Thursday, April 14, 2011

The Unserious Mr. Obama

In days of yore, the two American political parties blamed each other for the national debt. They each offered a clear vision to controlling the deficit based on cutting each others' pet programs. Each blamed the other party for politicizing entitlement reform, and the minority decried earmarks while the majority indulged in them.

That was then; this is now. Now, the earmark factory has been shut down. Now, Rep. Paul Ryan (R-WI) has set the agenda for the next two years with a very detailed, often painful plan to bring the deficits to a manageable level. It's not very ambitious: it doesn't offer serious hope of finding a budget surplus, but it's a step in the right direction. Mr. Ryan's budget proposal includes a much needed simplification of the tax code. In order to keep that simplification revenue-neutral (and thus tax-burden neutral), it lowers marginal rates as it closes loopholes. On average, everyone will pay the same amount of tax - we'll just spend less time doing our taxes. That shouldn't be controversial.

More controversially, Mr. Ryan offers a reasonably bi-partisan Medicare reform. Instead of the government paying marginal increases in the cost of care, allowing providers to inflate costs and bloat overhead, government will cover most of the cost, but let consumers pay the marginal cost. That will give a big incentive to keep costs close to the amount of the government voucher. Obviously, there are issues with this approach (how do we deal with the truly poor? How do we calibrate the voucher amount?), but it makes general-equilibrium economic sense, and it maintains the key fixture of social insurance.

Most surprisingly, Mr. Ryan's budget doesn't do what past Republicans have done: find scads of savings in Democrats' favorite programs. The big savings come from Medicare, which has thoroughly bipartisan support. Mr. Ryan isn't trying to shut down the department of education, and he pays verbal homage to the social safety net. For a staunch conservative, that's a bit surprising.

Mr. Obama's response yesterday, and actions throughout his presidency, have been even more odd, coming from a Democrat. Rather than attack defense spending (as Democrats usually do), he's grown it. His current budget suggests that he's going to "work with" military leaders to find savings; the fact that he has no concrete suggestions for cuts should be shameful. After all, he's had two years as Commander in Chief! It's not as though the need for austerity is suddenly upon us. If Mr. Obama has been sitting on $33 billion annual savings in defense spending for the last two years, he owes us an apology. Seriously, if a peacenik Democrat can't find specific defense spending to cut, what can he find??

As the WSJ points out, Obama inflates the savings under his plan by adding two more years to the normal ten-year budget window. That's a cheap way to turn $3.3 trillion into $4 trillion. Probably the shadiness is more severe: by promising to make cuts during the next president's tenure, he can sound like a reformer without feeling the pain.

Mr. Ryan hopes to be in Congress for another 10 or 20 years, and his Medicare reforms won't kick in for a while; sensibly, he doesn't want to change things for current Medicare recipients, just for the under-55 set. Mr. Obama has no hope of being president more than 6 years from now, and he really has no power at all to bind his successors to his policies. If he has no way of doing something now - during the 2 remaining years for which we elected him president - then he's fundamentally unserious. Mr. Ryan, at least, has a good chance of being around to feel the pain when these long-term reforms come due.

Mr. Obama, while proposing an average of $330 billion of savings over the next 10 years, with 3/4 of that from spending reductions, just fought tooth and claw to prevent spending cuts of $60 billion over the current budget half-year. When, exactly, is all this saving and cutting going to start? Before the Tea Party Congress was elected, Mr. Obama originally proposed a 2011 budget with $40 billion more in spending - $40 billion more than the stimulus-bloated 2010 budget!

Obama reached for hope in his speech, saying:
Here’s the good news: That doesn’t have to be our future. That doesn’t have to be the country that we leave our children. We can solve this problem.
A president running trillion-dollar deficits, tying the fiscal hands of his successors, and leaving his daughters' generation to pay off massive debts wants us to believe he cares about the country "that we leave our children"? Mr. President, I'm pretty sure our children will be better off if they don't have to spend their entire lives paying interest on their parents' debts.

No comments: