Another week, another fake plan from President Obama to cut the deficit. Here’s the outline, courtesy of the AP:
In a blunt rejoinder to congressional Republicans, President Barack Obama called for $1.5 trillion in new taxes Monday, part of a total 10-year deficit reduction package totaling more than $3 trillion. “We can’t just cut our way out of this hole,” the president said.
The president’s proposal would predominantly hit upper income taxpayers but would also reduce spending in mandatory benefit programs, including Medicare and Medicaid, by $580 billion. It also counts savings of $1 trillion over 10 years from the withdrawal of troops from Iraq and Afghanistan.
Let’s do some basic arithmatic. The promise is to generate $3 trillion in savings. One third of that, $1T, comes from defense spending in Iraq and Afghanistan that isn’t going to happen anyway. The drawdowns are already in place. You can’t “save” money you were never going to spend. So already we’re down to $2T in deficit reduction.
Next, the President wants to wring $580 billion out of entitlements, by finding that many dollars worth of “waste and inefficiency.” Of course, we were already granted a boon of $500 billion in cost-free savings in Medicare when ObamaCare passed. If we pretend, like the President does, that those $500 billions were really saved, it’s hard to see where we’ll find another imaginary $580 billion. So now we’re down to a mere $1.42 trillion in deficit reduction — over the next ten years.
But don’t worry because Obama says we’re going to get $1.5T in deficit reduction from tax hikes on “the rich.” What’s the real number? Let’s use a little something I call the “Clinton Rule of Thumb.” When President Clinton and the Democratic Congress jacked up taxes in 1993, revenues only increased by about two-thirds of the expected amount — and that was in a booming economy. So using the CROT, we can expect Obama’s tax hikes to generate $1T in new revenues.
However, this economy is, shall we say, not booming. So let’s cut the number in half again: $500 billion dollars in new revenues. And unlike the rest of the malarky in the President’s plan, I expect the tax hikes to be as real (and as serious) as a hemorrhagic fever. Which leaves us with a deficit plan that “saves” half a trillion dollars over the next ten years — or by a little more than one-third of our deficit spending from just last year.
This isn’t a credible plan. This is yet another soak-the-rich/class-warfare scheme aimed solely at securing Obama’s reelection.