Obama’s Deficit Talk

Pundits are calling President Obama’s speech on deficit reduction a “defining moment” for liberals, meaning that they think he’s going the Clinton route, disappointing his Left flank to strike a deal, get the economy under control and secure a second term. But what did Obama actually say at George Washington University on Wednesday?

He began, oddly enough, with the notion that Americans are rugged individualists with a healthy skepticism of too much government – an essentially conservative notion. But he quickly added that they also believe that we’re all connected and must do some things as a nation – like funding the military, schools, railroads and highways, research and so on. Many in the Tea Party movement would disrespectfully disagree.

Each of us also deserves some security and dignity, he said. Thus, we have programs like Medicare and Social Security, unemployment compensation, and Medicaid. We wouldn’t be a great country without those commitments. And to pay for all this, the wealthy have often contributed a bit more.

Those were the good old days.

Sometimes it’s necessary to borrow to pay for priorities, he said. But the county has been amassing too much debt for almost 30 years. Bipartisan deals protected the middle class and seniors, but the country lost its way in the last decade, with two wars and an expensive prescription drug program, plus unpaid-for tax cuts. Then the recession forced more borrowing. It was the right thing to do, but expensive.

Why is budget talk important? Because the US will continue spending more than it takes in unless something serious is done. Just the interest on debt will be $1 trillion by the end of the decade. By 2025 taxes will only be able to cover Medicare, Medicaid and that debt interest with projected revenues. The rest will require borrowed money. If that happens, the US won’t be able to afford good schools, decent roads or much of anything else. Interest rates will rise for everyone.

Reducing waste, abuse and foreign aid won’t be enough. Two-thirds of the budget goes to Medicare, Medicaid, Social Security and the military – Obama called the last “national security.” So any serious plan requires putting everything on the table. But the Republican plan put forward by blue-eyed Scrooge Paul Ryan would fundamentally change the country: a 70% cut in clean energy, 25% cut in education, 35% cut in transportation, and less for college aid. It says that instead of guaranteed health care you would get a voucher, and if it’s not enough, tough luck. It ends Medicare as we know it. Obama called this a “deeply pessimistic” vision.

The Republicans say that somehow the country can afford more tax breaks for the wealthy while increasing costs for everyone else. There’s nothing serious or courageous about this, charged Obama. In response, he proposed what he called “a more balanced approach,” a plan that supposedly puts everything on the table while protecting people who need help. Here it is:

1) Save $750 billion by continuing with the budget cuts made last week. But he still wants to invest in research, technology and infrastructure.

2) Find more savings in the defense budget, plus a basic review of our mission in a changing world. This sounds like the piece least likely to be implemented.

3) Further reduce health care spending. This means lowering bills by reducing the cost of health care – wasteful subsidies, drug costs, more efficiency for Medicaid, new incentives, and a commission on unnecessary spending. He projects saving $500 billion by 2023, and another trillion in next decade. If that doesn’t work, then look at changes in Medicare – but not a voucher program.

4) Reduce spending in the tax code. The country can’t afford tax cuts for millionaires, and he refuses to do it again. Instead, he proposes limiting itemized deductions for the wealthy and reforming the tax code.

The total impact, Obama claims, would be to reduce the deficit by $4 trillion in a decade. If the recovery speeds up and the economy booms even greater progress can be made. But if not, he proposes a debt “fail safe:” If the debt doesn’t fall by 2014 and the goals aren’t met, make more spending cuts and more changes in the tax code.

He didn’t mention any of his potential presidential rivals by name but said, in essence, that people like Mitt Romney and Donald Trump don’t need another tax cut. Drawing a line in the sand that will please progressives – if he sticks with it – he promised to oppose any attempt to turn Medicare into a voucher program. The deficit should be cut with a scalpel, not a machete, he said. On the other hand, if some changes aren’t made the US won’t be able to meet its commitments. For liberals, he said, the goal should be to prove that those commitments are truly affordable in the long term.

At the end came his version of the “vision thing.” Americans, said the president, believe that they can’t just think about themselves, but also must consider the needs of the country, their fellow citizens, and what’s required to preserve the American Dream. Thus, he called on Americans to rebuild, together, and pass on a country they can all believe in.

But that’s precisely the issue – time is running out, yet it looks like people in the US still don’t agree on anything these days, right down to whether their leader is actually an American.

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