Monday, September 19, 2011

The President's Plan For Economic Growth & Deficit Reduction

Sep 19: In follow-up to President Obama's $447 billion American Jobs Act (AJA) announced on September 8 [See WIMS 9/9/11], today he released his 80-page Plan for Economic Growth and Deficit Reduction. According to a summary released by the White House, "The health of our economy depends on what we do right now to create the conditions where businesses can hire and middle-class families can feel a basic measure of economic security. In the long run, our prosperity also depends on our ability to pay down the massive debt the federal government has accumulated over the past decade." As promised when he announced the AJA, the President said his initiatives would be "fully paid for" via additional deficit reductions which he will detail in a submission to the Joint Select Committee on Deficit Reduction (Supercommittee) within the next 10 days. The President sent his Plan to the Joint Committee "to jumpstart economic growth and job creation now – and to lay the foundation for it continue for years to come."

    In announcing his Plan the President said, "You know, last week, Speaker of the House John Boehner gave a speech about the economy [See WIMS 9/15/11].  And to his credit, he made the point that we can't afford the kind of politics that says it's "my way or the highway." I was encouraged by that. Here's the problem: In that same speech, he also came out against any plan to cut the deficit that includes any additional revenues whatsoever. He said -- I'm quoting him -- there is 'only one option.'  And that option and only option relies entirely on cuts. That means slashing education, surrendering the research necessary to keep America's technological edge in the 21st century, and allowing our critical public assets like highways and bridges and airports to get worse.  It would cripple our competiveness and our ability to win the jobs of the future. And it would also mean asking sacrifice of seniors and the middle class and the poor, while asking nothing of the wealthiest Americans and biggest corporations. So the Speaker says we can't have it 'my way or the highway,' and then basically says, my way -- or the highway. That's not smart. It's not right.  If we're going to meet our responsibilities, we have to do it together."

    The President continued, "This is not class warfare.  It's math. The money is going to have to come from someplace.  And if we're not willing to ask those who've done extraordinarily well to help America close the deficit and we are trying to reach that same target of $4 trillion, then the logic, the math says everybody else has to do a whole lot more:  We've got to put the entire burden on the middle class and the poor. We've got to scale back on the investments that have always helped our economy grow.  We've got to settle for second-rate roads and second-rate bridges and second-rate airports, and schools that are crumbling. That's unacceptable to me. That's unacceptable to the American people. And it will not happen on my watch.  I will not support -- I will not support -- any plan that puts all the burden for closing our deficit on ordinary Americans.  And I will veto any bill that changes benefits for those who rely on Medicare but does not raise serious revenues by asking the wealthiest Americans or biggest corporations to pay their fair share. We are not going to have a one-sided deal that hurts the folks who are most vulnerable. . ."

    According to the summary, "The President's Plan for Economic Growth and Deficit Reduction lives up to a simple idea: as a Nation, we can live within our means while still making the investments we need to prosper -- from a jobs bill that is needed right now to long-term investments in education, innovation, and infrastructure. It follows a balanced approach: asking everyone to do their part, so no one has to bear all the burden. And it says that everyone -- including millionaires and billionaires -- has to pay their fair share. Overall, it pays for the President's jobs bill and produces net savings of more than $3 trillion over the next decade, on top of the roughly $1 trillion in spending cuts that the President already signed into law in the Budget Control Act -- for a total savings of more than $4 trillion over the next decade. This would bring the country to a place, by 2017, where current spending is no longer adding to our debt, debt is falling as a share of the economy, and deficits are at a sustainable level."

    In summary form the President's Plan proposes to produce approximately $4.4 trillion in deficit reduction net the cost of the American Jobs Act.

