Analysis: Barack Obama and the Economy
This is for Bruce Lerner, who wondered aloud on Twitter how Obama proposes to handle the budget and economy in specific terms. Bruce, here’s my promised answer.
I. Where we are:
According to the Center on Budget and Policy Priorities, extending the Bush tax cuts through 2018 would cost $4.4 trillion, or $400 billion per year. The same report notes that the cost of tax legislation passed since 2001 is $1.3 trillion.
As a point of reference, that $400 billion per year is more than 8 times the amount spent by the federal government on K-12 and vocational education and about ten times what is spent on hospital and medical care for veterans.
There’s an additional $3 trillion in war costs to be dealt with as well. Maintaining our presence in Iraq costs us $720 million per day. This figure includes long-term health care for veterans, interest on debt, and replacement of military hardware, so it is somewhat higher than the estimates you’ll see coming from Washington, but far more realistic.
II. Experts’ views on correction
According to the Brookings Institution, even if tax cuts are repealed, the Medicare prescription drug benefit eliminated, and defense spending dropped to pre-Iraq levels, we would face $100 billion per year in interest payments on the Bush debt. They recommend the following steps:
- Fully account for all costs in the budget, including projections of future costs on existing initiatives. They cite the difference between the 2006 request for a $485 billion defense budget and the 2008 request for a $693 billion defense budget. Had the increase been factored into the budget, reserves could be built in against the future costs.
- Exercise fiscal discipline. Veto any legislation that raises the deficit, or Pay as You Go
- Reach across the aisle toward a common goal of deficit reduction, while pushing ahead with initiatives to reduce health care costs, including bringing private insurance plans into parity cost-wise with government plans, implementation of wellness guidelines and incentives within the Medicare system, and establishing a baseline for all health care plans.
- Reform the tax system: Allow the Bush tax cuts to expire, consider an increase in sin taxes, reform mortgage interest deductibility, reform corporate accounting practices so that profits reported to shareholders are also profits reported for tax purposes, closing special interest loopholes.
While it would be impossible to produce even a theoretical balance sheet, a couple of things are clear:
- Our priorities can be reordered as Obama suggests without bankrupting the country
- It is imperative that fiscal responsibility be a mandate not only for our government but also for individuals and corporations, including reform of the mortgage and mortgage banking industry, streamlining bureacracies, and leveraging the Internet as a cost-cutting efficient method of government administration.
All of the Brookings’ recommendations are part of the Obama proposals to be fiscally responsible. He is committed to health care reform, and as part of that, the Medicare prescription drug benefit should be refashioned to be fair and not simply a payoff to cronies of George Bush. (The former CEO of Caremark was the primary architect of the Medicare Part D provisions, and Caremark continues to have wildly increasing profits each year, a large gift from the Bush administration.)
III. The Present as Predictor of the Future
Finally, I think it’s important to look at whether each candidate has been fiscally responsible with their campaign.
- Hillary Clinton Overspent from the outset with poorly-budgeted and ballooning expenditures to Mark Penn’s firm and other outside consultants. Having maxed out her large donors, she turned to small donors in mid-February and is keeping her campaign afloat with a $5 million bailout from her personal funds. Clinton has 22 million banked for the general election from those large donors, but cannot use those funds unless she wins the nomination. As of March 31st, she had 11 million in the bank for the primaries with 8.7 million in unpaid bills, not counting her personal loan. If that’s factored in, Clinton ended March $2.7 million in the red.
- John McCain After nearly being bankrupted by a former campaign advisor early in the campaign, McCain negotiated a bank loan to keep the campaign afloat until he could regain momentum and donors. Now that he has won the nomination, he is also out of money until the general election begins, and is reliant upon 527 groups for advertising and fundraising efforts. He may be forced to agree to public funding for his campaign in the fall, which will also leave him reliant upon arms-length donors and backroom relationships for assistance with that campaign.
- Barack Obama Raised $30 million in January, $55 million in February, and $40 million in March. As of 3/31, the Obama campaign had $31 million in the bank and $625,000 in debts.
If one were to look at the fiscal management of a campaign as an indicator of how the national budget might be managed, I’d say Obama demonstrates a clear advantage in that area.
Some argue that repealing the Bush tax cuts actually harm, rather than help the economy. My answer is this: Before the tax cuts, there was a budget surplus, no war, and a solid budget. After the tax cuts, we’re at a record-high spending deficit, pouring $720 million per day into Iraq, building a ridiculously ostentatious embassy which will also have costs to maintain, there are numerous examples of no-bid contracts, extraordinary incompetence, cronyism, and government waste. Sheer foolishness, unrewarding foolishness, devious foolishness.
The only beneficiaries of the Bush tax cuts are those who least need to be the beneficiary of economic relief.
The only way to correct the unfairness of those tax cuts is to repeal them, and realign our budget and national priorities toward the larger good of society, our economy, and our standing world-wide.
As a final, personal note, when I think about the Clinton tax returns and the fact that they benefitted from those same tax cuts for the rich, and I know that Bush will probably have triple the income in his first year out of office that they did, it seems all that much more imperative to me that those tax cuts be an integral part of any candidate’s economic proposals.
One thing is sure: War is not any kind of pathway to economic and budgetary stability.
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