James Pethokoukis

Politics and policy from inside Washington

Conflict of visions: Obama vs. Ryan

Apr 15, 2011 20:53 UTC

So the House just passed Paul Ryan’s highly-detailed “Path to Prosperity” Plan. It almost immediately achieves primary balance and reduces debt as a share of the economy. It balances the budget in the 2030s and eliminates outstanding debt in the 2050s by cutting and restructuring government healthcare spending. And it does all this without raising taxes while also lowering tax rates on companies and investors, both big and small. Even more impressive, the plan uses the slow-growth economic assumptions of the Congressional Budget Office, which, by the way, has scored the lengthy fiscal blueprint.

Then we have President Obama’s plan, as outlined in his speech earlier this week. Despite an economy plagued by high unemployment and falling wages, somewhere between 40 percent and 60 percent of his debt reduction would come through higher taxes over the next decade.  And there is no long-term plan to bring the budget into long-term balance. Achieving that while also keeping Obama’s high level of spending — even assuming unproven, Washington-imposed healthcare cost controls work —  would require raising middle-class taxes, a reality the White House wishes to hide.  Even worse, Obama assumes growth will be stronger than the CBO does, making a comparison with the Ryan plan even less flattering. And will the White House ever submit this plan to the CBO? Who knows? The fiscal scorekeeper would have a tough time scoring it in its present shape. (The propeller-heads in the White House budget office apparently had no role in in creating Obama’s new plan. Neither did the defense department despite the defense cuts.) And it was all bundled in a thick wrapping of class-warfare rhetoric.

At least, that’s how I see things.

COMMENT

So both plans fall woefully short of addressing all of the challenges confronting the Nation’s fiscal state. Once again, no doubt, politics has clouded the better judgement of our representatives and forced our “Better Angels” to be driven away. As usual for most complex problems, the real solutions lie somewhere in the middle between the typically delivered two extremes. The question for us to answer is does any of our Congressmen Possess the intestinal fortitude to risk their political futures, step away from the party lines/positions and reach across the political aisle and embrace compromise and consensus building. Everyone, and I really mean everyone, has to sacrifice their current socioeconomic positions in this great Nation and give back to demonstrate to the rest of the world (and financial markets) that we are very serious about addressing our debt situation. Credit worthiness is truly a matter of perception. If the lender believes you are a credit risk, then you are a credit risk regardless of the details or numbers. The same applies for the nation. So our near-term objective should be to change the perceptions of our creditors. The first step toward that end is to generate a fiscal plan that reassures them we are serious about addressing our debt situation. Start there, focus are actions accordingly and work our way back to that AAA ratings the world is accustomed to seeing from the United States!

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Obama approval now down to 41 percent: Gallup

Apr 15, 2011 17:58 UTC

Gallup has Obama’s approval ratings down to 41 percent (with 50 percent disapproving) and just 35 percent among independents. Ratings like this put an incumbent president deep in the red as far as reelection.  They just don’t get reelected with ratings under 48 percent —  and only a 1/3 chance with a rating of 45 percent.

gallup

COMMENT

He’s still ten points ahead of Congressional Republicans, who are still one point BEHIND Congressional Democrats. Obama is polling ahead of everyone, James.

Shouldn’t your article be titled, “Congressional Republicans Approval Now Down To 31 Percent: Gallup”?

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Obama’s new plan may actually rely 60 percent on tax increases

Apr 15, 2011 15:38 UTC

In his budget speech earlier this week, President Obama described his budget plan this way:

It’s an approach that achieves about $2 trillion in spending cuts across the budget. It will lower our interest payments on the debt by $1 trillion. It calls for tax reform to cut about $1 trillion in tax expenditures — spending in the tax code. And it achieves these goals while protecting the middle class, protecting our commitment to seniors and protecting our investments in the future.

Now with all these plans floating around — the debt commission, Paul Ryan’s — Goldman Sachs has tried to do an apples-to-apples comparison over 10 years (not 12 as White House tried to pull off). And here is what it found:

gsSo of the 3.4 percentage points of savings, more than half — 1.9 points — comes from taxes. That’s 56 percent, not the one-third or one-quarter that Obama was talking about. And I am assuming that Goldman is using the White House’s rosier economic forecasts when evaluating Obama’s plan. (Ryan uses the gloomier ones from the Congressional Budget Office.) I think the Republicans will be pointing this out.

UPDATE: Here is one more key bit from the Goldman Report:

Measured against the CBO alternative scenario, the President’s proposal relies more heavily on increased revenue than the other proposals. It assumes that the $1 trillion in proposed revenue increase (over 12 years) does not include the additional $700bn (over ten years) from allowing the upper-income tax provisions to expire; the President’s spending cut proposal is on the same general scale as the external commissions, though somewhat smaller, at around 1.5% of ten-year GDP.

To be clear, Obama is abolishing the Bush tax cuts for $250,000 and  an additional $1 trillion tax hike.

COMMENT

@mailo24, anyone who doesn’t think as you do is crazy…. right? And “down with social programs!” (until it is you who are sick, injured, unable to work, laid off, fired, retired etc etc etc)

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