Right Thinking From The Left Coast
Chance favors the prepared mind - Louis Pasteur

Wednesday, April 13, 2011

The Prez’s New Plan

A few thoughts on Obama’s volley on the Burgeoning Budget Battle.  I will not describe it as a “plan” since it clearly isn’t one.  It’s more of a rebuttal with a little ground given.

First, I think conservatives are wrong to respond to this so negatively.  While the President isn’t giving as much ground as I’d like, his proposal has three dollars in spending cuts for every dollar in tax hikes.  It’s a huge step from his earlier joke of a budget proposal and a big step toward the Simpson-Bowles plan that is, I think, clearly becoming the most likely thing to happen.

(To be fair, the Democrats went completely non-linear when Ryan unveiled his proposal.  Compared to Pelosi et al.’s rhetoric about starving seniors to death, the GOP response to Obama has been comparatively mild).

The main conservative opposition stems from an opposition to any tax hikes whatsoever.  While I sympathize, I just don’t think that’s a realistic point of view.  We’ve made commitments to seniors, to our creditors and to the defense of this country.  That alone can not be sustained at the current tax rates. However, any tax hikes, as I said below, need to come with enough reform to, on balance, reduce the deadweight loss to the economy—that being the bargain Reagan struck when he raised taxes to attack the deficit. And they need to be broad-based.  The pitiful returns one gets from raising taxes on just “the rich” exposes the main driver of Democrat support for tax hikes—economic control, not revenue.

The biggest problem with the Obama proposal, for me, is its reliance on magical thinking for reducing Medicare spending.  It doesn’t raise the retirement age and certainly doesn’t cap spending the way Ryan’s plan does.  It relies on Congress to control itself in issuing coverage mandates and for Committees of Wise Men to decide what treatments should be covered.  Obama and his liberal allies support these ideas because they believe that people are stupid, the market is useless and government is benevolent and wise.  My attitude can be easily discerned from my tone.  If we leave spending restrain in the hands of Congress, rather than the market, there will be no spending restraint whatsoever.  And committees of wise men will not decide healthcare spending based on science or cost-benefit analysis; they will decide based on politics and influence peddling.

Finally, it’s important to remember something in this budget debate—anything we do is only binding today.  Relying on future Congresses to somehow show the spending restraint we refuse to exercise now is simply kicking the can down the road.  Increasing spending now, projecting that future Congress will rein it in and counting that as a “spending cut” is simply bullshit.  While long-range plans are the key to deficit control, the commitment to that control is what Congress does right here and right now.  That’s why raising the retirement age or cutting current spending or even raising taxes is important—it’s something that would actually happen right now rather than something we kinda sorta hope future leaders will make happen.

In the end, this is not really a serious proposal or a serious speech.  It does not even attempt to project spending over the timeline that Ryan does nor does it restrain spending as sharply.  Indeed, it has the usual blather about pointless “investments” in useless stuff like high-speed rail.  I suspect that if the CBO scored this, they would find that it doesn’t work at all without a broad-based tax hike.

All that having been said, I think today’s speech is a good sign.  It’s a sign that we’ve got the Democrats pointed somewhat in the right direction.  Every time the President speaks, he’s moved a little bit closer to reality.  The Democrats have now admitted the scale of the problem—something they spent years denying.  They’re acknowledging the kinds of steps that need to be taken.  They’re still laboring under the delusion that tax hikes on the rich and magical medicare thinking can fix the problem.  But the CBO will continue to put the lie to that.

As I said, the Democrats are getting pointed in the right direction.  A bit more turning and a strategically placed boot in the ass and we might actually get somewhere.

Posted by Hal_10000 on 04/13/11 at 06:56 PM in Politics   Law, & Economics  • (0) TrackbacksPermalink
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