Listening to President Obama’s weekly address on Saturday was a rollercoaster experience for me. At times, I was lifted by his message of fiscal discipline. At other times, I was depressed by his unwillingness to connect fiscal discipline with politically difficult choices.
It started out well with the President’s observation that “the cost of confronting our economic crisis is high. But we cannot settle for a future of rising deficits and debt that our children cannot pay.”
Then came the first downward plunge when the President proclaimed, “we have identified two trillion dollars in deficit reductions over the next decade.”
This statistic is based on savings achieved from a contrived “baseline.” If you assume that war spending remains at the current level adjusted for inflation over the next 10 years, you can get a lot of “deficit reduction” by reducing that commitment -- as even the Bush Administration was planning to do. And, if you assume that all of the Bush tax cuts are permanent, which they are not, you can get more “deficit reduction” by assuming that a portion of them will not be extended, which is what would happen anyway under current law. So there isn’t really a lot of deficit reduction in the $2 trillion figure the President cited, and no hard choices.
But maybe, I thought, this $2 trillion in dubious deficit reduction was just a throwaway line. My hopes rose when the President said, “we must also recognize that we cannot meet the challenges of today with old habits and stale thinking…. It’s time to fundamentally change the way that we do business in Washington.”
This sounded like a good prelude to tough talk about Medicare, Social Security, and taxes. Unless we jetison “old habits and stale thinking” in all three areas, it’s hard to see how our unsustainable fiscal path can be altered.
Unfortunately, my hopes took another plunge when the President retreated to the easy ground of condeming waste, fraud and abuse. He mentioned the “substantail savings” identified at a recent Cabinet meeting but neglected to note that the $100 million goal set at that meeting is about .003 percent of the budget. He went on, “we will continue going through the budget line by line and we’ll identify more than 100 programs that will be cut or eliminated.”
Perhaps President Obama will have better luck with this than every other recent President. Hard as he may look, however, there is no line-item in the budget labeled "waste, fraud and abuse." Defining these things is often a matter of subjective judgment.
More importantly, even if all the “pork” in the budget could be eliminated, it would only save about one percent of all federal spending. Focusing public attention on such a relatively small part of our fiscal challenge merely serves as a distraction from the the much bigger challenges.
Yet, the President moved on to another subject that once again lifted my spirits. He said, “We need an all-hands-on-deck approach to reforming government…. First, we need to adhere to the basic principle that new tax or entitlement policies should be paid for. This principle – known as PAYGO – helped transform large deficits into surpluses in the 1990s.”
The President even called on Congress to pass a PAYGO law, making the principle stronger than current House and Senate rules.
My enthusiam was tempered, however, by a couple of caveats the Presdient failed to note. For one thing, his budget proposes to carve out a large PAYGO exemption for $2 trillion of expiring tax cuts; another $447 billion for reform of the Alternative Minimum Tax (AMT) and $285 billion to avoid scheduled cuts in Medicare physician reimbursements. This may reflect political reality, but waiving PAYGO for these items will add to the debt the President says our children cannot pay.
The other caveat about PAYGO is that, at best, it merely prevents a bad situation from getting worse. It’s good that the President has insisted on paying for his new initiatives, including health care reform, but even if he succeeds in this the preexisting policies will remain unsustainable.
And in the end, that is why I felt more depressed than uplifted by the President’s remarks. I’m all for statutory PAYGO and for cutting waste fraud and abuse from the budget. But these steps, like the President’s Saturday morning message, leave the heavy lifting for another day. Let’s hope that day comes soon.