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.