Wednesday, April 13, 2011

Obama Has To Be Pushed Kicking And Screaming To Act Like An Adult

So earlier this year president Obama proposes one of the most ludicrous budget proposals floated by a sitting president in decades. It completely ignored the work done by the deficit reduction committee, a committee formed at his request, which issued its report late last year.

This budget, coming in at a whopping $3.7 trillion, showed that the president was completely not serious when it came to the question of how to deal with the budget deficit. (This budget claims to hold spending of $3.7 trillion, however other commentators have noted that the true cost of this budget could actually be closer to $5.8 trillion.) In fact, although he touted the proposal as one which would reduce the deficit, most, if not all, of the savings contained within the proposal would not occur until after Obama left office. That is, if he left office in 2016. In fact, most of the savings contained in his proposal were not actually savings at all. What they were, two thirds of the time, were simply a freeze in the amount that we would be spending. In other words, we still spend the same and not have to reduce anywhere.

Does that make sense to anyone else? What credit card company accept the argument that you have increased your spending, but merely maintain the same level but she did that sometime in the past?

Then we have the Republicans trying to make political hay out of this. A lot of them were recently elected on the promise they would cut $100 billion from the federal budget this year. The problem was, they seem to only target the parts of the budget which were controversial among their base. High on their list were Planned Parenthood and NPR.the problem with the Republican version of cutting the budget deficit is 1) the cuts were too small and 2)  they did not address the problem of entitlements.

When they finally did manage to push through their cups, it seems the Republicans were just as dishonest about what they were cutting as the Democrats are in what they are "investing" in. Instead of actually cutting expenditures, it seems that the majority with the GOP managed to do a budget deal with the President that averted the shutdown, was to merely not spend money which has not been spent yet.

Add into that the problem of the debt ceiling and you think that some people would start taking process of reforming the budget a little more seriously.

It took the threat of a government shutdown  for President Obama to his knowledge that maybe his proposal might not be on target. So then we get today's address from the president. after months of talking about "winning the future", and being confronted with Congressman Ryan's budget proposal (not perfect, but at least its an honest attempt to deal with the problems), that maybe something had to be done to look like he was going to do something about the problem. After all, he is up for election next year.

And nothing gets Obama working at the thought that he may have to campaign to on to his job.

So what does he do? He becomes a born-again believer in the deficit reduction commission of 2010 (aka National Commission on Fiscal Responsibility and Reform)! Except, he really doesn't. He just says that he wants to adopt some of the proposals of the committee that he created. And then ignored.

President Obama starts with the overused trope that, "We have to live within our means, we have to reduce our deficit, and we have to get back on a path that will oust to pay down our debt[.]" (Gee, you mean all those people who've been deficit hawks may actually have a point?) But, it wouldn't be a president Obama policy speech if he didn't have someone to blame for the problem that was going on. Fortunately, he can go to his old standby and blame President Bush for all problems. Nice to know that our president has his priorities straight and fixes the blame before he does anything else.

When the president finally deemed to describe what his plan would involve this is what we get:

Approximately $770 billion in nonsecurity, discretionary spending cuts through the year 2023. This would be coupled with $360 billion worth of cuts over the same period to mandatory spending. allegedly this would save approximately $1.1 trillion.. Heaven only knows if this is actual cuts or simply spending freezes, which don't actually reduce the amount of money we're spending.  The

When it comes to the big problems, Medicare and Social Security, the President was much more vague as to what he wanted to do. the president Obama's plan, there will be no reason to the Medicare retirement age nor a switch in how payments under Medicare made. With regards to Social Security, president Obama was even less specific, although he did take the position that Social Security is not in crisis nor is it contributing to the deficit problem.

Apparently, Social Security is solvent because it still has assets. The assets which Social Security has are not cash on hand because that's already been spent. The assets which so security has our bonds which a purchase from the federal government. In order to get the money they would have to redeem the bonds from the federal government. Which would mean the government have to issue more bonds and take on more debt in order to pay the Social Security payments  which people are entitled to. So no, I guess Social Security isn't insolvent, yet. It's just that the federal government is going to have to come up with a whole bunch of money to pay back to Social Security for the loans that it's taken out from Social Security over the years. (I would suggest you read this article written by someone a lot smarter than me on the subject.)

