I just finished watching president Obama make his major budget address at George Washington University. To say the least, the speech was well delivered. It tugged at the heartstrings. It played on the patriotism of the audience. Unfortunately, what it did not do was provide any specifics as to what the president's budget plan actually is. Oh, he gave a bunch of big numbers, but they did not make much sense. He dished out scathing cricism of the house GOP budget presented by Paul Ryan, but he offered nothing real in response. In short, I see the speech as very well delivered rubbish. Here are some of the individual points that merit attention:
1) I nearly choked when Obama said that he want to cut $500 billion in waste and fruad out of Medicare over the next twelve years. For those who were listening during the debate on Obamacare, that law was supposedly financed by having the federal government cut $500 billion in waste and fraud over the decade from 2010 to 2019. Now that a year has passed since Obamacare becaume law, there have been no savings so far from reducing waste and fraud. That's right, zero, nada, zilch! But now, even though that supposed cut in waste and fraud has already been spent in connection with obamacare, the president wants to count it again. Indeed, he now says that it will be realized over the next 12 years rather than the next 9 years as previously promised. The truth is that this supposed savings is just a big lie. It is impossible to save money if the government takes no steps to do so. Obama and his people have had over a year to get started and have done NOTHING!!! There is no reason to believe that they ever will take any of the steps that Obama is now promising.
2) Obama's numbers boil down to cutting 1 trillion dollars in spending over the next ten years and raising taxes by 1 trillion dollars over the same period. Let me explain: Obama says that his 2012 budget already cuts $1 trillion from spending over the next decade. That is the result of a domestic spending freeze at the elevated levels of his proposed 2010 budget. Now he says that the spending cuts should total $2 trillion, so that is an additional 1 trillion over the amounts included with the 2012 budget proposal. Obama also says that there will be a savings of 1 trillion dollars over the next decade in interest expense if his plan is aopted. Finally he wants 1 trillion in tax increases.
It is important to note that even this new one trillion dollars in cuts in not really that large. Remember, Congress is about to pass the deal which was just agreed to in order to fund the government for the remained of 2011. In the crazy way that Washington calculates things, this deal is a cut of $78 billion in spending (although no sane accountant would total it up that way.) What this means is that over the next decade, thes cuts of $78 billion will amount to cuts of well over half a trillion dollars from the budget. Then there is also that half trillion dollars in cuts in spending for Medicare that I discussed above. So now, we already have Obama's one trillion in spending cuts. Obama likes to say that cuts have to be made with a scalpel and not a meat cleaver. Perhaps he should start saying cuts should be made under a microscope rather than with a meat cleaver. the truth is that for all that Obama said, his numbers indicate that his basic solution to the deficit is to raise taxes.
3) Obama actually said that the rich now pay taxes at the lowest rate of the last 50 years. Shame on the president for lying. First, the percentage of incometaxes paid by the top 5% of tax payers is higher now than it has been at any time during the last 50 years -- the exact opposite of what the president claimed. Second, tax rates are much higher than they used to be. For example, under the tax rates of the Reagan years, the highest federal tax rate was 28%. In 2011, the highest tax rate will be 35%. during the Reagan years, the deductions and exemptions that reduce taxes did not get reduced as one's income went up. In 2011, those deductions and exemptions are phase out as one's income goes up. in other words, the tax rates used to be much lower.
4) Obama tried mightily to blame the deficit on George W. Bush. the whole opening of his speech went to this point. Obama, however, was once again lying. The truth is that in two years under Obama, the country has undertaken a great deal more debt than in all eight of the Bush years combined. It was Obama who brought on a frenzy of spending. George W. Bush was no paragon of virtue when it came to spending, but Obama is the one at fault, not Bush.
5) Obama kept using the favored Democrat talking point of calling those who will benefit from tax relief "millionaires and billionaires". This too is a lie. Under the Ryan plan, there will be a number of changes to the federal tax structure. One of the largest is a shift in which the corporate income tax will be phased out and a corporate consumption tax will be phased in. This will result in taxes being levied on companies that sells goods and services in the USA -- whether or not they are American companies. That's right, a company in China that undercuts American products because it does not have to pay American taxes will not be forced to pay the same taxes as the American company. That change alone will create or save (I could not help myself) hundreds of thousands or even millions of jobs. where are the millionaires and billionaires that the president was talking about?
Ryan's budget also does away with most deductions and lowers marginal tax rates. The president said in this speech that he wanted to do just that! Then he said that Ryan and the House GOP was providing tax breaks for the millionaires and billionaires. Well, which is it Mr. president? If you repeat what Ryan proposed, are we to believe it is wonderful but Ryan's original proposal was just to benefit the rich? Gimme a break!
There is a lot more to say about the speech, but the main point cannot be made often enough: Obama gave a campaign speech. He gave no real specifics. The little he did say reveals that he has no intent to really get to the root cause of the problem by cutting spending.
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