There will be a speech this afternoon at George Washington University and the featured speaker will be the President of the United States, Barack Obama. His topic is going to be one that is 
very common in Washington these days, that of reducing the deficit. The speech will be used as a way for the President to outline his own plan to reduce the deficit, in direct response to the plan being put forth by Congressman Paul Ryan and the GOP. We already know what Ryan’s plan contains, ie. lowering the corporate tax rates and eliminating tax loopholes, as well as changing the way Medicaid and Medicare works and is paid for. It is a few small steps, but at least it is in the right direction. To be sure, there will be a boatload of differences between this plan and the one the President will be previewing to Congressional leaders this morning, before he gives his speech this afternoon, but there will one major difference that needs to be examined. As always, when a Democrat starts talking about reducing the deficit, the first thing they want to do is start raising taxes, and the Democrat in the White House is no different.
For now, the plan the President will propose is being kept pretty close to the vest, but from what is being learned, it appears he will renew his call to discontinue the tax cuts for wealthier Americans, better known as the Bush tax cuts. Of course, he will be portraying the proposal as a way to reform the tax code, but if he was really serious about that, he would be going about this in a much different manner. I expect it to be more of the same rhetoric we heard during the end-of-the-year debate about making the rich pay their fair share. Never mind that the rich already pay their fair share and then some, the President wants them to pay more. I think he calls it shared responsibility and sacrifice.
Please recall the drama we just witnessed last week, threatened government shutdown and the baggage that goes with it, all over a measly $38.5 billion worth of spending cuts. That’s $38.5 billion of spending cuts that are not likely to materialize, if we are to believe the details that have been released about the deal that was brokered late Friday night. Those details give every indication of leaving all of the President’s favorite programs intact, at least for the time being. Make no mistake, he takes it seriously when you start threatening to cut money from programs he wants to keep. That’s why this deal was so difficult to negotiate and why he was more than willing to hold the military hostage until he got the concessions he was after.
I am not so naive as to believe cutting spending is the cure all for reducing the deficit. I am fully aware that tax revenues will probably have to be raised, in conjunction with spending cuts and other reforms of real significance. The problem I have with the plan that is likely to be proposed by President Obama is that it will probably not recognize that the real issue is the amount of money our government spends, not the amount of money it takes in from taxes. When you look at how the President and the other Democrats are trying to frame the debate over deficit reduction, it’s clear they either do not understand this, or that they simply do not care. Until they have a real epiphany and understand that cutting spending is where they need to start looking, it will be hard for me to take any deficit reduction plan they propose seriously.
It’s pathetic, Larry. Obama and the Liberals only know one song; tax, tax, tax. What really POs me is that I’m sure Obama knows better but he would rather try to but votes from the “poor” than do what is right for the country.
That seems to be the case, Jim. The first thing they want to do is raise taxes and I just feel that is the wrong thing to do. Mention cutting spending and they automatically start having withdrawals.
The GOP line that “we don’t have a revenue problem, we have a spending problem” is correct as far as current and future deficits are concerned but, as I’ve said many times, spending cuts alone won’t address the deficit we’ve built up by overspending the last 10 years. Obama is compounding an already enormous problem by continuing to propose and pass budgets with trillion dollar plus deficits but don’t anybody think we can deal with our existing debt problem through spending cuts alone — we can’t. We need to do exactly the opposite of what Bush did — put in place tax increases with a 5-10 termination date. We spent the money we didn’t have and now we need to raise it to pay it back. It should be on us not on our kids and grandkids. And I’m sorry but we have to find that revenue where it exists and will do the least damage to our economy — and that’s with the wealthy. Frankly, I just don’t see any other alternatives. Even Ryan’s “drastic” cuts do nothing to reduce long term indebtedness. Yes, we need to cut spending everywhere and in huge fashion but that’s just to deal with what’s coming ahead and will do nothing to manage what we’ve left behind.
I’ll be the first to admit that there may have to be some form of tax increase to help bring the deficit down. Senator Tom Coburn has even caught flak from Grover Norquist for not ruling it out. Before a tax increase is enacted, I think spending has to be addressed first. Until it is, it will not matter how much taxes are raised. Spending reform has to come first, in my opinion.
