James Pethokoukis

Let me start off by saying I have no doubt that Sen. Tom Coburn wants smaller government — much smaller government. But is giving more money to government — and hoping against precedent that Washington just doesn’t spend the new cash –  the best way of doing it? Here is a bit from his Meet the Press interview yesterday:

GREGORY: Let me stick with you on the point of contention, particularly with senators like you, Republicans, conservatives, and outside groups having to do with taxes. Could you support a deal here out of this Gang of Six on the budget that includes tax increases?

COBURN: Well, we’re not talking about it. I think if you go back and look at the commission’s report, what we were talking about is getting significant dynamic effects by taking away tax credits, lowering the tax rate and having an economic increase that will actually increase the revenues to the federal government. We’re not talking about raising tax rates at all. … So if there is a net effect of tax revenue, that would be fine with me. I experienced that during Reagan’s period in 1986.

Except that we’re not just talking about more revenue from economic growth. Coburn’s Gang of Six would reduce various tax breaks and loopholes so that taxpayers would be supplying more revenue to Washington.  Apparently Coburn believes this is a price that must be paid to get a debt reduction agreement with Democrats.

But what exactly would spending hawks get in return? Are Democrats offering to dump Obamacare or agree to a revamp of Medicare like the one proposed by Paul Ryan. Highly unlikely. If that were the case, Coburn would have a much stronger arguement. If not,  a better compromise might be lower defense spending in exchange for other cuts discretionary or mandatory spending.

And remember the context: The reason America is on an unsustainable fiscal track is that spending, not revenue, is moving away from the historical average.

The bipartisan Committee for a Responsible Federal Budget has taken a crack at deciphering President Barack Obama’s murky new budget plan, called the “Framework for Shared Prosperity and Shared Fiscal Responsibility.” And its findings are devastating:

Using CBO rather than OMB numbers, we estimate that the plan is unlikely to result in a declining debt-to-GDP ratio, and would thus rely on the proposed “Debt Failsafe” to achieve further savings.

And that could mean higher taxes or additional spending cuts. As it is, the Obama Framework would save 40 percent less than the Ryan “Path to Prosperity.”  More:

The President’s Framework falls short of both he Fiscal Commission recommendations and those from the House Budget Committee, both of which would reduce the deficit by over $4 trillion and reduce the debt to below 69 percent of GDP by the end of the 10-year period. … Measured against CBO assumptions, it does not appear that the $2.5 trillion of deficit reduction in the President’s Framework would be sufficient to reduce the deficit to 2.5 percent of GDP in 2015 or 2 percent in 2020, as claimed. Using reasonable phase-in assumptions, we estimate that unless the debt failsafe is employed (as it would be in this circumstance), deficits would remain at or above 3 percent of GDP throughout the decade. As a result, debt would continue to slowly increase as a share of the economy, reaching 77 percent of GDP by 2021.

And here are the various debt trajectory paths:

And here is how the various plans compare on the details:

Just like in my analysis here and here, the CRFB found that the Ryan Plan cuts more debt than the Obama Plan. Also note that while  the White House said its plan relied just 25 percent on higher taxes (33 percent if you exclude interest), the CFRB found that it actually relies 30 percent on higher tax revenue (40 percent if you exclude interest.) And since the debt trigger would be pulled, even higher taxes would be possible, as well additional spending cuts.

Earlier today I noted that none of the major debt reduction plans floating around would meet S&P’s key financial metrics, as well as those of its competitors. At least this was the analysis of Goldman Sachs. Here is what I wrote (plus a pretty chart):

A key metric for the firm is the ratio of net interest payments to government revenue. Goldman Sachs found that all the major reform plans would still allow that ratio to increase to levels that rating agencies would probably consider worrisome.  Avoiding that would require defense cuts, immediate cuts to senior benefits and/or tax increases. Good luck with that.

But no fast. Jed Graham over at Investor’s Business Daily’s must-read Capital Hill blog says Goldman got it wrong:

Both Goldman and the policy arm of conservative GOP House members suggest that the U.S. could be in downgrade territory once interest payments exceed 14% of federal revenue.

That would happen in 2015 not only under President Obama’s initial budget plan, but also under the Ryan and commission plans.

So are we doomed? Hardly.

