Examining Obama’s “Moderate” Budget Proposal

by: doug edelman | published: 04 15, 2011

President Obama’s budget speech of April 13 may well go down in history as one of the worst Presidential speeches ever broadcast.  But it still bears analysis and commentary!  While Vice President Biden was sleeping through it, I was taking notes – so here goes.  We’ll take Mr. Obama’s most salient statements, and lay them against a plumb line of reality.  This may be a lengthy piece – but there is quite a lot to examine!

This debate over budgets and deficits is about more than just numbers on a page, more than just cutting and spending.  It’s about the kind of future we want.  It’s about the kind of country we believe in. 

Precisely.  This is a battle vision and philosophy.  The Big Government, Wealth Redistributing, Nanny State Leftists versus the Self Reliance, Personal Responsibility, Free Market Right.

From our first days as a nation, we have put our faith in free markets and free enterprise as the engine of America’s wealth and prosperity.  More than citizens of any other country, we are rugged individualists, a self-reliant people with a healthy skepticism of too much government.

Obama throws a bone to the majority of America!  Unfortunately he and the left don’t BELIEVE it, as we’ll see in the rest of the President’s remarks!

Part of this American belief that we are all connected also expresses itself in a conviction that each one of us deserves some basic measure of security.  We recognize that no matter how responsibly we live our lives, hard times or bad luck, a crippling illness or a layoff, may strike any one of us.  “There but for the grace of God go I,” we say to ourselves, and so we contribute to programs like Medicare and Social Security, which guarantee us health care and a measure of basic income after a lifetime of hard work; unemployment insurance, which protects us against unexpected job loss; and Medicaid, which provides care for millions of seniors in nursing homes, poor children, and those with disabilities.  We are a better country because of these commitments.  I’ll go further – we would not be a great country without those commitments.

So, let’s understand:  We DESERVE security at the hand and responsibility of the FEDERAL Government?  Do we all deserve compassion?  Certainly.  Charity?  Of course.  FAMILY responsibility?  Resoundingly, yes.  Perhaps even state governments can constitutionally choose to involve themselves in such services.  But the enumerated powers granted the Federal Government under our Constitution provide no authority, much less a mandate for any such programs!  And Obama thinks that we WOULD NOT BE A GREAT COUNTRY without entitlements?  Does he believe we sucked before FDR?

For much of the last century, our nation found a way to afford these investments and priorities with the taxes paid by its citizens.  As a country that values fairness, wealthier individuals have traditionally born a greater share of this burden than the middle class or those less fortunate.  This is not because we begrudge those who’ve done well – we rightly celebrate their success.  Rather, it is a basic reflection of our belief that those who have benefitted most from our way of life can afford to give a bit more back.  Moreover, this belief has not hindered the success of those at the top of the income scale, who continue to do better and better with each passing year.

Books could be written on this paragraph alone!  But I’ll try to be brief.  Half the people in this country pay NO Federal Income Tax at all!  They are the ones who benefit from this “way of life”.  The rich have striven for, worked for, risked for and EARNED their success, only to have it APPROPRIATED for redistribution to those who have not done so!  Many of these “beneficiaries” have their homes, heat, food, daycare and many other expenses paid for, and have nicer cars, televisions, cell phones and clothes than many who work hard for their sustenance!  Perhaps the “beneficiaries” who now live on Government Largesse at no expense to them should pay THEIR fair share! 

The so called wealthy already pay far more than the lion’s share of taxes.  They already see half or more of what they work for taken in Federal, State and other taxes.  At what point does confiscation of wealth become UN-fair?  The American Dream is that ANYONE has the opportunity to work hard and become successful.  But if you attain that success you become the enemy and your wealth must be confiscated for redistribution to those who did not take the initiative to utilize their opportunities that you did?  If you ATTAIN the American Dream, do you then deserve to have it TAKEN from you?

Now, at certain times – particularly during periods of war or recession – our nation has had to borrow money to pay for some of our priorities.  And as most families understand, a little credit card debt isn’t going to hurt if it’s temporary.

TEMPORARY?  Our nation has lived on the credit card as a major part of our budget for generations!  This isn’t new, and it’s never been “temporary! 

But as far back as the 1980s, America started amassing debt at more alarming levels, and our leaders began to realize that a larger challenge was on the horizon.  They knew that eventually, the Baby Boom generation would retire, which meant a much bigger portion of our citizens would be relying on programs like Medicare, Social Security, and possibly Medicaid. 

