Obama Debt Reduction Speech Rife with Class Warfare and Partisanship, But Good Start

To be frank, the first part of President Obama’s speech today at George Washington University was difficult for me to stomach.

While the President gave a cursory nod to Ronald Reagan by acknowledging that America was a country of rugged individualists, he offered a stout defense of big government. He said:

“From our first days as a nation we have put our faith in free markets and free enterprise as the engine of America’s wealth and prosperity. And more than citizens of any other country, we are rugged individualists. A self-reliant people with a healthy skepticism of too much government. But there’s always been another thread running through our history. A belief that we’re all connected and that there are some things we can only do together as a nation.”

The President then obliquely invoked the Rawlsian concept of the veil of ignorance to argue that taxing wealthier Americans more, somehow embodied self-evident concepts of fairness:

“As a country that values fairness, wealthier individuals have traditionally borne a greater share of this burden than the middle class or those less fortunate.”

He then indirectly blamed his predecessor (again) for running up massive debt because of: 1) two wars, 2) prescription drugs benefits, and 3) tax cuts.

While some of these accusations have an element of truth, particularly Bush’s prescription drugs program, President Obama fails to accept his share of the blame for America’s current debt situation. After all, President Obama added $1.8 trillion on average for each fiscal year he has been President. In contrast, President Bush added $0.5 trillion each year on average. Additionally, President Obama has had more than two years to turn the situation around. While there has been some progress, it has not come fast enough and unemployment is still higher now than when President Bush left office in January 2009.

The President then criticized the Ryan Plan for righty taking on Medicare. He claimed that up to 50 million Americans would have to lose their health insurance to reduce the deficit. He then resorted to the standard political fearmongering that both parties have engaged in during the past decade.

Then, just when I was about to throw up my hands in disgust, the President finally revealed high level elements of his proposal. Without getting into the details, his plan is to reduce the federal deficit by $4 trillion in twelve years. To get there, the President plans to increase taxes by $1 trillion, reduce spending by $2 trillion, and thereby reduce interest payments by $1 trillion.

I must admit that I was fairly shocked that the President plans to reduce spending at a rate 2 times faster than he plans to increase taxes. However, in that context, his fearmongering and finger-pointing during the first half of his speech now make more sense.

The structure of the President’s plan will likely be unpalatable to his political base. Therefore, it was necessary for the President to demonize his predecessor and Republicans to keep that base energized.

That said, this plan is not perfect, particularly its targeting of the top 2% of income earners. While those making more than $1 million per year could likely absorb additional tax increases, individuals making $250,000 a year would be much harder hit, especially if they live in high cost of living and high tax states like California or New York.

Either way, the President’s plan is a good start to improving America’s deficit malaise.

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About Sean Patrick Hazlett

Conservative clean energy crusader, national security hawk, financial analyst, engineer, and former military officer.
This entry was posted in Business, Defense, Education, Finance and Economics, Healthcare, International Security, Policy, Politics, Predictions, Social Security and tagged , . Bookmark the permalink.

10 Responses to Obama Debt Reduction Speech Rife with Class Warfare and Partisanship, But Good Start

  1. Paul Ryan gave us a real start. Today we saw Obama 2012 begin and it seems class warfare is the central plank. Regretable.

  2. Joseph Hartman says:

    Nice post. I’m liking this blog more and more. As a liberal trying pretty hard to make sense of conservatism can I request a bit more expansion on some of your ideas that conservatives may agree with innately but liberals may find puzzling? For example, what do you mean by “elements of truth”? I certainly think the wars in Afghanistan and Iraq have led to the debt, along with the Bush tax cuts. Can I respectfully ask what you find untruthful about that assertion? Also, I’d be lying if I said I weren’t a little bothered by your comparison of average dollars added to the deficit per year by Bush and Obama. I refuse to believe you don’t see the problems with such a comparison and to make it, frankly, struck me as being beneath you. Thanks again for the post though. Best Regards.

    • “For example, what do you mean by ‘elements of truth’? I certainly think the wars in Afghanistan and Iraq have led to the debt, along with the Bush tax cuts. Can I respectfully ask what you find untruthful about that assertion?”

