Why Obama's plans will win out in the long haul

By Neeraj Salhotra     10/24/12 7:00pm

 

The single greatest challenge to the U.S.'s long-term security and prosperity is its national debt. Debt levels approaching 70% of GDP are simply unsustainable, and the nation must develop a plan to reduce them. While both candidates offer plans for reducing the debt and deficit, only President Obama's plan is mathematically possible, politically feasible, and economically viable. 

Before explaining President Obama's and Governor Romney's plans, it is important to understand how we got into the current situation. Simply put, two unfunded wars in Iraq and Afghanistan and the Bush Tax Cuts account for 50% of the public debt. Coupled with the recession, wherein spending necessarily rises on programs like Food Stamps and Unemployment Insurance and tax revenue definitely falls due to Americans being out of work or earning less, these three expenditures represent 60% of the public debt. While TARP and the Recovery Act passed by President Obama contributed to the debt, the primary drivers of the fiscal shortfall stem from President Bush's policies or the recession. 

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Cognizant of the dismal fiscal reality, President Obama has proposed a balanced plan to reducing the deficit, which calls for $4 trillion of deficit reduction over the next 10 years. The President agreed to $1 trillion in spending cuts through the Budget Control Act; another $800 billion by ending the wars in Iraq and Afghanistan, and $143 billion in savings through the Affordable Care Act. He coupled these spending cuts with modest revenue increases, because, as the bipartisan Simpson-Bowles commission noted, reducing spending alone will not reduce the debt. The President also suggested raising taxes on the wealthiest Americans and enacting the "Buffet Rule" to ensure that millionaires do not pay a lower tax rate than middle-income Americans. Together, this suite of policy options would achieve $2.50 of spending cuts for every dollar of revenue increases - quite similar to the bipartisan Simpson-Bowles commission, which contained $3 of spending cuts for every dollar of revenue increases. 

Governor Romney shares President Obama's concern for the debt and has even made deficit reduction a pillar of his much-touted Five Point Plan. His policy proposals, however, fail to reduce the deficit, for, over the next decade, his tax plan cuts revenues by $5 trillion, on top of $1 trillion needed to extend the Bush tax cuts, alongside another $2 trillion in increased military expenditures. Governor Romney adds $8 trillion to our already large debt and then suggests he will reduce the deficit by "closing loopholes," without specifying which ones. If we assume that Governor Romney only ends deductions that benefit the wealthy, he is still trillions of dollars short. There are just not enough deductions to close the deficit, and that is simple arithmetic. Governor Romney also proposes capping government spending at 20% of GDP which would entail cutting all non-defense discretionary spending, including programs like Head Start and the Low-Income Heating Assistance Program which support underserved families, by 32% in 2016. These policy prescriptions would hurt the most vulnerable Americans, reduce equality of opportunity, and further jeopardize the American Dream. 

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