The “1980s” and “amassing debt” comment is an implied dig at Reagan.  Reagan cut taxes, and was blamed for increasing the deficit.  Yet the reality is that Reagan’s tax cuts DOUBLED revenues.  It was the Democrat Congress, led by Tip O’Neal, (who declared Reagan’s reasonable budgets “dead on arrival”), which increased spending by $1.84 for every dollar in tax-cut generated new revenue!

Yes, the Dems DID see the age-wave of the Baby Boomers coming… and welcomed it as a voter boom!  As they aged, they’d become more dependent on Government!  The ideal situation for the party of the nanny state! 

To meet this challenge, our leaders came together three times during the 1990s to reduce our nation’s deficit.  They forged historic agreements that required tough decisions made by the first President Bush and President Clinton; by Democratic Congresses and a Republican Congress.  All three agreements asked for shared responsibility and shared sacrifice, but they largely protected the middle class, our commitments to seniors, and key investments in our future.

As a result of these bipartisan efforts, America’s finances were in great shape by the year 2000. We went from deficit to surplus.  America was actually on track to becoming completely debt-free, and we were prepared for the retirement of the Baby Boomers.

Prior to the Gingrich revolution of 1994, the Democrats had a death-grip on Congress, where budgets/spending take place!  Interestingly, starting in 1994, we saw deficit reduction fiscal responsibility under the GOP majority that lead to a couple years of actual SURPLUSSES which, of course, Bill Clinton took credit for, though he was dragged kicking and screaming by the GOP Congress to budgets of austerity!  And now Obama’s claiming it to have been a BI-PARTISAN effort!

But after Democrats and Republicans committed to fiscal discipline during the 1990s, we lost our way in the decade that followed.  We increased spending dramatically for two wars and an expensive prescription drug program – but we didn’t pay for any of this new spending.

It wasn’t until the perfect storm of the dot-bomb, 9/11, and the prosecution of 2 wars that we had to pick up that credit card again!  Bush’s worst deficit (and the worst deficit in history to that point) was in 2003, at 420 Billion (a mere PITTANCE by today’s standards!).

The “dramatic increase” for 2 wars:  Remember the $87 Billion that Kerry voted for before voting against?  We ran 2 wars for a year on $87 Billion.  Remember the $787 Billion Bailout?  That was 9 times bigger!!

The Bush Tax Cuts (that Obama wants to roll back, as we’ll discuss later) did what tax cuts ALWAYS do… they raised revenues!  Our deficit declined in EACH of the following 3 years, so that when the power shifted back to the Democrats in 2006, the deficit had been reduced to a mere 120 Billion.  The Bush tax cuts REDUCED the deficit by 300 Billion in 3 years – or about 100 Billion a year!

Bush took office with our national debt at 4 Trillion.  He and the GOP Congress were deservedly criticized for increasing that by 50% to 6 Trillion in the first 6 years of the Bush Administration.  Bush raised the debt by 2 Trillion in 6 years, and was “rewarded” with the return of power to the Democrats and Pelosi and Reid took the helm of Congress.

Unfortunately, as bad as Bush’s fiscal leadership had been… it was exponentially better than what followed.  In their first year, Pelosi/Reid tripled the previous year’s 120 Billion dollar deficit to 450 Billion – 30 Billion worse than Bush’s WORST deficit in 2003!  But the following year, they tripled THAT to 1.2 TRILLION!  Pelosi and Reid started their tenure in charge with a 120 Billion dollar deficit and 6 Trillion in debt.  In merely 4 years they increased the deficit EXPONENTIALLY, to 1.6 Trillion (1600 Billion) and they raised our debt by 2 1/3 times to 14 Trillion!  It took 43 Presidents and 230 years to amass a 6 Trillion dollar debt… and these clowns added 8 Trillion to it in 4 years!

Instead, we made the problem worse with trillions of dollars in unpaid-for tax cuts – tax cuts that went to every millionaire and billionaire in the country; tax cuts that will force us to borrow an average of $500 billion every year over the next decade.

To give you an idea of how much damage this caused to our national checkbook, consider this:  in the last decade, if we had simply found a way to pay for the tax cuts and the prescription drug benefit, our deficit would currently be at low historical levels in the coming years.

So that’s how our fiscal challenge was created.  This is how we got here.  And now that our economic recovery is gaining strength, Democrats and Republicans must come together and restore the fiscal responsibility that served us so well in the 1990s.  We have to live within our means, reduce our deficit, and get back on a path that will allow us to pay down our debt.  And we have to do it in a way that protects the recovery, and protects the investments we need to grow, create jobs, and win the future.

