Obama promises $2T in budget cuts over 10 years

[NorthSideSox72]

So, Obama says his team has found $2T in cuts to make out of the federal budget over 10 years, on what he calls wasteful spending. This article details some examples.

 

Now, $2T seems like a ton, but its really $200B a year. Still a lot.

 

On the one hand, he has a huge uphill battle to get this done. Even if they really did find this much, there are so many people in Congress who won't want to see their pet stuff (and lobbyist faves) get cut.

 

On the other hand, what if Obama is really able to do this, or some significant chunk of it? To me, if Obama can manage to do this, that is a huge win. Further, he'd be doing something that the last GOp administration was never able to do anything like. A democrat (socialist?) actually cutting fat from the budget? How bad would the GOP look then?

 

Add to this the drawdown in Iraq and the money saved there, and you have some idea of how he plans to halve the deficit as he recently promised. Maybe, just maybe, he could actually do that.

 

Discuss...

 

[kapkomet]

I haven't read the detail, but I do think that Iraq is a significant part of his "savings".

 

[NorthSideSox72]

I haven't read the detail, but I do think that Iraq is a significant part of his "savings".

Actually, that is seperate and apart form the $2T over 10 years. But yes, it is obviously part of his overall effort to halve the deficit.

 

[kapkomet]

Actually, that is seperate and apart form the $2T over 10 years. But yes, it is obviously part of his overall effort to halve the deficit.

Ah, got it.

 

There probably is redundancy in the government to that much money... it wouldn't surprise me at all.

 

[lostfan]

The budget he's proposing is somewhere in the neighborhood of 4 trillion. Which obviously seems like an absurd number but it's the ACTUAL budget number instead of the pretty one, so it's not really a significant increase over what Bush was spending.

 

The problem with the budget is that it's really not that easy to trim, candidates make it sound like it is, but it's not. All presidents want a slimmed down budget but if you want to cut back on waste and inefficiency it takes a major overhaul, none of which are easy to do. So either Social Security (which Bush tried unsuccessfully), cutting back defense spending (which Clinton managed to do but had mixed results, Obama and Gates are going to try to cut back some unnecessary programs to save a few billion, but the defense contractors have a pretty strong lobby), or Medicare (doing this basically requires an overhaul of the entire healthcare system which is a Herculean task). Stuff like pork is a red herring, sure it's wasteful but it's a very tiny part of the budget.

[NorthSideSox72]

Clearly its not going to be easy. Too many interests involved. But, I think its smart to try it now, for multiple reasons:

 

--Obama just spent a s***-ton of money and needs to look more responsible

--Lots of people in the public worried about government bloat, so there is more support for this

--He can look more bipartisan, and maybe even work with the GOP to get help on it

 

Here is the deal. If Obama proposes these cuts, and works with Congress to get them, but Congress removes them... that is 100% on Congress. And I think Obama knows that, and is putting them on the line, so that he can get a little more juice to get things done with them. He is making them choose waste or not, and he will happily make sure the public knows the outcome.

 

[bmags]

Further, if the democrats do move on this and actually do have some evidence of this by 2010, the legs of the republicans are cut out from them. The congressional and senate dems would be wise to follow suit.

[Balta1701]

All that will happen is he will succeed, some Republican will come along, win the 2016 election, and propose $3 trillion in tax cuts.

[bmags]

Haha, balta is turning into our very own Kap.

[Balta1701]

Haha, balta is turning into our very own Kap.

I'm not sure I'd call that one hyperbole when it's exactly what happened the last bloody time.

 

Would it have made it more accurate if I'd said $3 trillion in tax cuts and $4 trillion in random wars?

[lostfan]

Afghanistan wasn't really a random war but yeah.

[HuskyCaucasian]

It can be done, but it has to be done carefully and diligently. 10 years is a far more realistic timeframe than McCain's "by the end of my first term" proposal.

[Balta1701]

It can be done, but it has to be done carefully and diligently. 10 years is a far more realistic timeframe than McCain's "by the end of my first term" proposal.

Diligently and carefully is not going to describe the kind of impact the government is going to need to make once we get past the current troubles. We've spent years digging ourselves a double-bottomed pit that interestingly enough looks like a W in cross section, we're going to need a major move to keep the walls from collapsing on our head.

[lostfan]

It can be done, but it has to be done carefully and diligently. 10 years is a far more realistic timeframe than McCain's "by the end of my first term" proposal.

I have no problems with high goals even if they're unrealistic.

[southsider2k5]

It can be done, but it has to be done carefully and diligently. 10 years is a far more realistic timeframe than McCain's "by the end of my first term" proposal.

 

To be fair, that plan came out long before the extent of the problems was evident.

 

In reality, this is going to be the same accounting trick that is always used when spending is "cut" buy the government. Take budget of department A. It is projected to have a 10% increase annually from the $100 billion is is this fiscal year. Cut the rate of increase to say 3%, and call the other 7% percent a "savings" even though you are still increasing the budget of this particular department by 3%. Hopefully I am wrong, and there are some real cuts, and they actually start to cut into the duplicity of government, but history doesn't look good.

[NorthSideSox72]

To be fair, that plan came out long before the extent of the problems was evident.

 

In reality, this is going to be the same accounting trick that is always used when spending is "cut" buy the government. Take budget of department A. It is projected to have a 10% increase annually from the $100 billion is is this fiscal year. Cut the rate of increase to say 3%, and call the other 7% percent a "savings" even though you are still increasing the budget of this particular department by 3%. Hopefully I am wrong, and there are some real cuts, and they actually start to cut into the duplicity of government, but history doesn't look good.

There will be some of that. But, look at the examples in the article - they are talking about cutting entire departments.

 

[Balta1701]

There will be some of that. But, look at the examples in the article - they are talking about cutting entire departments.

