First a few impressions. I guess it was predictable and expected – an interview with the Washington Post’s Ezra Klein on MSNBC noting that Obama still supports GOP economists Hubbard’s idea that job one is lower marginal tax rates for the rich because low marginal rates means the economy takes off – and no one on the program pulling out a chart of annual job gains versus the marginal rates over the years since WW2 – where high marginal rates and high job gains just seem to go together. So the GOP has the offer – a grand bargain – if they accept pretend loophole closing they get lower tax rates on the rich and get a tear down into welfare status with lower benefits for the Social Security and Medicare programs. But since the GOP won’t accept the offer, Obama’s proposal is progressive becomes he raises taxes – or does he? More on that later.
In Ezra’s blog http://www.washingtonpost.com/blogs/ezra-klein/post/five-unexpected-ideas-in-obamas-deficit-plan/2011/09/19/gIQAPpm4fK_blog.html , and http://www.washingtonpost.com/blogs/ezra-klein/post/how-the-white-house-would-save-320-billion-in-health-care-costs/2011/09/19/gIQA6UcpfK_blog.html , and http://www.washingtonpost.com/blogs/ezra-klein/post/does-obamas-plan-raise-taxes-yes-does-it-cut-taxes-yes/2011/08/25/gIQAmlncfK_blog.html , and http://www.washingtonpost.com/blogs/ezra-klein/post/no-compromise-from-obama/2011/09/19/gIQAgkateK_blog.html we find Ezra did a bit of critical thinking about the Obama proposal.
He notes the 5 “new useful” ideas in the plan – “Reform the Postal Service” via ending Saturday service plus the right to get out of the current union contract relative pension/health benefits as it cuts 100,000 jobs, plus offering non-postal products, plus paring back the flood insurance program for the rich who want to live on the beach and expect rebuilding by the government after every storm, plus a G W Bush idea to make aviation funding more equitable by making private jets pay the same fees for the air-traffic system as commercial jets (2/3rds the cost is currently collected from excise taxes on commercial tickets and jet fuel), plus selling off unneeded federal property (perhaps the 12,000 excess properties – see a map here – but also perhaps the nation’s parks and monuments and wildlife homes), plus in a very slight nod to the fact contractors cost 31% more than just hiring a Federal worker to do the job, Obama proposes to no longer compensate contractors for overhead calculated using actual executive pay – instead Obama would have the executive pay in those calculations capped at the amount that Cabinet executives get paid — currently $200,000.
In 2007, Bush began the process of turning Medicare into a welfare program by requiring higher-income beneficiaries to pay a greater share of average Part B costs (35 to 80 percent, depending on their income). Obama continues the GW Bush thought by extending that to Part D (drugs) in his $320 billion in health-care cuts. The blended rate Medicaid idea is not gone, but is made less drastic than Obama’s April proposal, resulting in only 1/2 as much savings. And the ACA’s new Prevention and Public Health Fund is cut by $16 billion by killing investment in public health projects.
But look on the bright side – this is the first Obama proposal that is not just a major concession to the GOP, or just a high-profile display of the Obama administration’s independence from party – so there must be an election soon. How else does one explain a proposal for increasing taxes on the rich that is not code for ending any return to the Clinton tax rates (but then it is code for killing the return to the Clinton rates, isn’t it), or even more impressive, a veto threat against cutting Medicare benefits without increasing taxes on the rich. And we can be impressed the for the moment that Obama ignored the conservative Democrats like the 2012 re-election worried Senators like Florida’s Bill Nelson who can’t make a decision on higher taxes on those who make more than $200,000 a year, and Nebraska’s Ben Nelson who commented “There’s too much discussion about raising taxes right now, not enough focus on cutting spending”, and Montana’s Jon Tester who backs closing tax loopholes that benefit millionaires and corporations while noting “This plan isn’t the one I would have written”. And if this were for real we’d need to worry about Democrats doing the GOP’s job by nitpicking the proposal into a big nothing – folks like the House Democrat from Northern Virginia’s and its Federal workers, Gerry Connolly, who worries about pension changes for federal employees as well as the cap on the deductions on mortgage interest and charitable giving, or Blue Dogs like Georgia Democratic Rep. John Barrow who simply says Simpson-Bowles had good ideas and the Obama plan is an important start to the conversation on deficit reduction but claims he needs more details.
As Ezra notes this is actually a huge tax decrease made to look like a tax increase. A neat trick made possible by the network forks refusing to judge the proposal by comparing it to doing nothing and letting the Bush tax cuts expire – we can’t talk about the more than $2 trillion in tax revenue lost in the Obama proposal turns out to be, as appears likely, a replacement for the return of the Clinton rates (lower rates with loophole closing kills a simple return to the Clinton rates)..