      Nothing is untruthful about the President’s comment, but like most comments from politicians on both sides, it ignores what led to these expenditures and why they were necessary.

      For instance, the events that led to Afghanistan were not events that President Bush chose (i.e., 9/11). In the same respect, the Bush tax cuts were a response to the 2001 stock market collapse as well as the double whammy of 9/11 (as was the Federal Reserve’s loose monetary policy, which turned out to be a major factor that helped usher in the 2008 debt crisis). Like Obama’s stimulus, they were necessary to keep the economy from collapsing (although in hindsight, the debt crisis was a heck of a lot worse).

      Iraq, of course, is less open to debate as it was an elective war, so the left has a stronger argument here. However, at the time (and I was in the military then), we really did believe Saddam had weapons of mass destruction and we even believed that he would actually employ them in combat. Of course, the intelligence was wrong and in hindsight, the war appears to have been launched on the basis of poor intelligence.

      “Also, I’d be lying if I said I weren’t a little bothered by your comparison of average dollars added to the deficit per year by Bush and Obama.”

      OK. Fair point. I just did exactly what Obama did in his speech, which is state the facts without providing any context. It was unfair of me not to suggest that Obama took over at a time when massive fiscal stimulus was needed. However, even if I remove Obama’s FY2009 debt growth of $1.89 trillion, the President still grew the federal debt by an additional $1.65 trillion in FY2010 and he is poised to again add between $1-2 trillion again this year. George W. Bush’s worst year was FY2008 with a $1.04 trillion debt increase.

      My major beef with President Obama is that he has been on the job for two years, yet he continues to blame his predecessor for our current fiscal mess. Additionally, he never admists that he has also contributed to the problem. President Bush is certainly responsible for much of the increase in federal debt. In fact, I can quantify it precisely. From FY2001 to FY2010, both Presidents added $7.9 trillion to the government debt. President Obama contributed a little under 45% to this debt increase, while George W. Bush contributed the remaining 55%. It is also important to note that President Obama controlled both Houses of Congress when he added $3.5 trillion to the debt in his first two years.

      In just three years, President Obama is on track to add more to the federal debt than his predecessor did in eight years. While President Obama had the great recession, President Bush had 9/11, Katrina, and the debt crisis. Deficit spending made sense in FY2009, but it didn’t make sense in FY2010 nor does it make sense today.

      I appreciate you following the blog and look forward to more discussions in the future. And thanks for keeping me honest. 😉

  3. Scott Erb says:

    Good post — and you definitely live up to the name of your blog! Obama risks losing his own base if he doesn’t sound more partisan, but I think he is serious. Given the low incomes nationwide I find it hard to comprehend how people earning $250,000 or more would really be hurt by a slightly increased tax; they have benefited the most in recent years.

    I agree the blame game is tiring. President Bush and President Obama have made mistakes, but the seeds of this recession and its costs go back thirty years and are bi-partisan. For instance, I think de-regulation, especially of the financial sector, was a big cause. Yet a large amount of that was done by President Clinton and his administration, even if the rhetoric of de-regulation is usually with the GOP. The great Democratic and Republican compromise for three decades was “you can spend more, and in exchange we can tax less.” Politicians could get behind that compromise! Unfortunately it was unsustainable and now they have to turn it around, and that’s tough!

    • Thanks, Scott.

      The more I watch our government at work, the more I think there should be a Constitutional amendment that in addition to the traditional age requirements, mandates that there be an IQ requirement as well.

  4. The biggest concern might be that the President assumed large savings from the implementation of Obama care bending the cuve on medical costs. Ryan’s I think much more firmly puts a cap on what the federal government will pay, though it also leaves seniors much exposed to those rising costs.

    • Bruce,

      I think both plans are far too optimistic on some of their assumptions. I agree that Obama’s assumptions on bending the healthcare cost curve are likely a fantasy. I believe that Ryan’s plan may also likely have some fanciful assumptions on economic growth derived from extension of the Bush tax cuts.

      The bottom line is that the solution likely falls somewhere in the middle.

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