By far the biggest key is finding a way to cut the rate of growth of health care expenditures. Health care costs of every variety are growing so much faster than the rate of inflation that it's just going to destroy everything barring a major, successful overhaul.

[southsider2k5]

There will be some of that. But, look at the examples in the article - they are talking about cutting entire departments.

 

The link I saw was a mini article that didn't have any detail. Did it change?

[kapkomet]

By far the biggest key is finding a way to cut the rate of growth of health care expenditures. Health care costs of every variety are growing so much faster than the rate of inflation that it's just going to destroy everything barring a major, successful overhaul.

I do agree with you here. I just don't think the government taking it over is the solution to cutting costs without jeapordizing the entire system as we know it (and yes, we both agree that the current system needs to change).

 

[NorthSideSox72]

The link I saw was a mini article that didn't have any detail. Did it change?

What the... yes, it did. It didn't have a LOT of details before, but it had a handful of examples at least, and allusions to other things. Weird.

 

[NorthSideSox72]

I do agree with you here. I just don't think the government taking it over is the solution to cutting costs without jeapordizing the entire system as we know it (and yes, we both agree that the current system needs to change).

So... what would work better?

 

[southsider2k5]

What the... yes, it did. It didn't have a LOT of details before, but it had a handful of examples at least, and allusions to other things. Weird.

 

Yahoo does that a lot. That's why I always try to copy and paste the full article before they change it or disable the link.

[kapkomet]

After working in the pharma industry and health care both:

 

* There needs to be price caps on drugs - they shouldn't be able to just raise prices whenever they want to.

 

* There needs to be a complete overhaul of "usual and customary" charges (in conjunction with ...)

 

* There needs to be a revision done on insurance contracts with health care providers because "usual and customary" and contractual adjustments really screw those on self pay

 

* There needs to be a COMPLETE overhaul of tort law to limit liability on frivolous lawsuits, thus reducing malpractice insurance (one of the leading causes of high "usual and customary" charges

 

* Lobbyists need kicked out of Washington... election law is part of the issue too

 

* There needs to be a HUGE audit of insurance companies and complexity of the IDC coding needs to be changed - there's millions wasted on incorrect diagnosis coding

 

I can go on and on... here's a start.

 

 

 

[StrangeSox]

Interesting NPR story on this:

 

http://www.npr.org/templates/story/story.p...oryId=101155466

Halve The Deficit? Good Luck, Obama

 

by Russell Roberts

 

Russell Roberts

Eitan Charnoff

 

Russell Roberts is professor of economics at George Mason University, a distinguished scholar in the Mercatus Center and a research fellow at Stanford University's Hoover Institution. He is the host of the weekly podcast, EconTalk. His latest book is The Price of Everything: A Parable of Possibility and Prosperity.

 

 

 

NPR.org, February 25, 2009 · In his first address to a joint session of Congress, President Obama pledged to cut the federal budget deficit in half in four years.

 

Keeping that pledge won't be easy.

 

The Congressional Budget Office is forecasting a deficit for this year of $1.2 trillion.

 

That forecast does not include the spending package Congress just passed and Obama signed that will add hundreds of billions of dollars to the deficit over the next four years. And that doesn't include unforeseen spending increases in further bailouts for Fannie and Freddie or AIG or Bank of America or GM or the state of California or whoever else shows up in Washington with a hand out.

 

So Obama probably needs to cut spending or raise taxes by at least $700 billion a year. To give you an idea of how much money that is, that's about the amount the payroll tax currently collects. The payroll tax is about 15 percent, shared between employer and employee. Doubling that rate to 30 percent would add an extra $700 billion if — and it's an impossible if — if a tax rate of 30 percent didn't lead employers to reduce their number of employees or force workers to reduce their hours.

 

Besides, Obama also promised Tuesday night that 98 percent of American families, those earning less than $250,000, would not pay an extra dime in taxes. So to cut the deficit in half, he needs to raise taxes on the richest Americans and look for spending cuts.

 

He claims to have found $200 billion per year in spending we can do without. Assuming those spending cuts actually materialize, that still leaves $500 billion in higher taxes for the richest Americans.

 

In 2006, the latest year we have data for, the top 2 percent of tax returns yielded around $500 billion in revenue. So to cut the deficit in half, Obama will have to roughly double the tax rates on the top 2 percent. I don't think that strategy will be politically viable or economically productive.

 

What I think will happen instead, is that he will simply settle for running larger deficits for a while, continuing to borrow money from our fellow citizens and from foreigners, and hoping that the interest rates we offer on those loans don't start to rise because people start to realize that no asset, even treasuries, is risk-free.

 

The cheery scenario is the economy grows like gangbusters and tax revenues surge without increases in rates. Could happen, but I am not optimistic. Too many unknowns lie ahead.

 

Every president who inherits a deficit promises to cut it somewhere down the road. Only one president in recent years has kept that promise — Bill Clinton. But he was helped by six years of Republicans in the House and Senate. When the White House and the Congress are from the same party, it's very hard to say no to key constituencies that expect rewards for past support. If Obama is really serious about cutting the deficit down the road, he will almost certainly have to fight with his own party.

 

Russell Roberts is an economics professor at George Mason University, a distinguished scholar in the Mercatus Center and a research fellow at Stanford University's Hoover Institution. He is the host of the weekly podcast, EconTalk. His latest book is The Price of Everything: A Parable of Possibility and Prosperity.

[kapkomet]

Only one president in recent years has kept that promise — Bill Clinton. But he was helped by six years of Republicans in the House and Senate.

Wow, GOP gets some credit for that? I'm shocked.

 

I have always said that there are two things Bill Clinton did well. One was deficit, two was the welfare reform he got passed.