James Pethokoukis

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.

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.

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:

So 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.