Speech Review: Deficit Reduction, President Obama

You know the drill….

  • Who: President Obama
  • Date: April 13, 2011
  • Where: George Washington University, Washington, D. C.
  • Title: The Country We Believe In

Normally, I just dive right in, but this one requires a little bit of pre-data. Please note, I’m providing this before I’ve read his speech on the assumption that we’re going to need this info for a proper analysis.

Definitions

  • Deficit–In this context, the amount in dollars that the country is short each fiscal year. For example, if our budget was $100 and we had $90, our annual deficit would be $10. Don’t we wish.
  • National debt–The total amount in dollars that we owe.

I throw that out because people confuse the two and think they are the same or unrelated. Obviously the deficit increases the debt, but just because you have no deficit doesn’t mean the debt isn’t a problem either. Make sense?

Annual National Debts (last 10 years, end of fiscal year)

Source: Treasury Direct

  • Total Debt Increase (Bush) =$4,350 BB
    • Average Deficit =  $543.75 BB per year (8 years)
  • Total Debt Increase (Obama) = $3,537 BB
    • Average Deficit = $1,768.5 BB per year (2 years, not counting 2011)

I think that’s enough to go off for now. On to the speech….

***

This debate over budgets and deficits is about more than just numbers on a page, more than just cutting and spending. It’s about the kind of future we want. It’s about the kind of country we believe in.

Yep. No argument there.

We believe, in the words of our first Republican president, Abraham Lincoln, that through government, we should do together what we cannot do as well for ourselves. And so we’ve built a strong military to keep us secure, and public schools and universities to educate our citizens. We’ve laid down railroads and highways to facilitate travel and commerce. We’ve supported the work of scientists and researchers whose discoveries have saved lives, unleashed repeated technological revolutions, and led to countless new jobs and entire industries. Each of us has benefitted from these investments, and we are a more prosperous country as a result.

I am anti-big government. I am generally anti-government regulation. I lean very Libertarian in that sense. But the above things President Obama talked about here are things I do agree with. I think that is proper role of government. The only exception I would make is education. I think education is best handled on, at most, the community level. National standards don’t work for me.

Part of this American belief that we are all connected also expresses itself in a conviction that each one of us deserves some basic measure of security. We recognize that no matter how responsibly we live our lives, hard times or bad luck, a crippling illness or a layoff, may strike any one of us. “There but for the grace of God go I,” we say to ourselves, and so we contribute to programs like Medicare and Social Security, which guarantee us health care and a measure of basic income after a lifetime of hard work; unemployment insurance, which protects us against unexpected job loss; and Medicaid, which provides care for millions of seniors in nursing homes, poor children, and those with disabilities. We are a better country because of these commitments. I’ll go further – we would not be a great country without those commitments.

If I disagree at all, it’s in the manner in which these services are provided. I do believe that we as people have a responsibility to the world around us. But I also believe that I can better care for my neighbor than Uncle Sam can. To borrow from scripture myself, I can “pour in oil” more accurately, efficiently, and effectively than Uncle Sam.

I recognize that such an attitude nation-wide is somewhat of a pipe dream right now, and in the absence of real accountability to each other, our current system is moderately effective. It’s not the best, it has many problems, but it does have some benefit. Sadly, it’s becoming broken by our too-heavy reliance on it.

As a country that values fairness, wealthier individuals have traditionally born a greater share of this burden than the middle class or those less fortunate. This is not because we begrudge those who’ve done well – we rightly celebrate their success. Rather, it is a basic reflection of our belief that those who have benefitted most from our way of life can afford to give a bit more back. Moreover, this belief has not hindered the success of those at the top of the income scale, who continue to do better and better with each passing year.

This might surprise my long-term readers, but I actually have no issue with this. I have no issue with the wealthy paying, in dollars, more than others. What I have issue with is that upwards of 50% of Americans pay nothing at all. We are all part of the solution, and we all have a load to carry no matter how large or how small.

I have no issue with taxes being raised on the rich, with deductions being eliminated for the rich. But along with that, it is only fair and just that the same be applied to me (middle class) and everyone else. When a proper burden is shared between all, the burden is also lighter for all. As President Uchtdorf would say, “Lift where you stand.”

