海角大神

Some of my 鈥渓ikes鈥� about the President鈥檚 speech and his general 鈥渇ramework鈥� for federal deficit reduction:

- advocates a 鈥渂alanced鈥� approach with a mix of spending cuts and revenue increases;

- recognizes that a lot of spending occurs in the form of 鈥渢ax expenditures鈥� which are economically inefficient and also disproportionately benefit the rich, and proposes to raise additional revenue by reducing some of these tax expenditures;

- acknowledges that the Bush tax cuts played a large part in turning the surpluses of the late 1990s into the record deficits in the following decade;

- clarifies that the choice is not reducing the deficit versus not reducing the deficit, but reducing the deficit by cutting benefit programs versus reducing the deficit by raising taxes;

- reminds Americans that we all benefit from safety-net programs even if we don鈥檛 personally need that safety net at this very moment (or even ever use it)鈥搕he 鈥渢here but for the grace of God go I鈥� sentiment;

- outlines a vision quite different from the Ryan one by refusing to use savings from spending cuts or tax base broadening to fund tax cuts for the rich;

- proposes an approach generally similar to that of the President鈥檚 fiscal commission.

Some of my 鈥渄islikes鈥� or at least 鈥渄isappointments鈥� about the proposed framework:

- proposes a mix of spending cuts versus revenue increases that is probably still too heavy on the spending side, and gives the President an 鈥渙pening bid鈥� that is basically where I think he wants to end up. (Is that the best negotiating strategy to counter Ryan鈥檚 all-spending-cuts proposal, or has the President already negotiated with himself?)

- suggests that the broadening of the tax base/reduction of tax expenditures would be limited to households with incomes above $250K鈥搒uch as those 鈥渕illionaires and billionaires鈥� the President kept referring to today. Not clear that this would raise adequate revenue or that the President is willing to go after the largest tax expenditures or pare them back enough (even on the rich). (Still, in terms of economic efficiency, raising taxes on the rich by broadening their tax base is still preferable to raising taxes on the rich by simply raising their marginal tax rates.)

- fails to acknowledge that even the 鈥渕iddle-class鈥� portions of the Bush(-now-Obama) tax cuts were deficit financed and were fiscally irresponsible, and that President Obama has always supported the deficit-financed extension of the great bulk of the Bush(-now-Obama) tax cuts;

- takes a pass on Social Security reform, just like the Ryan plan;

- doesn鈥檛 cut defense spending as aggressively as the commission recommended (and yes, probably for the same political reason that it doesn鈥檛 raise as much revenue as the commission proposed鈥搘hich by the way I still think was too low with its ceiling of 21 percent of GDP);

- proposes a 鈥渇ail-safe鈥� trigger that I worry would be either ineffectual because of its exemptions (Social Security and Medicare, and 鈥渆mergency鈥� situations) or even economically damaging because of its procyclical nature (cutting spending during recessions).

I thought the President鈥檚 speech was great in terms of tone and delivery, but just good in terms of substance. Not perfect, but at least good鈥揳nd I am reminded that the wise adage applies well here, that we can鈥檛 let the perfect be the enemy of the good. It actually exceeded , and I am somehow comforted and reassured to see the House Republicans react the way they did to the speech (in the )鈥搇ashing out with accusations of the President鈥檚 鈥減artisan rhetoric,鈥� basically shocked that the President disagrees with them on the issue of tax cuts for the rich and the draconian spending cuts they require. (So I guess the President did provide a decent counterpoint to the Ryan plan, even in taking that 鈥渂alanced鈥� approach of still three-fourths spending cuts to the one-fourth tax increases.)

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