The 14% interest-to-revenue ratio applies not to the federal government, but to general government, which includes states and localities. This is a measure that Moody’s offers for international comparison purposes, since European governments tend to do most of the taxing and borrowing on behalf of localities.

The applicable danger zone for the federal government would be an interest-to-revenue ratio of 18%, which Steven Hess, Moody’s lead analyst for the U.S. rating, recently confirmed for IBD.

Under current projections, the federal government’s interest-to-revenue metric would peak at 17.o% in 2020 under Ryan’s plan. Under fiscal commission plan projections released in December, interest would peak at 15.6% of revenues in 2018, when revenues would be about $550 billion higher than under the Ryan plan.

By prodding Washington to agree on a debt plan, Standard & Poor’s might achieve just the opposite. Its dour take on Treasuries could inflame the debt-ceiling debate, leaving little energy for a grand budget compromise. And the severe austerity S&P desires would have few takers anyway. Consider the following:

1)  Obviously the rating agency hopes its unnerving note will nudge lawmakers into reaching agreement on taxes and expenditures. Inaction until after the 2012 national elections risks an actual downgrade of America’s AAA bond rating.

2) But striking some mega-deal doesn’t have top priority on Capitol Hill. First up is the battle over raising the debt ceiling. Democrats want a clean vote on a bill, while Republicans are trying to tack on various debt reduction measures. The GOP quickly pointed to S&P’s statement as further justification of its bargaining position.

3) That the rating agency made no mention of the debt ceiling is irrelevant. Nor does it matter that Congress just released a report blaming S&P and its peers for triggering the financial crisis. Politicians take their friends where they can find them. And S&P’s warning is spurring Republicans to dig in. That helps ensure the negotiations will be arduous, requiring Capitol Hill’s nearly undivided attention until July and potentially pushing the country to the brink of default. There probably won’t be much chance to work on major changes to taxing and spending.

4) Such efforts didn’t have much momentum anyway. A bipartisan “Gang of Six” in the Senate is working on a proposal that draws on recommendations from the president’s debt panel. And it was gaining support among Republicans until House Budget Chairman Paul Ryan released his plan.

5) Even if Congress moves toward compromise, making S&P happy won’t be easy. A key metric for the firm is the ratio of net interest payments to government revenue. Goldman Sachs found that all the major reform plans would still allow that ratio to increase to levels that rating agencies would probably consider worrisome.  Avoiding that would require defense cuts, immediate cuts to senior benefits and/or tax increases. Good luck with that.

Given the acrimony, if S&P really wants Washington to act, it may find it actually takes more than a warning.

OK, let’s try and actually compare the new Obama budget plan — “The Framework for Shared Prosperity and Shared Fiscal Responsibility” — with Rep. Paul Ryan’s “Path to Prosperity.” My calculations — partly based on work done by Goldman Sachs — find that the Ryan Path would save more than double, 130 percent. In dollars, it’s a difference of $3.9 trillion (nearly 2/3 from higher taxes, net interest expense savings).

1) Obama says his plan cuts $4 trillion in debt over 12 years vs. … something or other. Ryan says his plan cuts $4.4 trillion over ten years vs. Obama’s original 2012 budget from February.

2) To do an apples-to-apples comparison, it’s necessary to a) plot them over the same time span; b) compare them against the same baseline and c) adjust them for similar economic assumptions. Goldman Sachs does the first two steps for me. It plots both plans vs. what the CBO calls its “alternate” baseline — the one it thinks most likely. (For instance, it does not assume all the Bush tax cuts get repealed like the main CBO baseline does.) Goldman thinks that’s what the White House did, too.

3) Goldman Sachs also adds back in Obama’s pledge to let the top-end Bush tax cuts expire, something which isn’t clear from Obama’s speech or subsequent White House fact sheet. Here is the chart of Goldman’s findings:

5) Those savings – 2.4 percent for Obama, 3.5 percent for Ryan — are over ten years vs. cumulative GDP of $196 trillion over 2012-2021 (not counting interest expense). In dollar amounts, that works to savings of $4.7 trillion for Obama and $6.9 trillion for Ryan. So the Ryan Path saves $2.2 trillion more.

