Obama abdicates on the budget

Robert Samuelson

Opinion Writer

By Robert J. Samuelson, Published: April 24

If you’ve wondered why it’s so hard to subdue budget deficits, you should consult a new study from the Congressional Budget Office called “Reducing the Deficit: Spending and Revenue Options” (free at www.cbo.gov). You’ll learn from its 240 pages that the deficits definitely can be curbed. The CBO presents 105 policies (it doesn’t endorse them) that would shrink deficits by trillions of dollars over the next decade. You’ll also learn — surprise! — that most choices are political poison.

Suppose we increased the federal gasoline tax by 25 cents a gallon, from 18.4 cents to 43.4 cents. That would raise $291 billion from 2012 to 2021, estimates the CBO. Or we could advance the ages for early and full Social Security benefits; one suggestion is to raise them (now 62 and 66) by two months a year until reaching predetermined targets (say, 64 and 70). The CBO reckons the decade’s savings at about $264 billion. How about slowly moving Medicare’s eligibility age from 65 to 67? The savings: $125 billion.

Are we finished? Nowhere near. At most, these crowd pleasers would make noticeable dents. Recall that the deficits total almost $10 trillion over the next decade under President Obama’s original 2012 budget. That’s the point: Even discounting the effects of the deep recession, prospective deficits are so large that they can’t be cured by tinkering. We should be asking basic questions:

l How big a government do we want? For four decades, federal spending has averaged 21 percent of gross domestic product. An aging population and high health costs mean that average spending, as a share of GDP, will rise by a third or more in the next 10 to 15 years if today’s programs simply continue.

l Who deserves government subsidies and how much? About 55 percent of spending goes to individuals, including the elderly, veterans, farmers, students, the disabled and the poor.

l How much, if at all, should social spending be allowed to squeeze national defense?

l If taxes rise, how much and on whom? Which taxes would least hurt economic growth?

We aren’t having this debate, and President Obama is mainly to blame. His recentbudget speech at George Washington University was a telling model of evasion, contradiction and deception. He warned that by 2025 present tax levels would suffice only to pay for “Medicare and Medicaid, Social Security and the interest we owe on our debt. . . . Every other national priority — education, transportation, even our national security — will have to be paid for with borrowed money.” He noted that businesses may not invest in a country that seems “unable to balance its books.”

Fine. But Obama has no plan to balance the budget — ever. He asserted “every kind of spending [is] on the table.” But every kind of spending is not on the table. He virtually ruled out cutting Social Security, the government’s biggest program (2011 spending: $727 billion). For example, Social Security is excluded from a proposed “trigger” that would automatically reduce spending and raise taxes if certain deficit targets weren’t met. He also put Medicare (2011 spending: $572 billion) largely off-limits.

The president keeps promoting an “adult conversation” about the budget, but that can’t happen if the First Adult doesn’t play his part. Obama is eager to be all things to all people. He’s against the debt and its adverse consequences, but he’s for preserving Social Security and Medicare without major changes. He’s for “tough cuts,” but he’s against saying what they are and defending them. He pronounces ambitious goals without saying how they’d be reached. Mainly, he’s for scoring political points against Republicans.

Deficit politics are inherently unpopular. One way — maybe the only way — to break today’s deadlock is to alter public opinion so that some government benefits are seen as unnecessary or illegitimate and some taxes are seen as fair burden-sharing.

Given better health, longer life expectancy and wealthier elderly, why shouldn’t Social Security and Medicare eligibility ages be raised and means-testing broadened? The president doesn’t broach this debate. Farmers receive about $15 billion a year in crop subsidies to help offset the insecurities of weather and fluctuating prices. Considering that volatile markets impose similar insecurities on many Americans, why do farmers deserve special protection? The president doesn’t engage that debate. Might not a higher gasoline tax reduce budget deficits and oil imports? Obama is silent there, too.

All this may be politically shrewd. Voters disdain hard choices. Liberal pundits loved Obama’s speech. But another audience is less impressed — global money managers. The Financial Times’ respected columnist Gillian Tett recently asked whether the administration’s “reassuring patter on debt” could be believed. Not entirely, she concluded. Shortly thereafter, Standard & Poor’s warned that it might downgrade U.S. government debt. Obama is flirting with trouble, even if he doesn’t realize it.