As the nation edges closer to hitting the debt ceiling, President Obama delivered at George Washington University yesterday a new plan to reduce the deficit by $4.4 trillion over the next 12 years — a rebuttal to the GOP’s “Path to Prosperity” plan sponsored by House Budget Committee Chairman Paul Ryan (R-WI). Matching targeted spending cuts with less drastic entitlement reform and a more realistic tax policy, Obama’s plan, as Center for American Progress notes, “puts us on a much more sustainable path, and most importantly, would do so without putting further burdens on seniors and an already-struggling middle class.” While a big step away from his 2012 budget, Obama’s plan stands in stark contrast to Ryan’s “draconian” vision that gouges out the budget at their expense. Trading cuts and reforms that overly burden vulnerable populations for tax cuts for corporations and the wealthy, Ryan’s budget earned rebuke even from conservative economists. Former President Ronald Reagan’s budget director called it “a measure of how far off the deep end Republicans have gone.” Obama did not mince words when drawing the contrast between the GOP vision and his “compassionate” alternative. In response, House Republicans elected to decry what they saw as the president’s political, unfriendly treatment rather than offer the merits of their policy. Hearkening back to the 1995 government shutdown, Republicans are now hinting that Obama’s strong words might be enough to derail budget negotiations — no matter how valid the proposal.
OBAMA’S VISION: Rather than relying exclusively on deep spending cuts, President Obama’s deficit plan offers a framework to more responsibly reduce the deficit over the next 12 years through a multi-pronged approach. To achieve the $4 trillion in deficit reductions, Obama called for $2 trillion in spending cuts while maintaining “investments” in “schools, highways, bridges and research” that help maintain global competitiveness. However, aware of the ballooning defense budget, Obama also called to cut $400 billion from national security over 10 years — a move the GOP has specifically avoided. On entitlement programs, Obama asked both parties to “work together now to strengthen Social Security” and proposed saving $340 billion on Medicare and Medicaid by 2021 through increasing efficiency. “We will reduce wasteful subsidies and erroneous payments” and “cut spending on prescription drugs by using Medicare’s purchasing power to drive greater efficiency,” he said. In stark contrast to Ryan’s Medicare voucher plan, Obama’s Medicare plan builds on the cost containment reforms in the health care reform law by expanding IPAB, a 15-person commission tasked with advising Congress on how to reduce excess growth in Medicare if costs exceed GDP per capita plus one percent but will do so without rationing care or raising premiums or cost sharing. Obama’s clearest policy declaration, however, centered on his rebuke of the Bush-era tax cuts. “We cannot afford one trillion dollars in tax cuts for every millionaire and billionaire in our society. We can’t afford it. And I refuse to renew then again,” he said. Opting to move towards his fiscal commission’s policies, Obama plans to allow those tax cuts to expire at the end of 2012 and would raise an additional $1 trillion by overhauling the tax code to lower rates and eliminate tax breaks. And should all these deficit reduction efforts miss their targets, Obama called for a fail-safe “trigger mechanism ” that would force “across-the-board spending reductions if the ratio of debt-to-GDP is not stabilized by 2014 and projected to decline for the rest of the decade.” While Obama’s plan does propose significant cuts and misses opportunities to add additional revenues and find secure additional savings in the Pentagon budget, it provides a more “balanced” deficit plan than offered by the GOP. In response, U.S. bonds and the dollar rose based on hopes that Obama’s plan would “shore up the United States’ credit-worthiness and the dollar’s reserve status.” Oil recovered by 1.5 percent.
RYAN’S ‘PESSIMISTIC’ PLAN: A driving factor behind Obama’s plan was to provide a “compassionate” alternative to slash-and-burn Republican proposal offered last week. “This debate over budgets and deficits is about more than just numbers on a page,” Obama said. “It’s about the kind of future we want.” Dubbing Ryan’s plan as a “pessimistic” vision that “is less about reducing the deficit than it is about changing the basic social compact in America,” Obama blasted Republicans for implementing cuts that allow our infrastructure to “crumble” and “collapse” and, by slashing billions from Pell Grants, for telling “bright young Americans” that “we can’t afford” to support their education. He then lambasted Ryan’s Medicare voucher program for “end[ing] Medicare as we know it.” “Instead of guaranteed health care, you will get a voucher. And if that voucher isn’t worth enough to buy insurance, tough luck — you’re on your own,” he said. Indeed, according to the non-partisan CBO, seniors will end up paying significantly more for their health benefits if House Republicans have their way. He viewed the GOP’s plan to rob Medicaid of $771 billion over the next decade by turning it into a block grant program as a vision that tells 50 million Americans, including “poor children,” “middle-class families” with disabled children, and low-income seniors “to fend for themselves.” But “worst of all,” he said, was the Republican vision increase the burden on the vulnerable just so a corporate tax rate can be ten points lower and so we can “afford more than $1 trillion in new tax breaks for the wealthy.” Criticizing the tax break he’d receive while asking seniors to pay “$6,400” more in health costs, Obama said “that’s not right, and it’s not going to happen as long as I’m President.”
POLITICS OF WHINING: Invited to the address, House Republicans bristled under Obama’s rebuke and quickly rejected his plan as a “political broadside from the campaigner-in-chief.” Almost completely ignoring his policies, House Republicans took their turn at the podium to lambast the president for engaging in “partisan rhetoric .” House Majority Whip Kevin McCarthy (R-CA) insisted that Obama’s plan was “light on the specifics” but “didn’t lack shameless political attacks and scare tactics.” Ryan claimed Obama’s “demagoguery” was “exploiting people’s emotions of fear, envy, and anxiety.” Indeed, Ryan gave a detailed account of his hurt feelings, tracing them from “excited” to “naively optimistic” to “disappointed” then to “sad,” and hinted that Obama’s rebuke “sure doesn’t help” Republicans forge a budget consensus. Now “sincerely disappointed” at Obama’s “partisan broadsides against us,” Ryan is also suggesting that his hurt feelings will make it “that much harder for the two parties to come together with mutual respect of one another to get things done.” House Majority Leader Eric Cantor (R-VA), however, did offer House Republicans’ sole policy response: “We, as a conference, won’t raise taxes” on the wealthy.