The President's Deficit Reduction speech

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2011-04-13 05:23 PM

Schmidt
Colorado Springs, CO
Posts: 1058

I watched Obama's 40 minute speech today at George Washington University. I thought he hit all the right buttons and was especially critical of the Paul Ryan budget that cuts taxes for the super rich while paying for it by cutting benefits on Medicare. His proposal cuts the deficit by $4 trillion over the next 12 years, but we don't know the details. Here's one of my favorite lines in his criticism of the Paul Ryan proposed budget:

"Worst of all, this is a vision [Ryan budget] 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. Think about it. In the last decade, the average income of the bottom 90% of all working Americans actually declined. The top 1% saw their income rise by an average of more than a quarter of a million dollars each. And that’s who needs to pay less taxes? They want to give people like me a two hundred thousand dollar tax cut that’s paid for by asking thirty three seniors to each pay six thousand dollars more in health costs? That’s not right, and it’s not going to happen as long as I’m President."

There are many more good lines, which the media are extracting. The transcript as prepared for delivery is at the above link, but some media pundits said he deviaited from his script on a few points.

As predicted the Republicans are slamming the proposed tax increase like it applies to everyone, never mentioning that it only applies the top 2 percent.

2011-04-14 01:17 PM

JEM
Ocean Springs, MS
Posts: 1

Here is my plan.

Adopt a Millionaire Program.

By groups of 33, let's adopt a millionaire and because seniors will have to pay $6,400 more in medicare expensed to fund their $250,000 tax cut. I would make for great bumpersticjer that says" ... we adopted Warren Buffer."

2011-04-14 05:17 PM

Schmidt
Colorado Springs, CO
Posts: 1058

Hey, I like the idea. We could even set up a facebook page listing the millionaires/billionaires needing adoption and a corrsponding "donor list"of 33 seniors willing to volunteer $6,400 each to that person's cause. Ha!

We could start with Donald Trump...he's badly in need of adoption.

2011-04-18 08:21 PM

paul T.
Colchester, VT
Posts: 31

You are missing what the President truely said...he (Obama) said that he was going to cut $4 Trillion dollars over the next 10+ years....that's roughly $400 Billion dollars a year...when we are running a yearly deficit of over $1.5 Trillion dollars...what President Obama is saying is that hisplan would add over $10 Trillion dollars to our National Debt...($1.5 Trillion less $400 Billion=$1.1 Trillion dollars X 10 years= +$10 Trillion dollars...As a nation that would enlarge our debt to over $24 Trillion Dollars...our economy would shatter...think about it....how many people do you know that have had to declare bankruptcy because they spent to much, and couldnot get out from under that rock...we as a nation are headed that way...if we just cut across the board 1/3 all our spending we would have a balanced budget...YES IT WOULD HURT...but just think...67% of something every day is still alot better thatn 100% of nothing when the economy crashes...now i'm not saying I like Ryan's plan either...because neither party is being truthfull...

2011-04-19 08:34 AM

Schmidt
Colorado Springs, CO
Posts: 1058

Paul, you make some excellent points. We would all like to see our debt cut dramtically, but consider that our current level of debt was 30 years in the making. Looking at the charts (and data) from the US Government Spending website, as a percent of GDP, Federal debt increased every single year since 1981, except for the period 1998-2001 (the Clinton budgets). In 1981 it stood at 31.82 percent of GDP. In 2011 it is estimated to be at 102.6 percent rising further to a maximum of 105.96 percent by 2016 before leveling off. These are the CBO forecasts if we do nothing (and I assume this means the Bush tax cuts expire at end of 2012).

But you are right that our total debt in dollar terms will still be increasing. This is shown in the spending chart. The picture looks more bleak in total dollar terms than as a percent of GDP.

But getting back to the GDP vs Debt chart, our federal debt as a percent of GDP stood at 121.96 percent of GDP in 1946 right after World War II. It took us 35 years to lower it to the low of 31.82 percent in 1981. And as I have noted in another posting, the lowering of the debt was largely accomplished with higher taxes on everyone, but especially the rich. In the 1950s the top marginal rate was 91 percent. It was lowered to 70 percent in the 1970s, but then when Reagan took office he lowered it first to 50 percent in 1982, and then 28 percent in 1988.

As you can see from the charts, the Reagan tax cuts started the upward spiral of debt.

I also agree that we need to see spending cuts (and tax increases) across the board, but I agree with many economists that making too large of spending cuts or tax increases can have a detrimental effect on the economy and more importantly jobs. I would be happy to allow the Bush tax cuts expire for everyone, and for starters go back to the Clinton era rates, including taxes on capital gains and dividends. But making too many spending cuts too quickly (as per the balanced budget amendment) could plunge us back into recession.

It's a delicate balance in how to keep the economy going, reducing unemployment, and cuttiing budget deficts and debt. After the war, it took us 27 years to lower our debt to just 50 percent of GDP in 1963. I think it will take more than 20 years to get there again...and perhaps much longer because the American public will never vote for anyone that proposes the types of tax increases that would be necessary to get us there.

And if you compare our debt ratio to that of other countries, we are up there with some bad company. The CIA's World Factbook has us ranked No. 11 right next to Ireland. Japan is the worst offender at 228 percent of GDP, but most all of that debt is owed to their own citizens, whereas more of our debt is spread across the world in places like China, Japan, Saudi Arabia and a few other countries.

My criticism of the Ryan budget is not in the absolute terms of just cutting $4 trillion...it's in how he expects to achieve it by putting most of the burden on Medicare recipients while cutting taxes again for the super rich. Is $4 trillion over 10+ years enough in both the Obama and Ryan proposals? Perhaps not, but the political reality is that with a divided Congress, it would be remarkable if we made even those first steps. To move us even further along the path of debt reduction, the American public needs to be more educated on the issues rather than just accepting the spin. And I don't see them trying right now.

2011-04-19 09:03 AM

paul T.
Colchester, VT
Posts: 31

Frank, thank you for those nice words, I too can see your points regarding GDP and all...But maybe we do need drastic cuts and all...Yes it will hurt everyone for some time...but think what would happen to everyone if the economy crashes...there would be nothing left to give/help the people...as I said...this country eats(spends too much)...and I would think that 67% of something is still alot better than 100% of nothing...maybe cut spending across the board by 10% every year until we reach a balanced budget...as per regarding taxes...see my post in "taxes"...as a wise economist said...it is not that we tax to little...it is that we spend to much...We would all love a gov't that would give its people everything it wanted....but that isnot feasable...another way to think of it is this...I would love to take my four kids to Disney and Seaworld, BUT I just cannot afford it...should I go into debt just because it is what my family may WANT...or should I do a vacation say like going to the Beach for 4 days that would not bust my budget...My family may NEED a vacation, but it doesnot mean that they must get what they WANT...gov't needs to be the same way...

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