President Obama’s new deficit-reduction plan reflects several appealing values: tax fairness, shared sacrifice, a balance of spending cuts and revenue increases, and protection of the most vulnerable Americans. But it also includes some fuzzy numbers and inadequate resolve to control the fast-growing costs of Social Security and Medicare.
Enacting the President’s plan would do much more to cut the national debt than merely surrendering that task to the congressional “super-committee” or letting across-the-board spending slashes take effect. But if Mr. Obama is to have any hope of overcoming Republican obstructionism in Congress, he will need ample support from voters across the political spectrum. That will require an increase in the plan’s boldness quotient.
The feature of the 10-year plan that has attracted the most attention is the President’s proposal to raise taxes on Americans who earn more than $1 million a year, as billionaire Warren Buffett has advocated. This should offend no one’s sense of justice, given the way the richest Americans have benefited from the tax cuts and deregulation pursued by Mr. Obama’s predecessor, George W. Bush.
The President also renewed his call for broadening the tax base and simplifying the tax code by eliminating corporate and individual loopholes, and for allowing the Bush tax cuts for the wealthiest Americans finally to expire. Yet he resisted offering specific proposals, such as an increase in the capital gains tax or alternative minimum tax for the best-off taxpayers. Such vagueness invites a political vacuum that Mr. Obama’s opponents will happily fill, and exploit.
Still, tax hikes account for little more than one-third of the President’s plan for long-term debt reduction; the rest comes from spending cuts. Some of these cuts are gimmicks, such as including the savings from the debt-ceiling agreement and from the draw-downs in Afghanistan and Iraq, which will occur in any event.
Others are sensible: curbing farm subsidies, putting federal employees’ benefits more on a par with those of private-sector workers, limiting payments to Medicare providers, and imposing new costs on health-care beneficiaries, in Medicare and military retirement programs, with the greatest ability to pay.
But the President can do more to control the costs of entitlement programs, such as applying similar ability-to-pay tests to Social Security benefits and raising the Medicare eligibility age. Americans are more likely to accept such changes if they believe Washington is serious about substantially reducing debt, not merely slowing its growth.
Republicans responded to Mr. Obama’s plan with predictable cries of “class warfare,” offering the false argument that the proposed tax increases on the richest individuals and corporations would afflict job-creating small businesses. If Republicans continue to insist they can balance the budget without new revenue, let them show Americans in detail the big cuts they would have to make in entitlement and defense programs to achieve that.
House Speaker John Boehner of Ohio harrumphed that “pitting one group of Americans against another is not leadership.” No, but it has become standard operating procedure for GOP lawmakers, as they defend economic elitism.
So if Mr. Obama wants his plan to be something more than merely the kickoff of his re-election campaign for 2012, he will have to go over the heads of members of Congress and sell it to all Americans, not merely his electoral base. Without compromising the admirable principles of his proposal, he can and should expand it to do more to control long-term debt and deficits.