was late to the discussion on the deficit and debt and his plan will likely not improve our long-term economic future.