The thing about enacting a tax increase with an expiration date is, once a tax increase is enacted, it is nearly impossible to repeal it. The government doesn’t like to let such a gift slip through their fingers. I think we would be safe in saying the expiration date would be extended and effectively removed.
Concerning your idea that taxing the wealthy would be least likely to harm our economy, I disagree. The end consumer is the payer of all taxes and these would be no different.
Good article. Check this one out… even if the “rich” and corporations were taxes at 100% the government would only have enough money until June:
http://www.investors.com/NewsAndAnalysis/Article/568737/201104111831/Tax-The-Rich-Good-Luck-With-That.htm
That’s an interesting article, Harrison.
Larry, good article. I agree with most of it. Mike, I can’t agree that taxing the wealthy will , to quote you, “do the least damage to our economy”. When the wealthy move their businesses and bank accounts out of the country, who gets stuck with the bill? As it is now, we are at least getting a good peice of it.
The problem is that increased taxes will increase costs. When you tax something, it usually decreases in terms of activities. Maryland passed a law taxing millionaires at a higher level. One year later, there were less millionaires in that state. Needless to say, they didn’t make the money they projected. Then, NY did their infamous cigarette tax, which has enriched the mafia. NY state, not so much. Then, there was the luxury tax in the early 90′s. The government paid out more in the unemployment benefits that it caused than they ever collected from it.
Folks that raise taxes do not consider basic human behavior when they pass their increases, and it usually ends up badly for the little guy, and the end user pays all taxes.
Either the Democrats don’t understand the basic facts of what you have described or they just don’t care.
The mobility of people state to state definitely limits the ability of individual states to enact major changes to their tax structure. No doubt Illinois will be finding that out in the next year or two. Wealthy individuals did extremely well in the 90s at the higher tax rates and no doubt they will be pissed off if the rates return to those levels; but the increase is just not enough to disincentivise work or move entire companies out of the country. By the way, I’d be extremely happy to see taxes reduced on businesses if at the same time we eliminated special tax exemptions and credits that benefit individual businesses at the expense of others. A few businesses get hurt but all the others benefit ad that should help business overall and employment too.
Entitlement reform or nothing, everything else is mental masturbation. We can talk tax increases, cutting pork or whatever till we are blue in the face, but until we basically abolish the big three entitlements, America is slowly just wiggling her death rattle.
Obviously, something has to be done about entitlements. So far, very few of our leaders are showing a willingness to approach the subject.
Obama was elected–in part–because he promised to let the Bush tax cuts expire, but he failed to make good on this promise and now with election season just around the corner he is once again proposing to let the Bush tax cuts expire. I think that this is nothing more than part of his re-election campaign kick-off. He is trying to rekindle the fire of the 2008 election and he is hoping that people will forget that this is a promise he already failed to deliver.
Well, he did make a promise and that promise ran head on into political reality, no pun intended. Now he is trying to recapture that promise and renew it. I am thinking the American people will be a bit smarter this time around. I sure hope they are, as I am not sure we can stand another four years of a Barack Obama presidency.
Great article Larry. I have always believed that you cannot shrink the size of government if you continue to feed it. This is why I do not support tax increases. The government is not disciplined enough to use a tax increase to pay off the debt. The key is lowering the debt ceiling and forcing the government to live within its mean. You could do this incremental steps. The first step in not raising it this next round. Let them figure out what programs will need to be cut to keep us within the current range. As we achieve our goals we lower it at some point. This will not only lower our debt and force responsible spending, it will ultimately shrink the size of government.
Thanks, John. I’ll be honest, I don’t know a lot about the budget process and the pros and cons of raising the debt ceiling. If you listen to certain people, refusing to raise the debt ceiling sounds akin to financial suicide for the American government. I do think something has to be done to force the government to live within it’s means and it may take a drastic steps to get it’s attention. The only way I would support a tax increase is if spending is slashed first and I mean real spending cuts of substance. Otherwise, a tax increase would be just feeding the beast.