First, he’s still playing to that economic myth that the left strives so hard to promote:  The “Tax Rates are Directly Proportional to Revenues” myth.  This theory has been disproven every time Tax Cuts have been tried!  Revenues INCREASE when tax rates are reduced.  Kennedy proved it.  Reagan proved it.  Bush proved it.  So if revenues go UP when tax rates go DOWN, then rates and revenues are NOT directly proportional and tax rate adjustments have BEHAVIORAL effects on the public which can cause DYNAMIC expansion and contraction of the economy.

This brings us to the second sacred myth of the Left: The “Zero Sum Game” theory of the Economy.  Under this theory, the economy is a fixed size and there is only so much sand in the sandbox.  Piling up too much in one corner deprives the rest of the sandbox.  If someone is too successful and amasses too much wealth, someone else somewhere is denied the opportunity to have enough.  This is the very FOUNDATIONAL truth of class warfare!  If you make the rich poorer, axiomatically you improve the lot of everyone else, as if by magic!!  But the economy is not static.  It dynamically expands and contracts with the behavior of the producers.  Wealth is created every time a new idea comes to market!  Every time a business grows and adds workers.  It contracts when the producers feel the need to protect their assets and minimize risk.  An adversarial relationship between Government and the producers in this country and anti-business tax and regulatory policies drive the producers into a defensive posture, contracting the economy and reducing tax revenues.  Raise rates on business, and you’ll net LESS revenue.

Now, before I get into how we can achieve this goal, some of you might be wondering, “Why is this so important?  Why does this matter to me?”

By the end of this decade, the interest we owe on our debt could rise to nearly $1 trillion.  Just the interest payments.

Just to remind you:  2006 debt, 6 Trillion.  After 4 years of Pelosi/Reid, debt is 14 Trillion.

Then, as the Baby Boomers start to retire and health care costs continue to rise, the situation will get even worse.  By 2025, the amount of taxes we currently pay will only be enough to finance our health care programs, Social Security, and the interest we owe on our debt.  That’s it.  Every other national priority – education, transportation, even national security – will have to be paid for with borrowed money.

In other words, the government made promises it can’t keep!  The nanny-state Socialists are running out of other people’s money!  Obama talked about 2525 – far enough away that folks will dismiss it as “the future”… but the fact is that TODAY our discretionary spending IN TOTAL is 1.3 Trillion while our deficit is 1.6 Trillion.  If we funded ONLY Entitlements and interest on the debt, we’d be 300 billion short!!  We’re ALREADY paying for 1/3 of our budget with borrowed money… and 2/3 of our budget is entitlements and interest on the debt!  In fact he admits it below, though with obfuscation:

So here’s the truth.  Around two-thirds of our budget is spent on Medicare, Medicaid, Social Security, and national security.  Programs like unemployment insurance, student loans, veterans’ benefits, and tax credits for working families take up another 20%.  What’s left, after interest on the debt, is just 12 percent for everything else. That’s 12 percent for all of our other national priorities like education and clean energy; medical research and transportation; food safety and keeping our air and water clean.

Note that he included National Security (Discretionary) in with Medicare, Medicaid and Social Security (so-called Mandatory entitlement spending), and he separated interest on the debt (mandatory) out.  Let’s look at ALL mandatory spending as distinct from Discretionary:  In 2010, Medicare (519 Billion), Medicaid (273 Billion) and Social Security (701 Billion) totaled 1.493 Trillion out of a 3.5 Trillion dollar budget. That’s 1/3 of the budget by itself.  Add in Interest on the debt (202 Billion) and “Other Mandatory” spending like welfare and food stamps (433 Billion) and you’re up to 2.128 Trillion out of 3.5 Trillion!

Up until now, the cuts proposed by a lot of folks in Washington have focused almost exclusively on that 12%.  But cuts to that 12% alone won’t solve the problem.  So any serious plan to tackle our deficit will require us to put everything on the table, and take on excess spending wherever it exists in the budget.

Our Defense budget (692 Billion) and all the rest of our Discretionary budget (666 Billion) totals 1.358 Trillion.  Less than 1/3 of the entire budget… and non-Defense Discretionary spending isn’t 12% it’s 19%, but that still means that less than 1 out of every 5 dollars we spend is non-Defense Discretionary spending. 

One vision has been championed by Republicans in the House of Representatives and embraced by several of their party’s presidential candidates.  It’s a plan that aims to reduce our deficit by $4 trillion over the next ten years, and one that addresses the challenge of Medicare and Medicaid in the years after that.

Those are both worthy goals for us to achieve.  But the way this plan achieves those goals would lead to a fundamentally different America than the one we’ve known throughout most of our history.

