Left Sees Hope In Obama’s Speech

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.”

‘Dangerously Far’

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.

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One Response to Left Sees Hope In Obama’s Speech

  1. There Are Much Better Deficit Reduction Solutions

    Why do all the monetary cognoscenti, fiscal policy mavens, Democrats, Republicans, Libertarians, etc., cling to the mantra, “there’s only one solution, tax and cut” for resolving budget deficits?

    The answer my dear citizen is because you’ve been “PUNKED” by the BANKSTERS.

    Oh yes!

    You see if you ask the Banksters to;

    1. Forego interest on the “fiat credit” they create to facilitate government spending they’ll call you a nasty name.

    2. Allow the government (all political jurisdictions) to reschedule existing debt to reflect concessional terms, you get nastier name calling.

    T hese are the two more effective means through which public sector debt can be eliminated while ELIMINATING hardship for 99% of Americans. It requires only a tiny sacrifice on the part of Banksters.

    The first solution, issuing debt free currency, requires that Banksters forego interest charges normally levied on funds appropriated by the Congress or state/county legislative assemblies. These Banksters would only benefit from government funds after political jurisdictions purchase goods and services from the private sector. Private sector suppliers would deposit their public sector payments in commercial banks, credit unions, etc. Banksters would then do what Banksters do with commercial and non-commercial/individual income earners or recipients of government transfers, charge interest to borrowers and pay interest to savers.


    But Banksters should never charge non-profit, non-commercial political jurisdictions interest. It costs the Treasury and the Fed absolutely nothing in real terms to make a few mouse clicks filling accounts with fiat credit. They don’t actually print $4 Trillion dollars in paper currency. It’s all ledger entries by mouse clicks.

    Oh, they tell us they must go into the bond market and get the cash from investors (foreign gov., corporations and individuals) to fund the national budget.

    No they don’t.

    Lincoln rejected that approach, so did the Colonists. So can we.

    There is no economic or financial imperative requiring federal borrowing to finance the Commons. Think about it! Why should government create credit through the Federal Reserve which then creates a commercial bond market that exacts an interest premium which must be paid by taxpayers? Come On! Wake up this is a Ponzi scheme.

    To optimize economic, financial and social benefits, we should create the credit through the Treasury only. Leave out the middlemen (Fed and other creditors).

    In the second solution, debt rescheduling, Banksters get paid over a longer period of time but at a lower annual payment. Political jurisdictions gain breathing space. This is a form of kicking the can down the road if it is not accompanied by use of debt free currency for all future funding requirements. Again there is no additional, unnecessary financial burden placed on the middle class and the poor.

    I challenge all to say the same about the solutions presented by the Cat Food Commission. All of their solutions, for reducing deficits, ultimately fatten the bottom lines of the Banksters. Their route involves more borrowing and robbing Peter to pay Paul.

    No where in their recommendations do they point at borrowing costs as the driver of debt in this society. Why, because a majority of those on the Commission are financial sector supplicants and dare not bite the hand that has and will continue to feed them.

    We must accept the fact that political jurisdictions are not profit centers. They either confiscate income through taxation to fund the purchase of goods and services or they borrow. Neither is a requisite for funding the Commons.

    Recall how the Colonialist prospered with interest free currency before the Crown massively counterfeited it. And, Lincoln’s Greenbacks were issued debt free to prosecute the Civil War and reinvigorate America’s Industrial Revolution.

    Yes, of course Governments can spend currency into an economy without incurring interest debt.

    Yes, there are viable alternatives with successful precedents.

    What we need now are leaders unafraid of the Banksters subtle threats to manipulate credit creating recessions and inflation. Nor should our leaders be cowed by Bankster threats to withhold campaign funding because most Americans need relief through a more egalitarian set of solutions which in the first instance do not hand to Banksters the keys to the kingdom.