6) But that’s not all! The Obama Framework likely uses the same higher growth assumptions as Obama’s February budget. When CBO re-ran that budget using its own gloomier forecast, it found the Obama plan raised $1.7 trillion less than it claimed. Ryan uses the CBO numbers. So a back-of-the-envelope estimate — adjusted for similar economic assumptions — finds the Obama Framework would only save $3 trillion vs. $6.9 trillion for the Ryan Path over ten years. And nearly 2/3 of Obama’s savings comes from higher taxes (net interest).

On Wall Street, calling some strategy a “black box” is an epithet. The term implies financial flimflammery may be at play. Opacity may conceal trickery. Bernie Madoff had a black-box model that supposedly helped him pick winning stocks. The deception was in the details, or, rather, the lack of them.

Treasury Secretary Timothy Geithner, former president of the New York Fed, knows about black boxes. So, too, White House budget chief Jack Lew, formerly of Citigroup. And it can’t be a foreign concept to Bill Daley, Obama’s top aide and a former executive at JPMorgan.

You can now count President Obama in that group, too. When he made his big budget speech last week, it wasn’t at all clear from where his numbers were coming — nor in what direction they were heading. A “fact sheet” on his “Framework for Shared Prosperity and Shared Fiscal Responsibility” gave a few more specifics, but little or no context to make real sense of them. Even for seasoned budget experts, it was a puzzlement.

Now, a week later, some tantalizing clues have begun to emerge. And even if they don’t fully illuminate Obama’s black box budget, they at least help explain why the White House chose to be so cryptic.

1) Why no economic numbers? The Obama Framework failed to reveal its underlying economic assumptions. House Budget Chairman Paul Ryan based his “Path to Prosperity” on the economic forecast of the Congressional Budget Office.

But budget experts think Obama used his own (via the White House Office of Management and Budget) much more optimistic numbers, just as he did in his February budget. From 2012-2015, Obama sees the economy growing at a pace of 3.6 percent, 4.4 percent, 4.3 percent and 3.8 percent. The CBO sees slower growth, 3.1 percent, 3.1 percent, 3.5 percent, 3.8 percent. For the rest of the decade, Obama assumes GDP growth an average of 0.2 percentage point faster than the CBO.

How big an advantage does the Obama Framework’s rosy scenario give it over the Ryan Path? Consider this: When CBO ran Obama’s numbers with its own growth forecast, it found that Obama raised $1.7 trillion less than his OMB had predicted due to those differing economic assumptions. Even worse, Obama assumes those higher growth rates would be possible despite the heavier tax burden.

2) Why no budget baseline? Obama says his budget plan saves $4 trillion. But is that compared to his forecast or the CBO’s? And which CBO forecast, since it has more than one? When you don’t know the baseline, it’s impossible to really compare the bottom-line savings of the Obama Framework vs. the Ryan Plan.

Well, the econ team at Goldman Sachs took a shot at backing out the numbers and they think Obama was measuring his savings against the CBO’s estimate of what it considers the most likely budget path. Over ten years, Obama’s plan saves about $2.2 trillion less than Ryan’s — and that’s still giving Obama his rosy forecast from above.

3) Why so little data about annual levels of revenue and spending? The 15-page Obama Framework fact sheet is all text. The Ryan Path is full of charts, tables and graphs. If Obama had been as thorough, it would be obvious that the following statement from his speech is incomplete:

This is my approach to reduce the deficit by $4 trillion over the next twelve years. 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 spending from the tax code. And it achieves these goals while protecting the middle class, our commitment to seniors, and our investments in the future.

Except that earlier in the speech, Obama reiterated his pledge to let $1 trillion worth of top-end Bush tax cuts expire. That means Obama is actually calling for $2 trillion worth of tax hikes, not $1 trillion.

4) Why a 12-year budget instead of a customary 10-year plan? I’m going to hand this one over to former Bush II economic adviser Keith Hennessey:

It’s fairly easy to see what’s going on here. The President decided on about $3 trillion of deficit reduction over 10 years, maybe a little less. He wanted to claim that he was “matching” the Ryan plan in deficit reduction, but was just achieving that same goal in a better way. Matching Republican deficit reduction is a lynchpin of the President’s fiscal argument. He was short by a trillion dollars or more, so he and his team decided to measure his proposal over a different timeframe and hope no one would notice. They lengthened the window by which they would measure the President’s deficit reduction until they matched the $4 trillion over 10 years in the Ryan plan and came up with 12 years.

