The Truth About Obama’s Plan: $3 in Taxes for Every $1 In Spending Cuts

The Truth About Obama’s Plan: $3 in Taxes for Every $1 In Spending Cuts
It’s not math, it’s class warfare.
by John Hayward 09/20/2011

Among the odd, and occasionally downright unhinged, utterances President Obama made when he finally decided to show up for his Rose Garden was this declaration about his demand for $1.5 trillion in tax increases: “This is not class warfare, it’s math.”

This was a mistake, because math is the eternal and implacable enemy of big-spending liberalism. While Obama claimed that his plan would cut two dollars in spending for every dollar of tax increases, the truth is very different. Senator Jeff Sessions, ranking Republican on the Senate Budget Committee, spoke about “astounding inaccuracies in the President’s plan” in a hearing today:

The White House says that the president’s plan achieves $3.2 trillion in deficit reduction. The actual deficit reduction is only $1.4 trillion—less than half of what the White House states. Of note: this is $1.4 trillion in deficit reduction, not spending reduction.

This has become the pattern: the president understates the depth of our fiscal danger, then overstates the scope of his fiscal plans.

Consider the astounding disparity between the levels of taxation claimed versus those actually contained in the proposal. The White House asserts $2 in cuts for every $1 in tax hikes. The true figure is nowhere close. President Obama’s plan is comprised of tax hikes alone. There is not a single penny of net spending that is cut. Yesterday, the president said: ‘I’m proposing real serious cuts in spending. When you include the $1 trillion in cuts that I’ve already signed into law, these would be among the biggest cuts in spending in our history.’

In reality, under the president’s plan, the net change in spending is an increase. In fact, the president’s plan is to keep spending more.

Sessions outlined three “accounting tricks” Obama used to claim spending cuts that would exceed the amount of his tax hikes:

War funding: The plan shows $1.1 trillion in savings from putting a ‘cap’ on war costs, but those costs are going to decrease as the war effort unwinds—whether or not the cap is in place. They do not represent actual spending cuts or a new policy to achieve future savings. The president’s proposed caps simply manipulate baseline concepts to show the savings as a policy choice, which inflates the spending ‘cuts’ in the president’s plan. Congress rightly rejected this approach at deficit reduction during the recent debt limit debate.

Doc Fix: The administration’s baseline also assumes a Medicare ‘Doc Fix’ (physician payment freeze), an increase in spending of $293 billion over ten years compared to a current law baseline. This gimmick counts the higher spending as a given rather than as a policy choice that needs to be offset. Without this gimmick, the president’s health care savings of $320 billion become health care savings of only $27 billion.

Interest Savings: The president counts as ‘savings’ the net interest reductions that result from his proposed tax hikes.

Stephen Dinan of the Washington Times points out that Obama also counts spending reductions “already signed into law in last month’s debt deal,” and comes up with a very different ratio of tax increases to spending reductions when all of the President’s accounting trickery is disposed of:

That means in terms of actual new proposals, the president’s plan totals about $1.2 trillion, of which the lion’s share comes from his longstanding vow to raise taxes back to Clinton-era rates on the top income brackets. The rest is $580 billion in reductions to formula-driven entitlement programs such as Social Security, with much of the savings coming from reducing overpayments and finding waste.

Those $580 billion in newly proposed cuts are dwarfed nearly three-to-one by the $1.5 trillion in additional taxes the president wants to see going forward.

That means about $3 in new taxes for every dollar of spending reduction, with precious little of the “reduction” coming from Obama’s mad three-year spending spree.

And, of course, any spending reductions that might exist in the President’s plan will be delivered on the standard “gladly pay you Tuesday for a hamburger today” out-year schedule, which in layman’s terms means “never.” After noting Sen. Sessions’ estimate that “the immediate impact of the bill would be higher debt and deficits,” ABC News drops this little bombshell:

Administration officials acknowledge the president’s plan would mean increased deficits in the first few years after it was enacted but insist the trend would be reversed more than a decade later through tax increases on wealthier Americans and oil and gas companies.

(Emphasis mine.) Barack Obama​ is a rare species of deficit hawk, isn’t he? Even his “bold deficit-cutting” initiatives drive America further into debt.

One of the many flaws with the “Super Committee” created by the debt ceiling deal was the delusion that Barack Hussein Obama​ would not be an honorary member. The Washington Post notes that Obama’s “peace dividend” accounting trickery could short-circuit the entire Committee:

The latest Obama plan “doesn’t produce any more in realistic savings than the plan they offered in April,” said Maya MacGuineas​, president of the bipartisan Committee for a Responsible Federal Budget. “They’ve filled in details, repackaged it and replaced one gimmick with another. They don't even stabilize the debt. This is just not enough.”

[…] Congressional Republicans are resisting the move to count war savings toward deficit reduction. But congressional Democrats are preparing a major push to count such savings in the budget blueprint under development by a bipartisan joint committee on Capitol Hill.

The “supercommittee” is under orders to produce a 10-year plan to save at least $1.2 trillion by Thanksgiving. If the panel counts war savings, “then it’s over,” MacGuineas said. “The committee will have done nothing real.”

In other words, the entire debt-ceiling deal was a ridiculous sham, and the Democrats are doing their level best to sabotage what vestiges of fiscal restraint remain. The grand “bipartisan compromise” reached in order to authorize trillions in new debt immediately will amount to little more than a trillion dollars in “deficit reduction” over the next decade… and even that assumes future Congresses decide to honor the terms of the deal.
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To read another article by John Hayward, click here.