A 70% cut to clean energy.  A 25% cut in education.  A 30% cut in transportation.  Cuts in college Pell Grants that will grow to more than $1,000 per year.  That’s what they’re proposing.  These aren’t the kind of cuts you make when you’re trying to get rid of some waste or find extra savings in the budget.  These aren’t the kind of cuts that Republicans and Democrats on the Fiscal Commission proposed.  These are the kind of cuts that tell us we can’t afford the America we believe in.  And they paint a vision of our future that’s deeply pessimistic.

Actually, Mr. President, the Ryan Plan’s vision is one that begins to move on the path not only to prosperity and sustainability… but to constitutionality!!  There is no constitutional authority nor mandate for ANY of the so-called Mandatory Budget… outside of interest on the debt that was unconstitutionally amassed!  And within the Discretionary budget are many Departments, Agencies and Programs which have no constitutional justification for their existence as well!  We could EASILY afford to fund a government which was LIMITED by the constitutional limitations they have ignored!

It’s a vision that says if our roads crumble and our bridges collapse, we can’t afford to fix them.

Actually, Sir, infrastructure IS one of the expenses AUTHORIZED under the Constitution’s enumerated powers!

It’s a vision that says America can’t afford to keep the promise we’ve made to care for our seniors. 

We CAN’T!  Our entitlement system is a Ponzi Scheme.  A pyramid where those at the bottom pay for those at the top!  The problem is that it’s an inverted pyramid and there are more dependents than the producers can support, and the demographics are shifting to INCREASE that problem!

Worst of all, this is a vision that says even though America can’t afford to invest in education or clean energy; even though we can’t afford to care for seniors and poor children, we can somehow afford more than $1 trillion in new tax breaks for the wealthy... 

…There’s nothing serious about a plan that claims to reduce the deficit by spending a trillion dollars on tax cuts for millionaires and billionaires.  There’s nothing courageous about asking for sacrifice from those who can least afford it and don’t have any clout on Capitol Hill.  And this is not a vision of the America I know.

“…More than $1 trillion in new tax breaks for the wealthy”???  WHAT new tax breaks?  We have passed no new tax cuts – we PREVENTED the automatic INCREASE to rates that have been in effect for nearly a decade!  No one is even TALKING about further rate reductions!  So what’s he talking about?  He views NOT making those increases in tax rates as a NEW CUT!

And how does he put a dollar amount of a trillion dollars on these failed tax rate increases?  As we showed earlier, raising tax RATES is not directly proportionate to revenues.  If he wants to increase revenues he should consider a further REDUCTION in rates which would spur economic growth and generate new business expansion, more jobs, more workers earning more taxable income etc.

No, the tax rate debate is not about revenue, or deficits, or budgets.  It’s about wealth redistribution and that 2^nd economic myth.  The Zero Sum Game theory implies that if you make the rich poorer, you magically make the poor richer!!  It’s a fallacy… but the left BELIEVES it and promotes it!

Today, I’m proposing a more balanced approach to achieve $4 trillion in deficit reduction over twelve years…  The first step in our approach is to keep annual domestic spending low by building on the savings that both parties agreed to last week… But as the Chairman of the Joint Chiefs, Admiral Mullen, has said, the greatest long-term threat to America’s national security is America’s debt... Just as we must find more savings in domestic programs, we must do the same in defense...  The third step in our approach is to further reduce health care spending in our budget.  Here, the difference with the House Republican plan could not be clearer:  their plan lowers the government’s health care bills by asking seniors and poor families to pay them instead.  Our approach lowers the government’s health care bills by reducing the cost of health care itself...That includes, by the way, our commitment to Social Security.  While Social Security is not the cause of our deficit, it faces real long-term challenges in a country that is growing older.  As I said in the State of the Union, both parties should work together now to strengthen Social Security for future generations.  But we must do it without putting at risk current retirees, the most vulnerable, or people with disabilities; without slashing benefits for future generations; and without subjecting Americans’ guaranteed retirement income to the whims of the stock market.

While I won’t state the Defense Budget is an untouchable sacred cow… Democrats have historically been eager to cut the lean with the fat.  If we eliminate fraud, waste and abuse in the Defense budget, and cut wasteful or ineffective programs while BOLSTERING spending on modernization, research & development of new weapons systems and recruitment, retention, training, equipping and PROVIDING FOR our military personnel… then Military spending is fair game to be on the table… but don’t expect huge savings if these things are properly approached!

