Check it out:. More than two-thirds of that was through some pretty tough spending cuts. The rest of it was through raising taxes — tax rates on the wealthiest 1 percent of Americans. And by the way, the whole design of these arbitrary cuts was to make them so unattractive and unappealing that Democrats and Republicans would actually get together and find a good compromise of sensible cuts as well as closing taxloopholes and so forth.
That was the whole point of this so-called sequestration. They haven't come together and done their jobs, and so as a consequence, we've got these automatic, brutal spending cuts that are poised to happen next Friday. But Congress has to act in order for that to happen. Learn more about President Obama's plan to avoid harmful cuts and reduce the deficit.
And most Americans agree with me. If you look before and after, a different picture emerges. In our view, what happened is quite straightforward: In , House Republican leaders used their new majority to force their priorities on the Democratically controlled Senate and the president by holding the debt limit hostage to demands for deep and immediate spending cuts.
The sequester was designed to be so potentially destructive that the supercommittee would surely reach a deal to avert it. Smith Republicans insisted on a trigger for automatic cuts; Jack Lew , then the White House budget director, suggested the specifics, modeled after a sequester-like mechanism Congress used in the s, but with automatic tax increases added. Republicans rejected the latter but, at the time, took credit for the rest. Obama took the deal to get a debt-ceiling increase.
But the president never accepted the prospect that the sequester would occur, nor did he ever agree to take tax increases off the table. At least the automatic cuts will reduce runaway spending and begin to control the deficit. What runaway spending? Under current law not including the sequester, non-defense discretionary spending as a share of the economy will shrink to a level not seen in 50 years.
Defense spending grew substantially over the past decade, but that pattern has slowed and will soon end. Email: jbennett defensenews. Twitter: bennettjohnt. By John T. Feb 2, President Barack Obama speaks at the Department of Homeland Security about the administration's fiscal year budget request released earlier today February 2, in Washington, DC.
More In Congress. The original cliff, you'll recall, was the simultaneous sunset of the Bush tax cuts, the end of the two-point temporary reduction in payroll taxes, the spending cuts mandated by the sequester, and the expiration of extended unemployment insurance. President Obama maneuvered Speaker of the House John Boehner into a corner where Republicans were forced to renege on their solemn pledge about not taxing the rich.
Obama did not, as some feared, throw Social Security or Medicare into the pot. He seemed to savor his new role as hard bargainer rather than conciliator. But a closer look suggests how little Obama won. The 2 percent hike in payroll taxes will cost working people close to a trillion dollars of disposable income over a decade. It is a far bigger tax increase in percentage terms than the tax hike on the top 1 percent.
The deal was touted as raising taxes only on the rich, but that widely reported description overlooked that payroll taxes are, actually, taxes. Both parties agreed to make further spending cuts into the trillions of dollars, details to be determined later. Nor did Republicans accept Obama's demand to stop playing games with the debt ceiling once and for all, and the impact of the automatic sequester was delayed by only two months until March 1.
So the immediate business before Congress is more spending cuts, with or without the sequester-the only question is how deep. Boehner was right to take the deal. As Pyrrhus, King of Epirus, said in similar circumstances, one more such victory and we are undone. This story has one other important and underreported element-inflation in the health sector.
One budget analyst after another keeps pointing out that the government doesn't have a general deficit problem so much as it has a problem with medical costs. As former Office of Management and Budget Director Peter Orszag, a deficit hawk and big promoter of the Bowles-Simpson Commission, recently wrote in the Financial Times, federal spending on health care is projected to rise from 5. During the same period, spending on Social Security is expected to rise only from 5 percent to 6 percent.
Take health care out of the equation, and deficits subside without further spending cuts. Though the rate of health-care inflation has moderated slightly in the past three years, partly because of the weak economy and partly because employers keep cutting back benefits, this is hardly a good solution. Obama's Affordable Care Act will bring coverage to more people, but it made a devil's bargain by not fundamentally changing the structure of the commercial health system, which is what keeps driving up costs.
Obama and progressive America will pay dearly for this lapse. At some point in the next few years, Democrats will either reopen the health debate and move to something like Medicare for All-which will bring far greater efficiency and cost savings to the system-or we will face deepening pressure for spending cuts elsewhere.
The commercialization of the larger health system is devouring the rest of the budget. The solution is neither cuts in other programs, nor the voucherization proposed by the right, nor the incremental cost savings proposed by the center-left.
It is a fundamental change in the nature of our health system, and not just of Medicare. Democrats made the wrong choice in backing "Obamacare" rather than true national health insurance and jettisoning even the proposed public option as a way station. Though too few Democrats will come right out and say it, there is a far better path to both economic recovery and eventual stabilization of the debt ratio. We need to increase public spending in the next few years, using both deficit spending and higher taxes on the wealthy, to get the economy back on a high-growth path.
Taxes on the wealthy are better put toward public investment than to deficit reduction. Taxing the rich is far less of a hit to purchasing power than hiking taxes on working families, who spend nearly all of their disposable income. With a program of economic expansion, we can reach a stable long-term debt ratio, but at a higher level of economic output and a more broadly shared prosperity. The goal is economic recovery-and the recovery improves the debt ratio, not the other way around.
In a recent article for the Economic Policy Institute, economists Josh Bivens and Andrew Fieldhouse observed that the "output gap"-the difference between what the economy is producing and what it is capable of producing-is now about a trillion dollars a year. If you cut the budget in such circumstances, you slow growth and get further away from stabilizing the debt ratio.
The problem is that these people are not part of the conversation at the White House, which is a dialogue among Obama's top aides, the corporate austerity-mongers, and Republicans, all of whom believe in deficit reduction. The plans in President Obama's State of the Union message for rebuilding the middle class will cost money.
0コメント