Monday, July 11, 2011

Why Is Obama Echoing The Right On The Deficit And Entitlements?

House Speaker John Boehner pulled back on the deficit deal as the Republicans balked at new revenue from corporations and the wealthy. No surprise there. What is surprising and disturbing is President Obama's recent rhetoric on the deficit and proposals to cut entitlements. Paul Krugman pointed out that his rhetoric echos conservative economics:

One striking example of this rightward shift came in last weekend’s presidential address, in which Mr. Obama had this to say about the economics of the budget: “Government has to start living within its means, just like families do. We have to cut the spending we can’t afford so we can put the economy on sounder footing, and give our businesses the confidence they need to grow and create jobs.”

That’s three of the right’s favorite economic fallacies in just two sentences. No, the government shouldn’t budget the way families do; on the contrary, trying to balance the budget in times of economic distress is a recipe for deepening the slump. Spending cuts right now wouldn’t “put the economy on sounder footing.” They would reduce growth and raise unemployment. And last but not least, businesses aren’t holding back because they lack confidence in government policies; they’re holding back because they don’t have enough customers — a problem that would be made worse, not better, by short-term spending cuts.

Krugman also points out that the idea of cutting Social Security as part of a deficit deal came from Obama, not the Republicans. Obama, in addition, proposed cutting Medicare, which the Democrats have been defending against Rep. Paul Ryan’s (R-WI) plan to turn it into a privatized voucher program. How is it that the president feels that cutting these programs is an acceptable exchange for ending the Bush tax cuts, closing loopholes and cutting corporate subsidies? From a NY Times editorial on Friday:

...[Obama] seems to have embraced this illegitimate process — rooted in the false and dangerous premise that the nation’s budget problems are entirely a matter of overspending on the needy and not of undertaxing the rich. Now he is trying to expand it to reach a grand agreement to cut the deficit by as much as $4 trillion over 10 years, twice as much as discussed in the first round of talks.

As The Times reported on Thursday, the president is considering proposals to cut spending on Medicare, Medicaid and even Social Security, along with huge cuts in discretionary programs, in exchange for a wholesale revision of the tax code to remove many deductions and change many rates.

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