Similarly, under spending cuts, the president’s plan calls for “strengthen[ing] the unemployment insurance trust fund,” to the tune of $50 billion. In actuality, it is an increase in unemployment-insurance taxes. It also claims $40 billion in “savings” from TSA and postal-service reform, but a large portion of that comes from new fees.
Means-testing Medicare benefits for upper-income taxpayers may well be a wise policy. But the president doesn’t propose to reduce their benefits, but to increase their premiums. That is a revenue increase, not a spending reduction. The president’s plan to “reform federal retirement programs” also involves boosting government employees’ contributions — a good idea, but not necessarily a spending cut.
And, as in a dozen or so earlier budget plans, the president would sell parts of the telecommunication spectrum and charge additional fees for spectrum access. Somehow, this too gets classified as a spending cut.
That is not to say that there are no good ideas in the president’s plan. There are. But it is misleading in the extreme, particularly in classifying tax hikes as spending cuts.
It is also important to recall that the fiscal-cliff deal in December raised taxes by $600 billion over the next ten years. In addition, Obamacare will impose roughly $1 trillion in new or increased taxes over that same period, with most beginning this year. That’s a total of $1.6 trillion in tax hikes. At the same time, the sequester imposes $965 billion in spending cuts through 2021 (not counting interest savings). Combining these means that the baseline measures this year yield $1.65 in tax hikes to $1 in spending cuts.
Therefore, repealing the sequester cuts and substituting the president’s plan would actually result in a total of $2.6 trillion in new taxes or other revenues, and just $600 billion in true spending cuts (excluding interest savings and disguised revenue increases), nearly all of which are unspecified. In other words, the president’s “balanced” approach would raise taxes and revenues by $4.30 for every $1 in spending cuts.
The president’s proposal shows the danger of focusing solely on debt and deficits. There is no doubt that fiscal insolvency is a serious threat to our economy and an unfair burden on future generations. But debt is just a symptom of a larger disease, an ever growing government. Simply balancing the books without reducing the size, cost, and intrusiveness of government would not solve the bigger problem.
The president’s proposals might treat some of our symptoms by slowing the growth of future debt. But the patient is still dying.