The President’s new budget plan provides insufficient detail to support his claim of $4 trillion of deficit reduction over 12 years. But if we stipulate that amount, it is likely that the President’s new budget proposal would result in $1 trillion more debt over the next ten years compared to the House-passed Ryan plan, and maybe more.

5) Why does the Obama budget only go out to 2023? The Ryan Path extends to 2050 when the total U.S. federal debt is just a minuscule 10 percent of the economy. The plan accomplishes this by dramatically reducing the projected growth of healthcare spending. If you don’t do that, you get a chart like this:

The chart shows that balancing the budget long-term requires either reducing projected healthcare spending or creating dramatically higher tax revenue. And to increase revenue anywhere near those levels without an incredible burst of economic growth would require broad, new taxes on the middle class, probably using a value-added tax. Cranking up taxes on only the rich is insufficient. (And this assumes no economic impact from such an enormous tax burden.) U.S tax revenue has never even hit 21 percent of GDP, much less the 25+ percent needed to make the numbers in the chart balance.

For Obama to keep spending above that level — which his budget does — and also reduce debt means admitting the need to break his tax pledge. But he avoids this revelation by ignoring those out decades.

Even by the low financial standards of Washington — here we call Enron-like legerdemain “best practices” —  shifting timeframes, hidden tax increases, and mystery baselines are pretty pathetic. This is no way to begin a serious debate on preventing fiscal crisis and collapse.

Credit rating agencies such as S&P really place a lot of emphasis on two financial metrics:  the ratio of net debt to GDP and the ratio of net interest payments to government revenues. When you look at those two factors, Goldman Sachs concludes “that the US is already at the outer edge of AAA territory. ” (Thank goodness for the supremacy of the dollar.) Look at the pretty chart from GS:

OK, so Standard & Poor’s has downgraded the outlook for the U.S. to negative, saying it believes there’s a risk policymakers may not reach agreement on how to address the country’s long-term fiscal pressures.

“Because the U.S. has, relative to its AAA peers, what we consider to be very large budget deficits and rising government indebtedness, and the path to addressing these is not clear to us, we have revised our outlook on the long-term rating to negative from stable,” S&P said in a release.

Some thoughts here:

1) Did the rather incoherent, hodgepodge nature of Obama’s budget speech last week play a role in this? As I wrote:

Obama’s much-hyped new budget plan is actually neither new nor a budget nor a plan. To the extent that it’s even a “framework” — to grant the White House its preferred descriptor — it’s one whose ideas and goals are precariously fastened together by the chewing gum and sticky tape of rosy economic assumptions and fiscal opacity. Then again, the core purpose isn’t budgetary balance but political persuasion.

And then there was the president’s rhetoric. Recall how Paul Ryan blasted Obama:  ”Rather than building bridges, he is poisoning the well.”  Here is how S&P puts it:

We view President Obama’s and Congressman Ryan’s proposals as the starting point of a process aimed at broader engagement, which could result in substantial and lasting U.S. government fiscal consolidation. That said, we see the path to agreement as challenging because the gap between the parties remains wide. We believe there is a significant risk that Congressional negotiations could result in no agreement on a medium-term fiscal strategy until after the fall 2012 Congressional and Presidential elections. If so, the first budget proposal that could include related measures would be Budget 2014 (for the fiscal year beginning Oct. 1, 2013), and we believe a delay beyond that time is possible.

2) The agency’s shocking note doesn’t mention the debt ceiling debate. But both Rs and Ds may try to use it to their advantage. Rs can argue it means the vote to raise the limit must include real budget reforms and cuts. Ds can say the U.S. fiscal position is precarious enough that this is no time to mess with the debt ceiling. Of course, that line would run counter to the Dem meme that the debt situation is important but not urgent.

3) Financial pros say that even should S&P take the next step and actually downgrade America’s AAA status — the note said there was at least a 1-in-3 chance of that happening within two years — it would likely have little economic impact. As the WSJ notes:

Meanwhile, Dan Greenhaus of Miller Tabak + Co. notes that even if the U.S. lost its premier status, that doesn’t mean the end of the world. “The experience of Canada and Japan show that the loss of a AAA rating is not a death blow,” he writes in a note to clients. “If governmental finances can be adjusted (in the case of Canada) or domestic participants continue to find the debt attractive (in the case of Japan), higher yields on a sustained basis are not assured.”

