President Obama recovered some vital lost ground in the budget battle Wednesday when, for a change, he finally took on the far-right Republican plan to enrich the wealthy and big corporations with even more tax cuts while paying for deficit reduction on the backs of ordinary Americans. He did so while launching his own platform for winding down the federal deficits that added to the Bush II debt with job and tax revenue losses and stimulus demands in the wake of the Great Recession.
Building on some of the proposals by the bipartisan deficit reduction commission report late last year, Obama proposed a plan to reduce the federal debt by $4 trillion on the next decade. There is an enormous difference, however, in the way Obama and the Republican right-wing extremists would whittle a little more than $4 trillion off the national debt in the next 10 to 12 years.
GOP ideologues’ position
The Republican ideologues would cut taxes for the richest American millionaires and billionaires and the nation’s big corporations by $4.2 trillion over the next 10 years. To offset those needless, mind-boggling tax cuts, they would slash $4.3 trillion in core entitlements (i.e., Medicare, Social Security and Medicaid) as well as a slew of programs that, among a multitude of similar things, help students afford college, keep children from going hungry and build state and federal infrastructure. Think: Medicaid for Granny’s nursing home, half of Tennessee’s college student body and the long-sought restoration/renovation of the Chickamauga Dam lock.
Obama’s plan to reduce the debt by $4 trillion over the next 12 years is far more sensible. It is humane and respectful of America’s broad middle class values and history, and it recognizes the sense of community and broad-based economy that has sustained and nurtured America’s long progress.
He proposes to allow the immense and disproportional Bush tax cuts for the wealthiest 2 percent of Americans to expire. That alone would shave around $1 trillion off the national debt by restoring the tax rates that prevailed under Presidents Reagan and Clinton.
Medicare a key
The cuts Obama proposes would not be painless, but they would be more thoughtful. His plan calls for cutting $600 billion from domestic programs over 10 years, versus the $1.6 trillion that the right-wing ideologues propose. His plan would sustain Medicare, however, while the plan pushed by House Republicans would dismantle it and substitute vouchers of declining value against the outsized inflation of an unregulated private health care market. He would not follow the Republican path of dismantling Social Security, Medicare or Medicaid, the mainstream programs on which most Americans heavily rely, but he does foresee some trimming and efficiency achievements.
Obama would, for example, allow Medicare to use its enormous purchasing leverage to bargain for lower prescription drugs, which U.S. and foreign pharmaceutical companies price at two-to-three times higher in America than in all other advanced nations.
Republicans, by contrast, explicitly barred Medicare from using its bargaining clout for the new prescription drug plan when they wrote the industry-friendly Medicare reform act in 2003 — an act which outrageously gave subsidies to private, for-profit insurers to entice them to offer so-called Medicare “advantage” plans to woo Americans out of Medicare proper. Those subsidies were taken directly out of the Medicare budget, and put in corporate coffers in the hope of eventually ending Medicare altogether.
Obama also proposes to lower the corporate tax rate, but not as deeply and as wide open as would the Republicans. His plan would eliminate many of the tax loopholes that let the nation’s largest and most profitable corporations escape paying a single penny in taxes.
The need for such revisions is abundantly evident. A 2008 study by the government’s General Accounting Office, for example, found that “two out of every three United States corporations paid no federal income taxes from 1998 through 2005.”
Corporate loophole burdens
More recently, a report by The New York Times revealed that General Electric, the nation’s largest corporation, posted a $14.2 billion global profit last year, of which $5.1 billion was derived in its American operations. Yet through a variety of aggressive tax avoidance strategies and persistent lobbying for tax breaks, GE paid not a single penny in corporate profits in America. Rather, it claimed a tax credit of $3.2 billion.
Republicans who would defend and expand such disparities, and the job outsourcing to foreign factories that goes with it, in exchange for dismantling Medicare, Social Security and Medicaid, should have to explain to American taxpayers precisely whose side they’re on in the budget battles, and precisely why.
“These are the kind of cuts that tell us we can’t afford the America that I believe in,” Obama said in presenting his deficit-reduction plan. “I believe it paints a vision of our future that’s deeply pessimistic.”
The Obama plan is clearly more rational and more centrist than the radical Republican approach anchored in the proposal by Rep. Paul Ryan, chairman of the House Budget Committee. But neither is really adequate to address the long-term debt that now lies before the nation.
How we got here
The $14 trillion debt that now hangs over the country will require Republicans themselves to own up to what they wrought. The national debt was pushed up by Presidents Reagan and Bush I, pushed down by Clinton to $5.7 trillion, and doubled by George W. Bush to over $12 trillion —plus more than an additional $1 trillion after he left in the war and TARP pipelines.
Obama’s share, so far, of the current $14.2 trillion is $600 billion. It is Republican war and tax-cut policies, and the loose banking regulation that precipitated the Great Recession, that put the nation into such a deep hole. That hole can’t be fixed quickly, and it certainly can’t be changed with any fairness to most Americans by more lopsided tax-cut Republican insanity.