I’ve postulated the changes Obama is implementing on this country is not really directed at us. It is really for the exploding immigrant population. Low skill workers and low paying jobs will not be able to cover social security and medicare costs. Good jobs are leaving the country. Low skilled workers are flooding the country. These folks will depend on government to take care of them and not bat an eye. They’ve never governed themselves. We just have to suffer this transition period, which unfortunately will probably be the rest of our lives.
I’m not convinced that we need to abolish the big three entitlements altogether. I am definitely for reforming them. I’m sorry, but some people do abuse the system and remain on welfare forever without any inclination to actually get a job and make it on their own. I worked with inner city kids for two summers, and I hate to say it but a lot of the stereotypes about welfare families are true.
I think what Obama did yesterday was lay the ground-work for serious debate and compromise. Neither party had a “good” option for getting our budget under control, and I think he realized that. The Democrats are morons who think that everything these government programs does are as good as gold, all we need to do is just tax the rich like 90%. I don’t know about you, but if I were rich, I wouldn’t want 90% of my income to go to programs that operate at the level of a 5 year old. The Republicans simply wanted to defund everything and force them to fix themselves. I’m not so sure that would have gone over too well.
I think John Kasich has the right idea here in Ohio. He wants to make cuts, but the numbers he’s using are what his camp thinks local government would actually be using if they were operating efficiently. He’s not leaving them high and dry, however, as he is also providing them with professional resources to help them work better with a lower budget.
I think the point Obama was trying to make was that neither slash-and-burn nor spray-and-pray budgets are going to work. Socialism doesn’t work (Europe) and hard-core capitalism (the Guilded Age) doesn’t work, so we need to find the right balance between the two.
Jack,
Thanks for commenting on Political Realities. I meant to reply to you earlier, but we have been dodging thunderstorms and tornadoes since early this evening.
Concerning what you thought the President accomplished with his speech, I have a different take on it. I felt like he was more concerned with making sure he could afford his social programs, he called it a progressive vision of our nation, than he was about actually controlling spending. As is usually the case with liberal Democrats, their first, knee-jerk reaction is to raise taxes. As I have already stated, in the post and in the comments, I would be much more open to a temporary tax increase if spending was brought under control. Until then, I would not support it.
As for entitlement reform, I completely agree with you that something should be done. As you and Jimmie both have said, there are many people receiving money that do not deserve it. By that, I mean they are more than able to hold down a job, but they have figured out how to game the system and now have a free ride, courtesy of you and me. That doesn’t sit will with me and I think it is indicative of how our society has changed.
It is a vicious circle. The government is using powerful words when speaking about the cuts but, in reality, is doing nothing to reduce the deficit. In fact, the total spending increases and the government relies on taxpayers to cover such spending. Unless the cuts become reality, the US is not going to get out of trouble.
A whole lot of government at every level could be and should be outsourced.
I’m not entirely sure that outsourcing of government services is always a good thing. Having some things run by the government is a good thing because we can regulate them if they’re not working properly.
This holds especially true if the private organization is for-profit, because they would be doing things on a profit motive. I maintain that we can get government programs to work efficiently, and that that reform would help drive down costs.
I have to agree with Jack. There are people receiving our money that should not be. Working in the field that I did for so many years, I saw for myself how it was. There are a lot of men and women receiving disability in better shape than I was in my younger years. It was a part of the process for me to inquire about their income and to verify that information. I would later see some of them doing things they could not possibly have done if they were indeed disabled. I’m not talking about those unseen disabilities, heart, kidneys, liver etc. These were/are able bodied people claiming such things as back or limb injuries. And, the one that really bothered me, obesity. I’m not being judgmental, I’m a pretty heavy girl myself and should lose some weight. But, I always had a job.
I’m retired now and receive Social Security myself. But, I firmly beleive the system needs an overhaul, along with Medicaid and Medicare.
Lets close all the special interest loopholes in the tax code. Then lets talk about the taxes.
That would be a very good place to start.