But that seems a bit too pat to me. Market and consumer psychology is a precarious thing. It might really depend on what else was happening in the world at that time.

4) I hope Republicans don’t let S&P use this warning to bully them into accepting tax increases to get a quick Grand Compromise budget deal. As I wrote a bit earlier today:

Here’s the problem: Any attempt to cut deficits and debt faster than Paul Ryan’s “Path to Prosperity“  would almost certainly have to involve immediate benefit cuts to Medicare and Social Security recipients or higher taxes. And to the extent that S&P’s call will be interpreted as an exhortation to cut now, those Democrats and Republicans (such as those in the U.S. Senate’s Gang of Six) who insist higher taxes must be part of the fiscal fix will have their hand strengthened. But what S&P is really saying is Washington must decide on a plan. Ryan has a plan, the Obama White House does not.

5) Washington types keep telling me that Americans really don’t care about the debt issue. But I think this warning — not to mention an actual loss of the AAA rating — is yet another data point that will sink into our collective head — right along with a trillion-dollar deficit, the EU debt crisis and our financial meltdown which shows too much debt can cause wealth to disappear in a flash.

Barclays bank offers its take on S&P. Here are some highlights (bold is mine):

1) A couple of hours ago, S&P put its long-term rating on U.S. sovereign debt on negative outlook. This means that it believes there is at least a 33% chance that it will lower the AAA long-term rating of the U.S. within two years.

2) Its base case remains that U.S. policymakers will agree on a deficit reduction plan with savings of $4-5trn over the next 10-12 years. But importantly, S&P emphasizes that meaningful steps to implement this must start by 2013.

3) We believe this is an aggressive timetable, since it means that policymakers will have to agree on a long-term deficit reduction plan before the 2012 elections. This will be tough, given the political landscape and the structural nature of the budgetary problems.

4) According to S&P, the ratio of net general government debt/GDP would rise to 84% in the base case by 2013 (and 90% in a pessimistic scenario). Beyond the medium term, it views growth in entitlement programs to be the main source of fiscal pressure.

5) The catalyst for the negative outlook was the “increased risk” that there would be no resolution to “the medium and long-term fiscal challenges” facing the U.S. until after the 2012 elections.

6) In other words, once the two political parties put their deficit reduction plans on the table, it became obvious how far apart they were, and how difficult the road to political convergence would be. S&P noted that despite more than two years having passed since the financial crisis, there has been no agreement on steps to reverse the fiscal deterioration. It highlighted the examples of other countries such as UK, France and Germany, which have begun implementing plans to address their fiscal problems.

7) The announcement was seemingly a surprise to the bond market: 30y yields reversed their early morning rally, and the yield curve steepened immediately after the announcement. It was a surprise to us, as well. While we have always emphasized the unsustainable nature of the U.S. deficit and have outlined the likely factors that would drive a lowering of the U.S. AAA rating (see How risk-free are U.S. Treasuries? January 8, 2010), we had believed that the rating agencies would wait till after the 2012 elections before taking any action.

8) This announcement was not about the debt ceiling; in fact, the debt ceiling is not even mentioned in the S&P release. In sharp contrast, the reason why U.S. government ratings came under pressure in 1995-96 (Moody’s put parts of U.S. government debt on negative watch) was the debt ceiling impasse at that point. This means that even if the debt ceiling debate were to be resolved in the near term, it would not be enough to restore the outlook to stable.

9) On the other hand, the longer that debt ceiling negotiations drag on, the bigger the seeming rift between the two political parties and the greater the likelihood of a downgrade down the road. In turn, this would mean a steeper Treasury yield curve, higher yields on the long bond, narrower longer-term swap spreads, and a flatter swap spread curve.

10) The key to a stable outlook is that there be a concrete plan for deficit reduction that needs not only to be agreed upon, but also put in place by 2013. As noted earlier, this will be very challenging.

Talk about fuzzy math. President Obama claims higher taxes will account for a mere third — $1 trillion — of his proposed $3 trillion debt reduction over 12 years, not counting less interest expense. Wrong. The actual number is probably around 50 percent of $4 trillion in savings — some $2 trillion — and could be closer to 60 percent. (More details below.) Instead of offering a template for a Grand Compromise, Obama seems to have created a Grand Obfuscation.