  • $1.2 trillion from the discretionary cuts enacted in the Budget Control Act.
  • $580 billion in cuts and reforms to a wide range of mandatory programs;
  • $1.1 trillion from the drawdown of troops in Afghanistan and transition from a military to a civilian-led mission in Iraq
  • $1.5 trillion from tax reform
  • $430 billion in additional interest savings
    To spur economic growth and job creation, the plan includes one-time investment and relief in the American Jobs Act.  That adds to the deficit in 2012 but is fully paid for over 10 years, and deficit reduction phases in starting in 2013, as the economy grows stronger. Deficit reduction is achieved in a balanced approach, with a spending cut to revenue ratio for the entire plan (including discretionary cuts) of 2 to 1.  
    On the revenue side of the President's proposal he calls for the Joint Committee to undertake comprehensive tax reform, and lays out five principles for it to follow: 1) lower tax rates; 2) cut wasteful loopholes and tax breaks; 3) reduce the deficit by $1.5 trillion; 4) boost job creation and growth; and 5) comport with the "Buffett Rule" that people making more than $1 million a year should not pay a smaller share of their income in taxes than middle-class families pay.
    The tax reform should draw on the specific proposals the President has put forward, together with elimination of additional inefficient tax breaks. If the Joint Committee is unable to undertake comprehensive tax reform, the President indicated he believes the discrete measures he has proposed should be enacted on a standalone basis. "Their enactment as a standalone package still would significantly improve the country's fiscal standing, represent an important step toward more fundamentally transforming our tax code, and serve as a strong foundation for economic growth and job creation." 
    To advance the debate, the President is offering a detailed set of specific tax loophole closers and measures to broaden the tax base that, together with the expiration of the high-income tax cuts, would be more than sufficient to hit the $1.5 trillion target. These include: Allowing the 2001 and 2003 tax cuts for upper income earners to expire ($866 billion); Limiting deductions and exclusions for those making more than $250,000 a year ($410 billion); and Closing loopholes and eliminating special interest tax breaks (approximately $300 billion).
    House Speaker John Boehner (R-OH) reacted immediately with a statement in response to the President's debt plan saying, "Pitting one group of Americans against another is not leadership. The Joint Select Committee is engaged in serious work to tackle a serious problem: the debt crisis that is making it harder to get our economy growing and create more American jobs.  Unfortunately, the President has not made a serious contribution to its work today. This administration's insistence on raising taxes on job creators and its reluctance to take the steps necessary to strengthen our entitlement programs are the reasons the president and I were not able to reach an agreement previously, and it is evident today that these barriers remain."

    Speaker Boehner included a note saying, "The President's proposal would raise taxes on both small businesses and on private capital, which is the essential ingredient for job creation in our economy. By declining to support structural improvements to strengthen our entitlement programs, the President has chosen to ignore the warnings about our debt crisis sent by the markets in August – leaving Americans exposed to the possibility of further downgrades that will further damage confidence and make it harder for our economy to grow and create jobs."

    Senate Minority Leader Mitch McConnell (R-KY) also issued an immediate response saying, "Veto threats, a massive tax hike, phantom savings, and punting on entitlement reform is not a recipe for economic or job growth -- or even meaningful deficit reduction. The good news is that the Joint Committee is taking this issue far more seriously than the White House."

    Senator McConnell appeared on Meet the Press Sunday and commented on the President's $447 billion AJA proposal and said, in part, "Right now, we've got -- we've thrown a big, wet blanket over the private sector economy. We've borrowed too much. We've spent too much. We're dramatically overregulating every aspect of the private sector in our country and now we're threatening to raise taxes on top of it. That's not going to get the economy moving. . . I mean, if you look at the stimulus bill, David, what did we get out of that? Turtle tunnels and Solyndra. Solyndra. Look, more money was lost on Solyndra than came to my state to fix roads and bridges out of the entire stimulus package last year. And now he's asking us to do it again. One of my favorite sayings here in Kentucky, out in the rural areas, is there's no education in the second kick of a mule. I mean, we've been there. We've done that. Now he's asking us to do it again. I'm trying to get him to go in a different direction."

     American Petroleum Institute (API) President and CEO Jack Gerard issued a statement saying, "President Obama's call for higher taxes on the U.S. oil and natural gas industry would undercut efforts to create jobs." He said, "The president's plan to raise taxes would destroy jobs and drive investment out of the United States. It's ironic that in his search for revenues, the president overlooks the revenues available from increased access to domestic oil and natural gas. Rather than raising taxes on a single industry, he could raise revenues, create jobs and strengthen our energy security. With one stroke of his pen, the president could allow the oil and natural gas industry to create a million new American jobs in just the next seven years.  This could also generate $127 billion in new revenue to the government. . ."

    John Engler, president of Business Roundtable (BRT) issued a statement saying, "With the current, anemic economic conditions, the unemployment rate will remain consistently high and tax receipts will remain low unless the focus shifts to long-term policies and economic growth. The uncertainty created by the threat of even higher taxes helps neither job creation nor growth. . . We remain convinced that a lower corporate rate and a competitive territorial system are essential elements of successful economic growth strategy."

    Access a fact sheet overview of the President's Plan (click here). Access a summary with links from Jack Lew is Director of the Office of Management and Budget (click here). Access the complete 80-page Plan (click here). Access the statement from Speaker Boehner (click here). Access Senator McConnell's statement (click here); and Meet the Press excerpts (click here). Access the statement from API (click here). Access the statement from BRT (click here). [#All]