Obama doesn’t want to raise taxes for anyone but the top 5% of Americans who are making millions, plural, of dollars as well as couples making over 250,000 dollars. Considering the average American makes something like 30-40,000 a year it is idiotic to say that making that much isn’t excessive and raising taxes for them and I’m sure not significantly as far as percentile is concerned is not bad. Obama is one of the people making over 250,000 a year and he has no problem giving a little more to his country. Its sad that people are so greedy that they have such a problem with this. And the majority of people opposing it aren’t even making that much so the increases wouldn’t affect them. As far as him not wanting to lower spending if you actually watched the speech you will see he did address his plans to lower uneccessary defense costs as well as reforming medicare and medicaid in order to make them both more effective but less costly. If people would stop fighting our president then we could actually have a better America. He has already made us more just through repealing don’t ask don’t tell and all of the other great things he did during the lame duck session. It is really saddening that he is doing most everything right and no one is giving him credit. I cant help but think its more because of the color of his skin than anything. We thought the racism would come out in the election but its more during his term truly. He is really like the Rodney Dangerfield of presidents.
Thanks for your comment, but I couldn’t disagree with you more. Let me start by explaining how wrong you are with the statement you just made about racism. The disagreement I have with President Obama over spending, taxes, etc. has nothing to do with the color of his skin. Just because I disagree with him does not mean I am being racist, ie. I could care less if he is red, yellow, black, or white, it is his actions that scare me. He has not made America better by his actions, but instead has worsened the problems that were already here.
Let me say this as well. You seem to be more than willing for the rich to be taxed at even a higher rate than they already are. I saw one statistic today that said the wealthy in America are already paying over 70% of the taxes that are paid. And you want them to pay even more? We do not have a revenue problem, but we do have a problem with our government spending entirely too much money, money they do not have. Until they have the spending under control, I am not willing to see one more tax increase.
I have much more I could say, but I must sign off. There are tornado warnings in our area at this time.
Well, I think throwing out the race card on this one is absolutely wrong and misplaced. I’m not entirely sure what you mean by him “doing everything right.”
And I think I mentioned that I’m okay with him raising taxes on the rich, or at the very least letting their cuts expire and making it more difficult for them to weasel out of it.
My guess is that everyone here is definitely for making budget cuts where ever there is waste, and I for one am 100% supportive of reforming Medicaid, Medicare, and SS and THEN making appropriate cuts if savings still aren’t enough.
Hang in there Larry! I wondered how long before someone threw the race card out there. It’s all they can do. They have nothing else to use.
It has subsided somewhat, but there are still warnings out until 3:00 AM. I am afraid it will just have to wake me up if something else crops up. It is way past my bedtime.
As for the race card being played, let them bring it on. They can search every post I have written in almost four years and they will not find a single racist remark against President Obama or any other person of color.
The truth of the matter is the government spends money it doesn’t have. The issue that has to be addressed is where is the money going. There should be no increase in taxes until this matter has been scrutinized.
Our president likes to create class warfare with his desire to tax the rich more. If you taxed the rich 100% we would still be trillions in debt and the deficit will continue to rise.
I believe government needs to be run like a business with people elected who have a business background and not idiots like Nancy Pelosi and Harry Reid who have demonstrated no competence in this area.
The sad thing if this isn’t started now with seriousness the United States will go bankrupt.
We need leadership. We need a president like Harry Truman who often said, the buck stops here. The president will have now is too interested in running for re-election right now.
He doesn’t have a clue. And those who argue we are too big to fail I can only say we can and will fail if nothing is done. And if we do, our current president will not have to worry about re-election because there will be no United States.
Thanks for taking the time to comment on Political Realities. You have reiterated what I have been saying all along, ie. that the issue of spending should be addressed before a tax increase is considered. Senator Tom Coburn can detail countless billions of dollars that our government wastes every day, yet he is ignored when he points it out. I will openly admit that a tax increase may be in order at the end of the day, in order to finish the deficit off, but until the spending issue is corrected, I will not support it. To do so would be to give a spend happy government more money to flush down the toilet and that would accomplish nothing.