To meet [the challenge of rising Medicare, Social Security, and Medicaid costs], our leaders came together three times during the 1990s to reduce our nation’s deficit. They forged historic agreements that required tough decisions made by the first President Bush and President Clinton; by Democratic Congresses and a Republican Congress. All three agreements asked for shared responsibility and shared sacrifice, but they largely protected the middle class, our commitments to seniors, and key investments in our future.

No argument there. One thing that some often forget is that President Clinton actually had surplus years during the latter end of his presidency! Those surpluses directly led to the much-loved Bush Tax Cuts. How different our lives would be today had we applied those surpluses to the debt AND not granted the tax cuts….

But after Democrats and Republicans committed to fiscal discipline during the 1990s, we lost our way in the decade that followed. We increased spending dramatically for two wars and an expensive prescription drug program – but we didn’t pay for any of this new spending. Instead, we made the problem worse with trillions of dollars in unpaid-for tax cuts – tax cuts that went to every millionaire and billionaire in the country; tax cuts that will force us to borrow an average of $500 billion every year over the next
decade.

And every thousandaire, hundredaire, etc…. Hey, if we’re being honest, we can’t just say the tax cuts only went to them. We all got a tax cut.

That being said, this is accurate. We didn’t pay for those things, nor did we seem to plan to.

[The bailouts and stimulus were] the right thing to do, but these steps were expensive, and added to our deficits in the short term.

I’ve softened my position a lot on this over the last year or so. When the bailout and stimulus were first announced, I was livid. I was angry. I hated everything about them. I recognize now that they did have positive effects.

I suppose I’m withholding final judgement on those until later on when we see the long-term damage. As of right now, both were very expensive programs that have the potential of causing serious fiscal damage over the years.

We have to live within our means, reduce our deficit, and get back on a path that will allow us to pay down our debt. And we have to do it in a way that protects the recovery, and protects the investments we need to grow, create jobs, and win the future.

Honest question: Are those compatible goals? I hope they are, but I sometimes wonder. The urgency with which we need to attack our national debt (not just the deficit) is very real and will likely come at the cost of personal growth. It’s a path that would sacrifice today for a much better tomorrow. If it were up to me, it is the path I would take were I the president. I’m not, and many of you are grateful for that, I’m sure. 🙂 Ah… You’d thank me later.

“Why is this so important? Why does this matter to me?”

Here’s why. Even after our economy recovers, our government will still be on track to spend more money than it takes in throughout this decade and beyond. That means we’ll have to keep borrowing more from countries like China. And that means more of your tax dollars will go toward paying off the interest on all the loans we keep taking out. By the end of this decade, the interest we owe on our debt could rise to nearly $1 trillion. Just the interest payments.

Then, as the Baby Boomers start to retire and health care costs continue to rise, the situation will get even worse. By 2025, the amount of taxes we currently pay will only be enough to finance our health care programs, Social Security, and the interest we owe on our debt. That’s it. Every other national priority – education, transportation, even national security – will have to be paid for with borrowed money.

Kind of scary, isn’t it? And that’s why you’d thank me later. 🙂

The situation is, as President Obama makes perfectly clear, urgent. Very urgent. And very scary. Should we reach that point, we will default on the national debt. And you thought the Great Recession was bad….

But that starts by being honest about what’s causing our deficit. You see, most Americans tend to dislike government spending in the abstract, but they like the stuff it buys. Most of us, regardless of party affiliation, believe that we should have a strong military and a strong defense. Most Americans believe we should invest in education and medical research. Most Americans think we should protect commitments like Social Security and Medicare. And without even looking at a poll, my finely honed political skills tell me that almost no one believes they should be paying higher taxes. (emphasis added)

You know, I said it back in January that I had felt a real change in President Obama. This paragraph really paints that well for me. It’s pretty talk for sure, but if he actually follows through with that…. So far in this speech, he’s been very open to bipartisan work, something I haven’t really seen in the past.

Back to the actual comment though: talk about hitting the nail on the head. It’s all well and good for other people to give stuff up and save money, but me? I don’t want to give up. To be almost obscenely blunt, we really do like having the government teet firmly in our mouths. It’s easy, it’s “free,” and why should we give it up?

