Sunday, March 20, 2011

Obama - Inexperienced or unable...either way he's got to go in 2012!

Obama once again shows his inexperience and lack of ability to fix problems....but he's still playing golf, picking basketball teams, going to Rio with his family!

There’s Only One Word for the CBO’s Analysis of the President’s Budget-----UGLY!

March 18, 2011 3:12 P.M. By Douglas Holtz-Eakin

Ugly. That’s the best spin one can put on the just-released Congressional Budget Office analysis of President Obama’s budget. Deficits are above 4.1 percent of Gross Domestic Product (GDP) for the next ten years and rising at the end of the budget window. Debt in the hands of the public doubles and the debt-to-GDP ratio rises above 87 percent. Net interest is almost 20 percent of revenues — even with big tax increases — in 2020. The result: downgrade as a sovereign borrower in 2018. That’s ugly.

Not surprisingly, living through the Obama era has led some to demand a balanced budget, at least by the end of ten years. That’s a noble sentiment that should be admired and applauded. But there often isn’t much in the way of a specific plan to get it done. Many “balanced budget” plans are sold as either very simple — just slow the growth of total spending — or very mechanical — just cut a fixed percentage every year.

Closer scrutiny of the size of our deficits, structure of current programs, and demographics suggests that balancing the budget in the near term will be implausible, if not impossible. Net interest is projected to grow four-fold. A budgeter just can’t wish away that expense.

The demography is stacked against balance. Social Security and Medicare have nearly 80 million baby-boomers just beginning their march through the system. The CBO’s deficit projections assume roughly $500 billion in Obamacare Medicare reductions and don’t include a Medicare doctor-payment fix. Obamacare also loaded huge burdens on an already broken Medicaid system.

That’s the starting point. It will not be possible to cut more out of Medicare, unless one is willing to hit current beneficiaries with large reductions. Presumably there is even less appetite for immediately cutting Social Security. To make matters harder, some in the conservative community don’t want to cut defense. Even if they do, defense isn’t what’s driving the long-term deficit problems. And I doubt I will hear many Republicans talking about raising taxes.

The upshot is that it will be very hard to mechanically cut spending in a simple and across-the-board fashion. And even if one did, the underlying demography would not change, health-care programs would not change, and thus deficit pressures would not change.

The irony in this is that focusing on a balanced budget in the short-run would not eliminate deficits in the long run, thus exposing Americans to future tax increases. That would also cement into place the underlying architecture of a bloated welfare state.

In short, another kind of ugly.

The alternative is to undertake structural reforms to the real problems: Social Security, Medicare, Medicaid, and Obamacare. In reverse order, one can get some substantial budgetary savings by repealing Obamacare and providing a block grant for Medicaid (even one that rises with inflation and population). Both would also raise the quality of health care for their targeted populations, so it’s a win-win.

Structural reforms to Medicare ultimately lead to a defined-contribution system like premium support (again with indexing for inflation and adjustments for medical risk). Similarly, putting Social Security on a sustainable path is not hard and can improve the program. However, both of these reforms yield little in the near term.

For those appalled by the CBO results, that’s the choice: A short-term focus that does not solve the debt problem for the long-term and leaves the welfare state intact; or an approach that does not balance the budget as quickly, but permits it to be kept balanced by radically downsizing the long-term programs.

Here’s hoping the conservatives opt for the latter.

— Douglas Holtz-Eakin is president of the American Action Forum.

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