• The Heritage Network
    • Resize:
    • A
    • A
    • A
  • Donate
  • The President's "Debt Reduction": $1.6 Trillion in Tax Hikes, Almost No Net Spending Reductions

    During his Rose Garden speech Monday, the President claimed that his new “debt reduction” plan would provide $2 of spending cuts for every $1 of tax increases. A closer look at the administration’s own numbers, however, suggests the President, well, exaggerated.

    A realistic assessment—based mainly on table S-6 of the Administration’s plan—shows that his $1.57 trillion in tax increases are accompanied by just $130 billion in net new, policy-based spending reductions.

    The President’s “plan” claims credit for the following:

    Policies Already Enacted. The debt reduction proposal starts with two items already in place: reductions from the full-year continuing resolution for fiscal year 2011 ($357 billion over 10 years) and savings from the discretionary spending caps in the Budget Control Act ($992 billion).

    The Administration does concede that these reductions already have been enacted—sort of. Except when the President contends that his “plan” would reduce deficits by more than $4 trillion, as he did Monday; he includes these existing reductions, in effect double-counting them (as he did with the $500 billion in Medicare savings for Obamacare).

    It should also be noted that these policies yield “savings” only because they are measured against an illusory “baseline” that assumes that all discretionary spending programs will continue into the future intact, with increases to account for inflation. As long as spending does not increase as much as the baseline, it is considered a reduction.

    For instance, if the baseline projects spending to rise by $1.5 trillion in the next 10 years and Congress increases it “only” $1.25 trillion, it’s considered a $250 billion “reduction,” even though spending has increased by more than $1 trillion. This baseline measurement is a Washington practice so entrenched it is usually taken for granted. Bottom line: These savings should not be counted as new spending cuts.

    Bogus War Savings. The President then plays an even bolder baseline game, claiming $1.084 trillion in spending reductions from winding down military operations in Iraq and Afghanistan. Once again, these “savings” occur only because the Administration baseline for war spending (termed “overseas contingency operations”) starts with the 2010 “surge” level spending and then rises with inflation over the next 10 years—a policy that no one really assumes will happen.

    Compared with this unreal baseline, the President’s proposed war spending—$126.5 billion for fiscal year 2012, and then placeholders of $50 billion a year through 2021—results in more than $1 trillion in “savings.” Hardly anyone in the federal budget game accepts these as legitimate spending reductions—except, of course, the President.

    Debt Service. Curiously, the second-largest new spending reduction in the President’s plan—and the largest mandatory spending reduction—is a reduction in interest payments ($715 billion). This is not a policy change; it is simply the result of the assumed deficit reduction. Deficit reduction plans should be evaluated on the basis of real policy choices and should not take credit for such secondary effects.

    Mandatory and Health Savings. The plan does list a number of entitlement policies that, if enacted, might actually reduce spending. The value and likelihood of these proposals are discussed in yesterday’s Heritage blog. The estimated savings are about $577 billion over 10 years.

    New Stimulus Proposals. Ironically, the net new spending reductions in the President’s plan almost equal the amount of deficit increases from his “jobs” proposal introduced last week: All but $130 billion of the President’s net new policy-based spending reductions are swallowed up by the stimulus.

    Obama Deficit Reduction Table

    One of the best measures of the size and scope of government is spending, because every dollar of government spending is financed through taxes, borrowing, fees, premiums, etc., and all drain resources from the economy. Ultimately, the President’s “debt reduction” proposals do nothing to reduce net spending. It simply reflects the audacity of big government: keep spending high and drive taxes higher.

     

    Posted in Featured [slideshow_deploy]

    10 Responses to The President's "Debt Reduction": $1.6 Trillion in Tax Hikes, Almost No Net Spending Reductions

    1. jweb says:

      Great article…nothing new about this president, just a greater rate of stupidity. I look forward to the day when criminal investigations examine him and his administration. Justice must happen. What We the People really need is the list of people that he works for. They need to exposed by the media. They need to hear the outrage of the American people directly. Let's be real, our politicans work for the highest bidder, and Barry, the fund raising maverick, is no different. The goal is to weaken the nation, orchistrate chaos, establish a "new" system, and administer a control structure that will bring about the "brave, new world" that George HW Bush openly talks about. Sorry, it won't work. Like the beloved Milton Freidman said, "There is no utopia."

    2. Fedup says:

      I just can't believe that Heritage would say that a lying damn democrat is lying.

    3. Lloyd Scallan says:

      NO, his president is not "exaggerated", He's LYING through his teeth. Of course, this is nothing new for
      this guy. Almost every word from his mouth is either an outright lie or a total distortion. We must recognize
      this president has an agenda. He will do or say anything to complete that agenda.

    4. Kevin H says:

      It's odd that what you call bogus savings in Obama's plan, you gave credit to in Ryan's plan. Why give credit in one plan and not the other?

      • jweb says:

        Easy Kevin. It's the right-left paradigm. The right vs. left and the Democrat vs. the Republican are mere theatics to distract the true holders of power, that being the people, from the truth. While we are sudaited and restricted from reaching our potential, a vast array of criminal activity takes place. Remember the debt ceiling? 75% of the American people did not want it raised, but what were our "leaders" discussing? They were "arguing" over how much to raise it? They right and left are controlled by the same people. Why do you think there is a media black-out and smear against Ron Paul. He is labelled nutty by the "conservitive" media. Why? Because he is a time tested strict Constitutionalsit? Sense when has being a true Constitutionalist extreme? This current governent would consider Thomas Jefferson and Washington terror suspects. They would imprison Samual Adams. Let's see things for what they are.

    5. Bobbie says:

      Why is deception and misleading people of the world part of the president's fundamental transformation? Whoever wants this "change" need not reside in America. Humanity is freedom and all humanity need not a leader like this deceiver who hasn't stood for truth without distorting it since he's been in public. He doesn't support peace until he instigates violence and then calls "peace" hard!…

    6. Perry OK says:

      Who even listens to obama anymore? I had an e-mail earlier today that said it all. Appx 2 years ago the people elected someone with NO brains, NO heart, and NO balls. That he can not count doesn't surprise me,but what about all those Smart people we have hired to advise him. Would not want my kid going to that school!

    7. YnotNOW says:

      Obama is not going to propose specific spending cuts to anyone's pet project, because then he could not buy their vote for 2012.

    8. musmin1 says:

      Obama said that everyone is going to have to sacrifice and that includes him. Hmm. Why not start with the huge staff of 'social assistants' employed by Michelle at taxpayer expense? If the old saw "Charity begins at home" is used as an example, seems to me his example would carry just a bit more water. 'Course, that would cut into her monstrous activity schedule and budget and goodness knows, she can't abide that, now can she?

    Comments are subject to approval and moderation. We remind everyone that The Heritage Foundation promotes a civil society where ideas and debate flourish. Please be respectful of each other and the subjects of any criticism. While we may not always agree on policy, we should all agree that being appropriately informed is everyone's intention visiting this site. Profanity, lewdness, personal attacks, and other forms of incivility will not be tolerated. Please keep your thoughts brief and avoid ALL CAPS. While we respect your first amendment rights, we are obligated to our readers to maintain these standards. Thanks for joining the conversation.

    Big Government Is NOT the Answer

    Your tax dollars are being spent on programs that we really don't need.

    I Agree I Disagree ×

    Get Heritage In Your Inbox — FREE!

    Heritage Foundation e-mails keep you updated on the ongoing policy battles in Washington and around the country.

    ×