The President’s Budget: More Taxes, More Spending, No Reform

The Washington Post reports on some of what we can expect from the president’s budget: 

President Obama will release a budget next week that proposes significant cuts to Medicare and Social Security and fewer tax hikes than in the past, a conciliatory approach that he hopes will convince Republicans to sign onto a grand bargain that would curb government borrowing and replace deep spending cuts that took effect March 1.

Obama will break with the tradition of providing a sweeping vision of his ideal spending priorities, untethered from political realities. Instead, the document will incorporate the compromise offer Obama made to House Speaker John A. Boehner (R-Ohio) last December in the discussions over the “fiscal cliff” – which included $1.8 trillion in deficit reduction through spending cuts and tax increases.

A conciliatory approach? Shouldn’t that mean proposing something different from what he has been proposing for the last four years? Obviously we won’t know the details until we actually see the budget, but the Post reports: 

The budget is more conservative than Obama’s earlier proposals, which called for $1.6 trillion in new taxes and fewer cuts to health and domestic spending programs. Obama is seeking to raise $580 billion in tax revenue by limiting deductions for the wealthy and closing loopholes for certain industries like oil and gas. Those changes are in addition to the increased tobacco taxes and more limited retirement accounts for the wealthy that are meant to pay for new spending.

This is not conciliatory. First, only a few months ago, the president won a tax increase, so one would expect his appetite for the new tax revenue to be somewhat smaller. Second, overall, this is the same old “balanced approach” to budgeting that the president has been proposing for years. In fact, in this budget, the president will repeal the sequester cuts. While over the ten-year budget window, these “cuts” weren’t actually cuts, they at least slowed down the growth of government spending. What does replacement mean? More tax increases. 

In addition, based on the details released by the White House, the reductions to Medicare and Social Security spending won’t be significant, nor will they address the fundamental problems with these programs. Making small changes at the edges and merely calling them “structural reform” won’t fix our problems. The real test for entitlement reform is whether or not it puts us on a different and more sustainable long-term fiscal path than we’re currently on. I can promise you that this budget won’t. 

To understand the fundamental difference between cutting entitlement spending and reforming entitlement spending, I would recommend this post by Yuval Levin from a month ago. This paragraph helps highlight the difference:

But Republicans are trying to do more than simply cut spending on entitlement programs. They’re trying to reform these programs—especially the health entitlements—so that they better serve their purposes and spending on them doesn’t keep growing at the sorts of rates that make it totally unsustainable in the coming years. They’ve proposed a premium-support reform of Medicare and a cap on federal Medicaid spending combined with greater flexibility for the states, in both cases in an effort to drive these programs and the underlying health-care system toward a more economically rational financing model that would help restrain cost growth without undermining quality and access. With the exception of his CPI reform for Social Security, the president’s proposals above simply don’t meet these goals and do not constitute a step forward on entitlement reform.

The whole thing is here.

Veronique de Rugy — Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University. Her primary research interests include the U.S. economy, the federal budget, homeland security, taxation, ...

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