That attitude is going to get us all killed.

Because all this spending is popular with both Republicans and Democrats alike, and because nobody wants to pay higher taxes, politicians are often eager to feed the impression that solving the problem is just a matter of eliminating waste and abuse – that tackling the deficit issue won’t require tough choices. Or they suggest that we can somehow close our entire deficit by eliminating things like foreign aid, even though foreign aid makes up about 1% of our entire budget.

Once more, dead on and a very accurate representation of how most Americans see the budget. We aren’t cognizant of the reality of the budget, the debt, and the deficit. It’s not waste. It’s not abuse. It’s not these little programs. Yes, cutting those three things would save money and, where appropriate could and should be pursued, but that’s like sticking a cork in the dam while ignoring that the flood gates are wide open.

So here’s the truth. Around two-thirds of our budget is spent on Medicare, Medicaid, Social Security, and national security. Programs like unemployment insurance, student loans, veterans’ benefits, and tax credits for working families take up another 20%. What’s left, after interest on the debt, is just 12 percent for everything else. That’s 12 percent for all of our other national priorities like education and clean energy; medical research and transportation; food safety and keeping our air and water clean.

And that is the truth, and so few of us get that. So many of us are up in arms about Medicare, Medicaid, SS, and defense, but so few of us realize that that is the lion’s share of the budget by far. If we are going to get anywhere with saving our country, we must cut there. Not all cuts should come from that portion of the budget, but we must cut there.

[speaking of the cuts proposed by House Republicans] These aren’t the kind of cuts that Republicans and Democrats on the Fiscal Commission proposed. These are the kind of cuts that tell us we can’t afford the America we believe in. And they paint a vision of our future that’s deeply pessimistic.

Two minds: Yes, President Obama is right. Those cuts aren’t necessarily in the right places, nor do they accomplish the right things. However, there were more cuts than just those. The Republican plan cuts a lot from all over, and that is not fairly represented here. As the President himself said just moments prior, everything must be on the table. Sorry, President Obama, you can’t say in one breath that everything must be on the table and then ridicule others with your next breath because they did exactly that.

By the way, I’m not endorsing the Republican plan either.

Today, I’m proposing a more balanced approach to achieve $4 trillion in deficit reduction over twelve years. It’s an approach that borrows from the recommendations of the bipartisan Fiscal Commission I appointed last year, and builds on the roughl $1 trillion in deficit reduction I already proposed in my 2012 budget. It’s an approach that puts every kind of spending on the table, but one that protects the middle-class, our promise to seniors, and our investments in the future.

Cut $4 TT over 12 years. Sounds good, doesn’t it? Not when you compare that to the wild growth in the debt that the Congressional Budget Office predicts. See, this is that gray line between debt and deficit. Reducing the deficit does nothing for the debt. The debt alone, as President Obama said earlier in this speech, is slated to run us $1 TT a year in interest alone. We can’t survive that as a nation, and reducing the deficit will not fix the problem.

We must focus on debt reduction.

The first step in our approach is to keep annual domestic spending low by building on the savings that both parties agreed to last week – a step that will save us about $750 billion over twelve years. We will make the tough cuts necessary to achieve these savings, including in programs I care about, but I will not sacrifice the core investments we need to grow and create jobs. We’ll invest in medical research and clean energy technology. We’ll invest in new roads and airports and broadband access. We will invest in education and job training. We will do what we need to compete and we will win the future.

This is a functional plan. It builds while it cuts. I think it’ll be abused before it makes it through congress, but still…. That being said, the cuts aren’t deep enough to even touch the debt. In short, this will fail because it takes care of the symptom of our problem, not the cause.

It’s like treating cancer by managing the pain without doing anything else.

The second step in our approach is to find additional savings in our defense budget. As Commander-in-Chief, I have no greater responsibility than protecting our national security, and I will never accept cuts that compromise our ability to defend our homeland or America’s interests around the world. But as the Chairman of the Joint Chiefs, Admiral Mullen, has said, the greatest long-term threat to America’s national security is America’s debt.

