海角大神

Class warfare? Hardly.

Opinions on the president's debt plan

Let鈥檚 hear from Bill Gale, Jim Horney, and Barack Obama on the new budget plan:

Economist Bill Gale provides a useful and thoughtful of the package outlined by the President this morning. Since I鈥檓 with the class warfare nonsense we鈥檙e hearing from the R鈥檚 on this, allow me to highlight that section of Bill鈥檚 analysis (note the part of Rep. Ryan鈥檚 budget):

Class Warfare

Proposals to raise taxes on high-income households inevitably generate claims of 鈥渃lass warfare.鈥�

鈥揃ut it seems reasonable to ask for some fiscal sacrifice from a group that (a) is very well off, (b) has seen meteoric income gains relative to the rest of the population over the past 30 years, and (c) has nevertheless seen their average tax burden fall, not rise, during that period. It does not seem fair to let the wealthiest escape from sharing the burden of closing the fiscal gap; nor is there a way to impose that burden without tax increases.

鈥揑ronically, proposals like Rep. Ryan鈥檚 recent plan to address long-term fiscal issues would impose more than the full burden of closing the fiscal gap on low- and middle-income households and, at the same time, give high-income households a tax cut. That seems much less justified on fairness grounds than asking high-income households to share in the burden of closing the fiscal gap.

Next, my CBPP colleague Jim Horney provides a at some key aspects of this plan. He hits a particularly important point here:

The only people largely shielded from cuts under the President鈥檚 plan are the most vulnerable Americans 鈥� children, the disabled, the blind, and the elderly with very low incomes. In light of the recent Census data showing a historically high rate of poverty, the President wisely followed the core principle established by the Bowles-Simpson commission report that deficit reduction should not push more Americans into, or deeper into, poverty. Such a balanced approach 鈥� both increases in revenues and reductions in spending 鈥� is the only approach that will put the budget on an economically and politically sustainable path.

He then turns to the forthcoming Congressional debate (my bold):

The balanced approach the President has proposed takes on a wide variety of special interests, from wealthy Americans who want to preserve their tax breaks to the pharmaceutical industry that does not want to give up the increases in the prices the federal government pays for prescription drugs for low-income Americans that the industry was given in the 2003 Medicare prescription drug bill. But if Congress does not stand up to these special interests, it will be the broad American public that pays 鈥� both in squandered opportunities for deficit reduction and in big cuts in programs that benefit average Americans rather than those best able to lobby Congress.

鈥�An unbalanced deficit reduction package that allows lawmakers to continue to pretend that no increase in revenues is necessary and that it is possible to avoid confrontations with powerful special interests would be worse than no deal at all. The latter outcome would at least show the public that it is lawmakers鈥� unwillingness to confront reality on revenues and special interests that is blocking the path to substantial, sustainable deficit reduction. This is why the President鈥檚 vow to veto a deficit reduction package that is not balanced represents a stand in support of real deficit reduction.

Remember, this plan is the President鈥檚 recommendation to the supercommittee. If they gridlock鈥攁nd if you thought that probability was high last week, you must think it鈥檚 higher now, following Rep. Boehner鈥檚 protestations against new revs and the $1.5bn in revs in the plan itself鈥攖hen the automatic cuts kick in, and those a) exempt the entitlements (outside of a 2% provider cut in Medicare) and b) get 50% of their cuts from defense.

Such a sequester would be far better than a lousy budget deal. And the President was quite clear today what a lousy deal would look like鈥揗r. President, you get the last word (from his speech yesterday):

This is not class warfare. It鈥檚 math. The money is going to have to come from someplace. And if we鈥檙e not willing to ask those who鈥檝e done extraordinarily well to help America close the deficit and we are trying to reach that same target of $4 trillion, then the logic, the math says everybody else has to do a whole lot more: We鈥檝e got to put the entire burden on the middle class and the poor. We鈥檝e got to scale back on the investments that have always helped our economy grow. We鈥檝e got to settle for second-rate roads and second-rate bridges and second-rate airports, and schools that are crumbling.

That鈥檚 unacceptable to me. That鈥檚 unacceptable to the American people. And it will not happen on my watch. I will not support 鈥� I will not support 鈥� any plan that puts all the burden for closing our deficit on ordinary Americans. And I will veto any bill that changes benefits for those who rely on Medicare but does not raise serious revenues by asking the wealthiest Americans or biggest corporations to pay their fair share. We are not going to have a one-sided deal that hurts the folks who are most vulnerable.