ObamaCare is a fiscal boondoggle and everyone knows it.  The left can put all the whitewash they want on it, but even the CBO has continued to issue report after report… each worse than the one before it… declaring Obamacare as a money-sucking black hole that will not improve care, access or costs!  Yet Obama is determined to preserve it, though the Supreme Court will ultimately find it unconstitutional as 2 lower courts have.  Meantime businesses must make the expenditures to gear up for implementation that may or may not be funded, and may or may not be dismantled ultimately by SCOTUS.  This uncertainty is bad for the economy – and recovery could be accelerated by simply abandoning and repealing ObamaCare utterly, as though it never occurred!

Social Security is about to go bankrupt.  The President is correct in saying Social Security is not the cause of the deficit… but the decision under Democrat Administrations to eliminate the “trust fund” and “lock box” aspects keeping Social Security separate from the general fund of the US treasury IS a cause.  Social Security might have remained solvent if it were not raided by prior administrations to fund their pet vote buying schemes!

The fourth step in our approach is to reduce spending in the tax code.  In December, I agreed to extend the tax cuts for the wealthiest Americans because it was the only way I could prevent a tax hike on middle-class Americans.  But we cannot afford $1 trillion worth of tax cuts for every millionaire and billionaire in our society.  And I refuse to renew them again.

Beyond that, the tax code is also loaded up with spending on things like itemized deductions.  And while I agree with the goals of many of these deductions, like homeownership or charitable giving, we cannot ignore the fact that they provide millionaires an average tax break of $75,000 while doing nothing for the typical middle-class family that doesn’t itemize.

This is the most egregious Orwellian NewSpeak in the entire speech.  SPENDING IN THE TAX CODE?  Let’s see… So ALL our money is the Governments, and anything we’re allowed to KEEP is a Government EXPENDITURE???

Obama views itemized deductions… in other words, DOING those things that are deductible from ones tax obligations like paying home mortgage interest or making charitable contributions, is like sending the government a bill for payment?  We know that leftists don’t like private charity.  It is a competitor for Government Programs that buy votes!  Why have a church food pantry when the government can give food stamps?  And subsidizing private home ownership?  Personal Property Rights?  Another of our rights under assault by the left!

And what about that “$75,000 tax break” that millionaires get while the typical middle class family doesn’t get because they don’t itemize?  If someone’s a millionaire, then with only ONE million that average $75,000 tax break represents only 7.5%!  If they’re RICHER than that $75,000 represents an even lower percentage!

The STANDARD DEDUCTION for a typical family is over 11,000 so if you earn less than 110,000 and don’t itemize that deduction represents more than 10%, and the less you earn, the higher that percentage!

Of course, there will be those who disagree with my approach.  Some will argue we shouldn’t even consider raising taxes, even if only on the wealthiest Americans.  It’s just an article of faith for them

Exactly right.  Americans are NOT under taxed.  Congress over spends.  As I outlined in my recent article: http://www.examiner.com/conservative-in-st-louis/after-the-shutdown-showdown-reality-still-bites, “…the revenue side of the equation is simply not an option.”

Others will say that we shouldn’t even talk about cutting spending until the economy is fully recovered.  I’m sympathetic to this view, which is one of the reasons I supported the payroll tax cuts we passed in December.  It’s also why we have to use a scalpel and not a machete to reduce the deficit – so that we can keep making the investments that create jobs.  But doing nothing on the deficit is just not an option.  Our debt has grown so large that we could do real damage to the economy if we don’t begin a process now to get our fiscal house in order.

Obama is talking to the true Keynesians in his own party here.  They TRULY BELIEVE that they can spend their way out of debt… as counter intuitive as that sounds (and as false as it IS!).  Obama has come to realize that, while he’s “sympathetic to this view”… that is, he, too, is a Keynesian at heart – but he recognizes that to hold firm to the theory would now be political suicide!  This is a politically motivated moderation… not a change of heart!

Finally, there are those who believe we shouldn’t make any reforms to Medicare, Medicaid, or Social Security out of a fear that any talk of change to these programs will usher in the sort of radical steps that House Republicans have proposed.

Here comes the dig that “Republicans will take Grandma’s check and give it to the rich while she starves and freezes in her cold, empty shack!” But Obama will make kinder, gentler “reforms”.

Indeed, to those in my own party, I say that if we truly believe in a progressive vision of our society, we have the obligation to prove that we can afford our commitments

Yes, you have that obligation… and to date you have failed to offer that proof!

“I still believe.  I believe in that great country that my grandfather told me about.   I believe that somewhere lost in this quagmire of petty bickering on every news station, the ‘American Dream’ is still alive…

The American Dream IS alive.  We are the land of equal OPPORTUNITY, not equality of outcome.  If you seize the opportunities with both hands, work hard, and are willing to take risks… there are rewards.  The biggest danger to the American Dream is the threat that as soon as you achieve it, the IRS will be there to take it away! 

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