«

»

Apr 16

Print this Post

President offers detailed tax increases, but few detailed spending cuts

On April 13, President Obama gave a speech that basically was in response to plans that the Republicans’ “path to prosperity” proposal that would cut $4.4 trillion from the deficit over the next ten years.  Obama’s speech indicated that he proposes a mix of $3 in spending cuts for every $1 in tax increases claims to reduce the deficit by $4 trillion over the next twelve years.  Details of the President’s proposed spending cuts are not clear.  Much more time was spent indicating what would NOT be cut.    

Here is what we know about the President’s spending cuts:

The first step in our approach is to keep annual domestic spending low by building on the savings that both parties agreed to last week – a step that will save us about $750 billion over twelve years.  We will make the tough cuts necessary to achieve these savings, including in programs I care about, but I will not sacrifice the core investments we need to grow and create jobs. We’ll invest in medical research and clean energy technology.  We’ll invest in new roads and airports and broadband access.  We will invest in education and job training.  We will do what we need to compete and we will win the future.

The second step in our approach is to find additional savings in our defense budget…. I intend to work with Secretary Gates and the Joint Chiefs on this review, and I will make specific decisions about spending after it’s complete.

The third step in our approach is to further reduce health care spending in our budget. …  But let me be absolutely clear:  I will preserve these health care programs as a promise we make to each other in this society. … That includes, by the way, our commitment to Social Security. 

The fourth step in our approach is to reduce spending in the tax code…. The tax code is also loaded up with spending on things like itemized deductions.  And while I agree with the goals of many of these deductions, like homeownership or charitable giving, we cannot ignore the fact that they provide millionaires an average tax break of $75,000 while doing nothing for the typical middle-class family that doesn’t itemize.”

Interesting, this fourth and last step of spending custs is really a tax increase.  So, the ratio of spending cuts to tax increases is NOT the 3 to 1 ratio that the President stated, and the press is widely repeating. 

Although the President claims to desire a bipartisan solution, much of the speech illustrated deep disagreements.  See if you think the following comments speak to bipartisanship:

One vision has been championed by Republicans in the House of Representatives and embraced by several of their party’s presidential candidates.  … But the way this plan achieves those goals would lead to a fundamentally different America than the one we’ve known throughout most of our history.

A 70% cut to clean energy.  A 25% cut in education.  A 30% cut in transportation.  Cuts in college Pell Grants that will grow to more than $1,000 per year.  That’s what they’re proposing.  These aren’t the kind of cuts you make when you’re trying to get rid of some waste or find extra savings in the budget.  … These are the kind of cuts that tell us we can’t afford the America we believe in.  And they paint a vision of our future that’s deeply pessimistic.

It’s a vision that says if our roads crumble and our bridges collapse, we can’t afford to fix them.  If there are bright young Americans who have the drive and the will but not the money to go to college, we can’t afford to send them. … It’s a vision that says America can’t afford to keep the promise we’ve made to care for our seniors. … This is a vision that says up to 50 million Americans have to lose their health insurance in order for us to reduce the deficit. … That’s not right, and it’s not going to happen as long as I’m President.”   

…the difference with the House Republican plan could not be clearer:  their plan lowers the government’s health care bills by asking seniors and poor families to pay them instead.  Our approach lowers the government’s health care bills by reducing the cost of health care itself.

The President’s plans for increased taxes are much clearer.  The President effectively repeated the tax increases proposed as part of his recent budget proposal.  This earlier blog entry provides the details.  Not counting the increased taxes from what the President calls “tax spending”, the increased taxes total $1 trillion.

About the author

David Nolte

I am a founding principal of Fulcrum Inquiry, an accounting and economic consulting firm that performs damage analysis for commercial litigation, forensic accountings, financial investigations, and business valuations. I am a Certified Public Accountant (CPA) and an Accredited Senior Appraiser (ASA), as well as having other professional credentials. I regularly serve as an expert witness involving damages measurement. My litigation-oriented resume is on Fulcrum's website.

Permanent link to this article: http://betweenthenumbers.net/2011/04/president-offers-detailed-tax-increases-but-few-detailed-spending-cuts/

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

*