The President Obama's minds that must sound perfectly solvent and not a drain on the budget. To me it sounds like a house of cards about to be blown over.

The President's position seems even more absurd if you look at what he actually said in his speech. President Obama stated
Up until now, the cuts proposed by a lot of folks in Washington have focused almost exclusively on that 12%. But cut to 12% alone won't solve the problem. So a serious plan to tackle our deficit will require us to put everything on the table, it takes on excess spending wherever it exists in the budget. A serious plan doesn't require us to balance our budget over night-in fact, economists think that with the economy district to grow again, we will need a phase I approach-but it does require tough decisions and support from leaders of both parties. And above all, it will require us to choose a vision of America we want to see live in 10 or 20 years down the road.
It's so nice to see that everything on the table means we're not going to talk about Social Security and Medicare changes.

President Obama went on to say that would be wrong to make changes to Medicare and Social Security because in 10 years it would affect a person who turns 65. That is, a hypothetical person who, 10 years from now, turns 65. 10 years is an awful long time to readjust your planning for the future. You can do a lot in a decade. Apparently, President Obama does not have the faith in the American people to make adjustments given a 10 year lead time.

Not content to believing that the average American is incapable of making any future plans, President  Obama began to make the case for increasing taxes and decreasing the amount that Americans get to keep their own money. President Obama states, "Beyond that, the tax code is also loaded up with spending on things like itemized deductions. And while I agree with the goals of many of these deductions, like homeownership for charitable giving, we cannot ignore the fact that they provide millionaires average tax break of $75,000 while doing nothing for the typical middle-class family that doesn't itemize." To that end, the president is going to propose more changes to the tax code by restricting the amount of itemization deductions for the wealthiest 2% of Americans.

Part of the reason why Americans donate to his right thing to do. Another part of why we donate is because it's something that we can write off our taxes, an incentive that the government encourages. In fact, in 2006 for instance, the donations by Americans equaled 1.7% of the total economy for that year. In terms of total dollars, those in the top tax brackets give more than those in the bottom. Percentage wise story is different.

In a way, this is an interesting insight into President Obama's philosophy. He is a liberal politician. And in this country, liberals give less of their money to charity then conservatives. To President Obama's mind, going after itemization such as charitable donations make sense. Why? Because, if the governments job to provide, and not the individual or local community groups.

In addition to calling for restrictions on itemization, President Obama then makes a rather interesting comment. He states, "But to reduce the deficit, I believe we should go further. That's why I'm calling on Congress to reform our individual tax code so that it is fair and simple-so that the amount of taxes you pay isn't determined by what account and you can afford."this is curious for a number of ways. First, it suggests that individuals are escaping paying their tax liabilities a far higher rate than say corporations. Second, it seems to indicate that he wants to radically change the tax code in some fashion. Disney suddenly wants to go with a flat tax? I find that to be highly unlikely. Which brings me to my third question: is this president Obama's way of saying that he intends to start asking for a VAT tax?

(If you wish to read the entire speech, you can find it here.)

In short, this was another "hope and change" speech that ignores reality. President Obama is short on specifics, and long on platitudes. He calls on people to remember the better days that existed in the past and to hope that they will exist in the future while promising not to make any fundamental changes to massive burdens which are driving the deficit in this country.

Once again, President Obama refuses to deal with the problems this country faces and instead promises to continue the "bread and circuses" policy has been the heart of his administration. it seems that I President Obama's mind,  there is no sacrifice worth taking today that can ensure the future tomorrow because to do so may cause someone discomfort. 

While I do not like the idea of losing some of the cherished itemization benefits than current US tax code, I realize that there may come a time when those will have to be changed or abolished in favor of a system which adequately provide for the needs of the country. However, it is my belief that changes need to be made now and not in the future. plans for the future should be made based off of the worst-case scenario and not the best case scenario. It is also my belief that before we begin taking property away from people, whether it be through direct taxation or through amendments to the tax code which would abolish the advantages provided to a wide range of people through homeowner mortgage deductions or Roth IRAs, that we first make serious cuts alterations to the programs which we already have and have paid for.

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