President Obama has presented yet another economic plan to do I am not sure what. This, I think, is the third plan in the last 2 weeks but it confusing as they are all sounding rather empty, seem to drone on and meshed together.
Before getting into some of the details, having reviewed the substance, the rhetoric and the political landscape, it seems to me Mr. Obama has given up on governing. He has chucked it in. He is no longer interested, if he ever was, in trying to present credible leadership and sound ideas to improve the climate for the private sector to grow and provide job opportunities for the American worker. His plan, his remarks are all directed in his bid to be re-elected.
My reaction is not based just on the tax issue. I advocate a complete overhaul of the tax system to make it simpler, neutral and effective. Under my definition, it may be that some people will pay more than they are currently paying, tax expenditure will disappear, but there will be certainty, fairness and limits. However, none of that is the case in the material presented by the President.
Looking at the overview, Mr. Obama calls for deficit reduction of around $3 trillion over 10 years. Some may have the figure higher and some lower but let’s stay with that.
- $1.2 trillion in discretionary cuts that were already enacted in the Budget Control Act passed by Congress. This does not count, it has already been agreed to.
- $580 billion in cuts and reforms across all mandatory programs. We can take a look at this later
- $1.1 trillion in savings from troop draw downs in Iraq and Afghanistan. This number is already in the projections and who knows what will happen in the future for National Security.
- $1.5 trillion in tax reform — $800 billion from allowing the top rate Bush tax cuts to expire. The Bush rates expire. Full stop. That fact-unless changed by Congress-is already in the future budget numbers.
- $700 billion in closing loopholes and limiting deductions. This is a real tax raiser mostly rejected by Congress in the past and not a way to get to a better tax system.
- $430 billion in additional interest savings. Making this projection is bogus and an illusion. It is part of the game to make the numbers look higher. Both sides do it but it dishonest.
So in looking at all this, I do not see where the President is making any real suggestions at all. Goodness knows some Republicans have not been very receptive in the Administration’s policies and suggestions. However, the President is supposed to be a leader providing real solutions. I do not see it here. It reminds me of the Talking Heads song lyrics:
This ain't no party, this ain't no disco
This ain't no fooling around
No time for dancing or lovey dovey
I ain't got time for that now
However, since my focus has been on taxes rather than on music, looking into the suggestion more closely:
- Allowing the 2001 and 2003 tax cuts for upper income earners to expire ($866 billion)
- Limiting deductions and exclusions for those making more than $250,000 a year ($410 billion)
- Closing loopholes and eliminating special interest tax breaks ($300 billion)
- Enact some sort of new tax rate or payment for taxpayers will more than $1 million in income.
We have seen most of this before. The “loopholes” I assume are the same ones bounced out before such as “carried interest on hedge fund managers”, “oil and gas expenses”, and “corporate jet” depreciation. These were in Plan Two from last week. Some of these can be shaped along with dozens of other provisions that need a second look. (Note: what about the billions and billions of dollars in tax provisions expiring at the end of this year?)
There will be lots of attention on the so-named “Buffett Tax” proposal increasing taxes on incomes of more than $1 million, about 450,000 taxpayers. It is symbolic as it does not raise much revenue, is political theater and shows this plan is not serious about addressing the deficit or any economic issues. Frankly, from a tax policy point of views, it is silly. I would have thought the President would deem this a distraction but apparently not. He views it as a centerpiece. I would not break my pick on this, one way or the other.
Today’s announced plan includes $320 billion in health savings. I confess I am not an expert in this area but I can tell a government budget scam when I see one. For example, this plan calls for Medicaid to reduce wasteful spending and erroneous payments. Goodness that sounds like something Ronald Reagan would come up with, including $224 billion in reductions in overpayments in Medicare. The question is—why are they making any overpayments at all and why doesn’t the government take steps to stop it? Does the President wants deficit reduction credit for something that should be done right now? Also note any so-called health savings affecting beneficiaries would not begin until 2017. Is there any significant to the date 2017 other than any second term by Mr. Obama would be over?
In addition, the plan includes $250 billion in savings from other government programs including:
$33 billion in savings from agriculture subsidies, payments, and programs. No problem here. Farm income has been quite robust.
$4.1 billion from the disposal of unused government assets. There is that selling of the Grand Canyon again. (see an earlier piece on this)
$92.2 billion from restructuring government operations and reducing government liabilities. OK fine, do this, that is why you were elected but it not deficit reduction.
$77.6 billion from improving Federal program management and reducing waste and abuse. Another Reagan move and a ruse.
I do not profess to understand the operation at the White House. They are the political professionals and I just have an opinion. I want my country to succeed. I think it is in a horrible moribund state. The direction (and demeanor) of the President along with this plan, what has been done and not done in the past year will not change the course for the better.