The President released his debt reduction plan today. Based on its contents, it is clearer than ever that he is more concerned about his reelection prospects than solving the nation’s economic and fiscal woes.
President Obama again leads with his tiresome demonization of the “evil rich.” His plan notes:
“These measures include cutting tax preferences for high-income households, eliminating tax breaks for oil and gas companies, closing the carried interest loophole for investment fund managers, and eliminating benefits for those who own corporate jets.”
I am fine with the president eliminating tax breaks for oil and gas companies so long as he also does away with wasteful programs that allow the government to make investment decisions that benefit party loyalists. An egregious example of this is the $535 million Solyndra default.
However, the President’s conspicuous singling out of depreciating assets like corporate jets and carried interest from investment fund managers appears to be baseless scapegoating (more on that later). I suspect he is highlighting them only because he thinks it will play well in Peoria.
The plan seeks to reduce the deficit by a total of $3 billion from now until 2021. Of course, it claims $1.044 trillion that was already going to result from the American drawdowns in Iraq and Afghanistan. If one removes this number from the President’s plan as well as the debt service payments paid of $413 billion, one can get a better sense of the real proportion of deficit savings from spending cuts and tax increases.
The President’s plan contains $320 billion in Medicare and Medicaid cuts, as well as $257 billion in mandatory savings. It doesn’t touch Social Security, but it punishes active military personnel and military retirees who sacrificed at least twenty of the best years of their adult lives by cutting their medical benefits by at least $21.8 billion. This “savings” nets out to $130 billion after one deducts President Obama’s $447 billion jobs bill.
In contrast, the bill provides for $1.534 trillion in tax increases, which overwhelming “punish” high income households (over 81% of the revenue generated is from individual income and estate taxes). And if you believe that the government can raise this much money from only people making more than $200,000 a year, expect an unpleasant reality check should President Obama win the next election.
Unsurprisingly, the other headline terms that the wealth redistributors frequently use in their talking points are mere drops in the bucket. Eliminating special depreciation rules for corporate jets represent only 0.3% of the total proposed revenue increase. Closing the carried interest loophole for “evil” investment fund managers represents a meager 0.8%.
The bottom line is that the President’s deficit proposal consists of 8% spending cuts and 92% tax increases. Just because he put lipstick on his plan does not make it any less of a partisan pig.
Reflections of a Rational Republican 
Love the quip about the pig reference. But most of these cuts from what I’ve been able to keep up with were already going to happen like bringing our troops back. Also taxing the rich more doesn’t seem like a good plan. My father a six figure earner losses nearly 35-40% of his paycheck already to taxes and such.
As I told and proved to a person. Most of these guys pay enough taxes to support multiple families of four just with the taxes they pay and in some cases they still owe the government some more on the end still.
Agreed. This plan is nothing but a campaign ploy.
Sean ,
You are far too hard on our Glorious leader. The man is obviously a financial genius. You brought up Solyndra. So how do you make a bad investment worse ? You get your investment subordinated to new investors.In January Obama got the taxpayers put behind the new investors $75million. Maybe a guy that smart really can reduce the deficit.
http://www.bloomberg.com/news/2011-09-03/taxypayers-rank-behind-solyndra-s-investors-under-obama-refinancing-deal.html
Yeah. Especially since tax payers, who held Solyndra debt, are supposed to have priority over equity holders for the firm’s cash flows. It is GM restructuring all over again.
Well, I think the President is on the right track. Our wealthy have benefited from huge tax cuts in the last thirty years and pay historically low tax rates, and the lowest in the world. That wealth has not been invested in making jobs so much as making bubbles. Even with these taxes our wealthy will still be taxed at lower rates than under Reagan and the lowest in the industrialized West. It’s tax warfare to force the poor to suffer the cuts and become unemployed while those who can afford some sacrifice aren’t touched — even though they benefited disproportionately over the last thirty years (the top 1% income rose 291%, the bottom 60% didn’t keep up with inflation). Look, I don’t want to go back to the super high Eisenhower years where the wealthiest pay 90%. I don’t even think we need to go back to the Reagan rates, which were also much higher. I’m not even advocating altering the fact our wealthy pay the least taxes in the industrialized world (perhaps some East European states are lower, I’d have to check). But with the poor constantly demonized for being lazy, dependent on welfare, stealing from the wage earners, or being bribed to vote Democratic (talk about class warfare rhetoric!), I don’t think anything the President has said comes close to that. Heck, some people say that you shouldn’t be able to vote if you don’t pay federal income taxes!
