James Pethokoukis writing at the AEI Enterprise blog, examines the president's "balanced" plan to cut $4.4 trillion from the budget over the next decade. James points out that the plan is a "reheating of his 80-page deficit reduction package from September 2011 which, on paper, showed $2 in spending cuts for every $1 in taxes raised.
Not so fast:
But once you begin to dig into the numbers, the plan doesn't look balanced at all. As the bipartisan Committee for a Responsible Federal Budget noted back then:
The Administration claims that the plan would save about $4.4 trillion in total (including interest savings, war savings, and the costs of the jobs proposals). However ... counting the war savings is counting a policy that is already in place and is thus a gimmick to be avoided. Taking out the war savings and savings from the discretionary cuts in the Budget Control Act leads to total savings of less than $2 trillion.
Of the supposed savings, then, $1.6 trillion comes from tax hikes and $577 billion comes from spending cuts, not counting saved interest. So 73% of the savings comes from taxes, 27% from spending cuts. That's $3 of tax hikes for every $1 of spending cuts.
Even if you include interest savings, 60% of the debt reduction comes from tax hikes. Obama is making the exact mistake Europe is making by employing a tax-hike heavy version of fiscal austerity. Indeed, a 2010 analysis by AEI scholars found that successful fiscal consolidations are heavy on spending cuts, light on tax hikes. Even Bill Clinton's debt reduction plan was 2-1 in favor of spending cuts. The Obama plan is dangerously unbalanced, especially given the weak economic recovery.
The president just concluded a pep rally at the White House with his far left liberal base. These hard core leftists are adamantly opposed to any entitlement reform, and any cuts in the federal budget outside of massive reductions in defense spending.
Obama made it clear that he will hold the line on entitlement spending which leaves precious little else in the budget to cut. These people are not serious about deficit reduction, clinging to the fantasy that we can grow our way out of the crisis. But with projected GDP growth hovering near 2.5% for the next several years, this is nonsense.
Republicans need to stiffen their backbones if they are to have any influence at all in the coming negotiations.