This is just one example among many that shows how Obama’s much-hyped new budget plan is actually neither new nor a budget nor a plan. To the extent that it’s even a “framework” — to grant the White House its preferred descriptor — it’s one whose ideas and goals are precariously fastened together by the chewing gum and sticky tape of rosy economic assumptions and fiscal opacity. Then again, the core purpose isn’t budgetary balance but political persuasion.

The Obama White House naturally wants the media to favorably compare his outline to House Budget Chairman Paul Ryan’s 73-page  “Path to Prosperity” which is highly detailed and has been scored accurate by the Congressional Budget Office. It brings the budget into balance and eliminates the national debt by cutting spending — not raising taxes.

And how does Obama’s  “Framework for Shared Prosperity and Shared Fiscal Responsibility compare?

1) Obama’s Framework is a speech, along with a roughly 15-page fact sheet that is unlikely ever to get placed under the CBO microscope. It’s tough to score generalities such as the president’s claim the plan would put “deficits on a declining path toward close to 2.0% of GDP toward the end of the decade.” “Close to”? “Toward the end”?

2) The Obama Framework also fails to give a clear trajectory of where the debt-to-GDP ratio is heading, other than to call for a trigger that would boost taxes or cut spending in 2014 if the ratio doesn’t appear to be bending lower.

3) Other oddities abound. The plan has a 12-year time frame rather than the customary ten. It doesn’t indicate  what baseline it uses to make claims that it cuts debt by $4 trillion, if you include interest expense. Nor does it spell out what economic projections are being plugged in. Obama’s 2012 budget released in February was more bullish than the CBO’s, which Ryan uses.

4) Also unlike the Ryan Path, the Obama Framework doesn’t show how his plan affects debt and deficits over the coming decades. If it did, Obama would have to reveal that he can’t a) keep government spending above historical levels and b) balance the budget and reduce debt long term without c) jacking middle class taxes through the roof.

The Obama Framework is so vague and fuzzy that doing a true apples-to-apples comparison between the Ryan Path and the Obama Framework comparison is almost impossible. (Best guess: Ryan cuts $3 trillion more than Obama over a dozen years.) This could be intentional.

The tax issue mentioned earlier provides a perfect illustration. Toward the end of his speech last week, Obama said the following:

This is my approach to reduce the deficit by $4 trillion over the next twelve years. 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 spending from the tax code. And it achieves these goals while protecting the middle class, our commitment to seniors, and our investments in the future.

But earlier in the speech, Obama also said this:

In December, I agreed to extend the tax cuts for the wealthiest Americans because it was the only way I could prevent a tax hike on middle-class Americans. But we cannot afford $1 trillion worth of tax cuts for every millionaire and billionaire in our society. We can’t afford it. And I refuse to renew them again.

If you’re keeping score, what Obama is actually proposing is $1 trillion in new taxes on wealthier Americans (and small businesses) and $1 trillion in higher tax revenues by reducing tax breaks and subsidies for a total of $2 trillion in new taxes over 12 years. That means total debt reduction, not counting interest, would be $4 trillion, 50 percent of which would come from higher taxes. The econ team at Goldman Sachs ran a similar analysis and found that 56 percent of Obama savings over ten years could come from higher tax revenue.

In this way, Obama relies far more on taxes than the two-parts spending/one-part taxes formula of the Obama-Bowles-Simpson debt panel that is supposedly his model. As Obama said, “It’s an approach that borrows from the recommendations of the bipartisan Fiscal Commission I appointed last year.” Not really.

Now none of this is easy to discern from Obama’s speech nor from the accompanying fact sheet. Neither indicates which budget baseline Obama is using. If he is, for instance, using the standard CBO baseline which assumes all the Bush tax cuts expire, Obama’s budget plan might actually get close to 60 percent of its debt reduction from taxes, especially if he also used the CBO’s gloomier GDP forecast. And if his mid-decade tax “trigger” should get pulled …

Of course, the framework that really interests the White House is a political one. They want to set the terms of the 2012 presidential election debate. And with this budget plan they have, though surely not in the way they intended. America’s debt problem is one of too much spending, not too little revenue. By offering a tax-heavy fiscal fix that keeps Big Government firmly in place, Obama offers Americans a clear choice of economic futures, his or Paul Ryan’s.