While we can agree on many things, this issue is one where my leanings to the left and yours to the right create a real substantive difference. I suspect your side will win this battle, but at least until people actually talk seriously about taxing the wealthy at rates that are above those from the Reagan era, it’s not demonization of the rich.
Scott,
I think we’ll have to agree to disagree on this point.
Also, I never heard the proposal that “some people say that you shouldn’t be able to vote if you don’t pay federal income taxes!”, but I actually like it!
What a fantastic idea! It completely eliminates moral hazard.
It also means that anyone who is poor and struggling will likely be unable to have a voice in the politics of the country. That will increase alienation, lead to resentment, and could even be fodder for radicalism. Democracy means all citizens share in the choosing who governs. If it were government of the wealthy, by the wealthy and for the wealthy, society would likely break down. Failing and being poor shouldn’t cost you being able to play a part of the body politic.
“Democracy means all citizens share in the choosing who governs. If it were government of the wealthy, by the wealthy and for the wealthy, society would likely break down.”
First of all, we don’t live in a democracy. The federal government is technically a republic. A pure democracy would be chaotic. California has about as close to a democracy as any state in the union (i.e., the referendum system), and it is a sheer and unmitigated disaster.
I also don’t advocate government of the wealthy, by the wealthy and for the wealthy. All I advocate is that only taxpayers should have the right to vote, because it eliminates moral hazard by those who contribute nothing to the system.
I think what most people have asked for but haven’t seen is true tax reform. We keep talking of “rich” and “poor” in the context of what that meant 20 years ago. $250k is no longer rich, and beyond that, from what I can tell the rich who are in bed with government remain largely untouched. The lame rhetoric of “the middle class vs.millionaires and billionaires” only makes it that much more laughable.
Personally, I want to see a proposed plan where a guy like Immelt, for example, is so pissed at what Obama’s proposing he threatens to quit his role as “Jobs Czar” and expatriate to Bermuda. I then want to start reading headlines that Obama’s at risk of losing all his rich, “fat cat” financial sector friends if he continues along the same path. Then we’ll know he’s really working for the middle class instead of just saying that he is.
As I’ve said in one of my rants, I don’t worry any more about the “transfer of wealth”, even though I totally disagree with it in principle. No matter what happens in the economy, the “real rich” are just going to regroup and restrategize a way to capitalize on the ignorance that the middle class has held since the dawn of time, getting twice as rich as they are now no matter how much Obama or Michael Moore wants to tax them. All it takes is a posted sale on hamburgers at McDonalds, 20% cheaper vacations to Disneyland, low introductory credit card rates, another “cash for clunkers” program, or some other “sounds-great-now-who-cares-about-later” thing and the middle class will be handing whatever so-called transfer of wealth it receives back to the government and the rich in droves. Present company excluded, the bulk of the middle class are that short sighted, and like Bill Maher says, “That f–king stupid.” The remainder are those who have worked their way above that $250k line, and now they’re getting punished for doing so.
Great point. If you give the average American enough rope, he will hang himself. Even the smart ones.
I remember my business school classmates taking out $200k loans in business school to fly to India and China for vacation. I was scared sh*tless when I had to take out over $100k in debt just to pay for tuition. I then lived in a 3-bedroom apartment with 2 kids and 1 car for about 3 years after graduating until I paid back that loan (plus I thought housing prices were WAY too high at the time – I was right of course).
$250 K not rich? How do define rich, Vern? That’s the top 1.5% of earners in the US. If the top 1.5% are not rich, then how is it defined? For the record I actually think of my family as rich, and we earn less than $200 K (but not a lot less — with two incomes, to be sure). But we’re in the top 6%. Obviously we’re not in the Buffett super-wealthy (I almost wrote buffet-supper wealthy) class, but where is the line between rich and not rich?
A minor quibble: in political science we define democracy in a way that both encompasses what we have and includes Republics. Crude majoritarianism is considered undemocratic because people could vote to have other people not participate, which would be undemocratic. I understand the distinction between Republic and democracy coming from Aristotle, so clearly you’re not wrong. It’s just that the usage in my field now includes the US.
The idea of democracy does not require one contribute to the system. One could imagine a system with no direct taxation of individual incomes. Everyone has a stake in the system because they are citizens with duties and responsibilities.
“A minor quibble: in political science we define democracy in a way that both encompasses what we have and includes Republics.”
I was not aware of that. Fair enough.