I read a report a year or so ago that the DOD could cut at least $100 BB annually from their budget without reducing the effectiveness of our military. Get it done.

Just one example, a super carrier operated and built by the United States costs $9 BB each. These carriers, while among the most advanced naval vessels ever constructed, are dinosaurs. They are ponderous, they are expensive, they require huge compliments of men (over 4,500) to run…. Need I say more? Most other nations now operate what are known as Light Carriers. You could also call them mini-carriers. These ships require closer to 750 crewmen to operate and cost around $200 MM to $400 MM each. So even at the most expensive side, we can have one super carrier or 22-23 Light Carriers that are cheaper to operate, just as effective, and infinitely more versatile.

Which would you rather have?

The third step in our approach is to further reduce health care spending in our budget.

This is quite possibly the greatest need and hope for debt reduction. He said a lot more about that, but I think we all know how I feel about President Obama and healthcare….

The fourth step in our approach is to reduce spending in the tax code. 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. And I refuse to renew them again.

Beyond that, the tax code is also loaded up with spending on things like itemized deductions. And while I agree with the goals of many of these deductions, like homeownership or charitable giving, we cannot ignore the fact that they provide millionaires an average tax break of $75,000 while doing nothing for the typical middle class family that doesn’t itemize.

I agree with this in principle. However, I think tax deductions should be eliminated period.

I’m calling on Congress to reform our individual tax code so that it is fair and simple – so that the amount of taxes you pay isn’t determined by what kind of accountant you can afford.

Yes!!! I pay, on average, about $350 a year to file my taxes because of the complexity of the tax code. I’m sure I’m not alone. My taxes are so complicated that I have to take them to a professional to have them done. I’m so looking forward to next year because we’ve finally stopped renting our basement. That one decision will save us $350 a year in tax prep fees AND make it so that I can do my taxes by myself.

Here’s the deal: Make my tax rate X. I pay X. I don’t pay Y, I don’t take deduction Z. I pay X. It’s that simple.

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.

So let me rephrase. It’s basically the same thing as the Republicans with slightly different emphases on slightly different areas. Oh, and it takes two years longer.

It’s a start.

And it comes nowhere near to the point we need to be at. Cutting $4 TT over ten or twelve years will not save this nation. It’ll slow the demise, but it won’t save it. Now if you cut $4 TT from the debt, we would have something to talk about.

In the coming years, if the recovery speeds up and our economy grows faster than our current projections, we can make even greater progress than I have pledged here. But just to hold Washington – and me – accountable and make sure that the debt burden continues to decline, my plan includes a debt failsafe. If, by 2014, our debt is not projected to fall as a share of the economy – or if Congress has failed to act – my plan will require us to come together and make up the additional savings with more spending cuts and more spending reductions in the tax code. That should be an incentive for us to act boldly now, instead of kicking our problems further down the road.

You can be sure I will hold you to it. And when the economy improves, you better be serious about a serious fix.

Part of my problem with both plans is that neither plan goes far enough to make real change. They both go just far enough, however, to appease the masses. Once we are appeased, we will forget. In short, in ten years, we’ll be right back where we started because the cork we shoved in the dam worked. Like I said earlier, too bad we forgot about the flood gates.

To those in my own party, I say that if we truly believe in a progressive vision of our society, we have the obligation to prove that we can afford our commitments. If we believe that government can make a difference in people’s lives, we have the obligation to prove that it works – by making government smarter, leaner and more effective.

Now isn’t that an interesting thing to hear from the mouth of a Democrat. 🙂

I agree with it, by the way, even if I believe that government doesn’t have the responsibility to make that difference. Provide the means by which I can make my own difference, don’t make the difference itself.

That’s the end.

Overall, good speech. Like most of his speeches, it was solid. It was what we all wanted to hear at least in part. That’s one of the things that makes him such a good leader. But I still have that nagging doubt of action. When I listen to him speak or read his words, I just don’t quite believe he’ll follow through.

That being said, I’m more committed to seeing him succeed than I ever have been. I’ve never been like Limbaugh, hoping he fails. However, I’ve never really quite supported him either (you can thank Obamacare for that). But now? … … I don’t know. I hope he makes it. I truly do. Not for him, but for the country.

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