Despite apprehension on the left ahead of the speech, prominent progressives found reason to cheer President Obama’s plan to tackle the federal budget deficit and debt.
While finding reason for optimism, though, one left-leaning budget expert nevertheless says he sees a basis for concern in the president’s proposed approach.
Obama delivered an address Wednesday at a university in Washington in which he outlined a strategy for bringing down the mounting deficit and debt, while pledging to protect such key priorities as Medicare, Medicaid and Social Security. The president also not only pushed back on tax cuts for the wealthiest Americans, but declared that thw well-off ought to pay more.
“Part of this American belief that we’re all connected also expresses itself in a conviction that each one of us deserves some basic measure of security and dignity. 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,” Obama says. “‘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, those with disabilities,” he adds. “We’re a better country because of these commitments. I’ll go further. We would not be a great country without those commitments.”
Sen. Bernie Sanders (I-Vt.) earlier this week criticized the budget-cutting deal Obama struck late Friday to prevent a government, but nevertheless cheered the president’s Wednesday speech.
“President Obama is right in suggesting that any serious effort toward deficit reduction should require shared sacrifice and that the pain should not simply be felt by working families and the most vulnerable people in our society,” says Sanders, a key Senate liberal.
“During the coming weeks I will be working with members of the Senate and the House on a deficit reduction proposal which cuts spending in those areas of government which are wasteful and unnecessary, while at the same time asking the wealthiest people in this country and the most profitable corporations to start paying their fair share of taxes,” Sanders adds. “I am especially interested in ending those loopholes which allow corporations and the wealthy to shelter income in tax havens overseas, costing the U.S. Treasury an estimated $100 billion a year in revenue.”
Robert Greenstein, head of the Center for Budget and Policy Priorities, a Washington think tank, also applauded much of Obama’s speech.
“Of particular note, the President called for bipartisan negotiations to start quickly on these issues, both to avoid a default that looms if Congress does not raise the debt ceiling in coming weeks and to make progress on the deficit reduction front,” Greenstein says. “Also to his credit, the President leveled with the American people, making clear that the budget is dominated not by ‘waste and abuse’ or by programs like foreign aid, but instead by basic programs and services that the vast majority of Americans want or need — particularly Social Security, Medicare, Medicaid, and national defense. He made clear that, if the American people and their elected leaders truly want to reduce deficits to sustainable levels, policymakers will have to address these program areas as well as taxes.”
Obama’s approach “stands in sharp contrast” to the budget plan offered last week by Rep. Paul Ryan (R-Wis.), chairman of the House Budget Committee, Greenstein says. Ryan’s approach would make steep cuts into Medicare, Medicaid and other programs while further cutting taxes for the rich. “Unlike the Ryan plan, the President’s plan puts all parts of the budget on the table, including defense and revenues,” Greenstein says. “Unlike the Ryan plan, which the Congressional Budget Office (CBO) has found would increase the costs of providing health care to Medicare beneficiaries, the President’s plan contains measures to reduce these costs.”
Still, Greenstein raised some concerns after Obama’s speech.
“Because the Obama plan relies on budget cuts for two-thirds of its deficit reduction measures, it goes dangerously far in two areas,” Greenstein says. “It calls for $360 billion in cuts in mandatory programs other than Medicare, Medicaid, and Social Security. The large budget-cut target for this part of the budget risks leading to substantial cuts in core programs for low-income Americans, our most vulnerable people. To the President’s credit, his plan states that ‘reforms to mandatory programs should protect and strengthen the safety net for low-income families and other vulnerable Americans.'”
Another significant concern stems from Obama’s proposal to limit the annual growth in Medicare costs per beneficiary to the per capita rate of growth in the Gross Domestic Product (GDP) plus only 0.5 percentage points and to require automatic cuts in Medicare if this target would otherwise be exceeded, says Greenstein.
“This goal is laudable. But it may be unrealistic,” he says. “Historically, Medicare costs per beneficiary have risen about 2 percentage points per year faster than GDP growth per capita. The health reform law will launch a series of demonstrations, pilots, and research projects to find effective ways to slow health care cost growth without reducing the quality of care or access to care. But we don’t know yet how much or how quickly we can lower health care cost growth, especially since the principal driver in cost growth is medical advances that improve health and save and prolong lives but add significant costs.” Finally, Greenstein says, the president’s plan calls for a mechanism to trigger automatic reductions in programs and tax expenditures if the debt would exceed certain benchmarks (measured as a share of GDP).
“The goal of stabilizing the debt as a share of GDP is precisely the right one. But all triggers like this that have been designed in the past have suffered from a fatal flaw — they required the deepest budget cuts when the economy was weakest and the smallest cuts when it was strongest — the opposite of what sound economic policy entails,” Greenstein says. “The President’s plan calls for the trigger to “include a mechanism to ensure that it does not exacerbate an economic downturn.” No one has succeeded until now in producing a mechanism that meets this test, and it remains unclear whether it can be done. This new proposal bears some similarities to the trigger in the 1985 Gramm-Rudman-Hollings law, which was not successful and which Congress ultimately repealed.”
Scott Nance is the editor and publisher of the news site The Washington Current. He has covered Congress and the federal government for more than a decade.