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Obama's Baby Step

April 10, 2013 in Economics

By Michael D. Tanner

Michael D. Tanner

President Obama will officially unveil his proposed 2014 budget today, just 64 days after it was required to be submitted under the Congressional Budget Act of 1974. Better late than never.

While it is not exactly the compromise the media has portrayed it to be, the president’s budget is a serious proposal that takes some steps in the right direction. It is certainly a much better starting point for negotiations than the nonsense passed last month by Senate Democrats.

For example, President Obama really should be given credit for putting entitlement reform on the table. There can be no serious effort to balance the budget without tackling entitlements, but it’s not an easy thing for a Democrat to do. A politician willing to do what is right even when it is opposed by his own base is rare enough that he should be celebrated. The president’s proposals, further, may give Republicans a bit of political cover for their entitlement-reform plans.

Besides, anything that makes MoveOn.org and the AARP this angry can’t be all bad.

The president’s budget acknowledges our fiscal realities, but his reforms fall far short of the structural changes necessary to avoid catastrophic levels of debt. For example, the president has embraced “chained CPI,” a mechanism for calculating cost-of-living increases that better accounts for changes in lifestyle and technology. This apparently was an idea that originated with House Republicans, notably Speaker John Boehner, which just goes to show that not every Republican idea is a good one. Chained CPI would reduce Social Security’s liabilities by roughly $130 billion over the next ten years and, while the savings will grow in the out years, they are nowhere near sufficient to restore the program to solvency. In fact, the actual savings may turn out to be far less than predicted, since the gap between traditional CPI measures and chained CPI has been diminishing over the past several years.

The president has some decent proposals, but his budget is still far from what we need.”

On the other hand, chained CPI would also increase taxes by $124 billion over ten years, as it pushes millions of low- and middle-income Americans into higher tax brackets. One need only recall what an albatross the Alternative Minimum Tax (AMT) has become for taxpayers it was never meant to hit to understand the potential fallout from applying a slower measure of inflation to …read more
Source: OP-EDS

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