CQ TODAY ONLINE NEWS
Dec. 3, 2008 – 5:33 a.m.
Experts Say Obama Needs to Dial Back Expensive Campaign Promises
By Adriel Bettelheim, CQ Staff
President-elect Obama will need to back off some of his expensive campaign promises and take politically risky steps such as targeted tax increases and cuts in entitlements if he is going to keep the federal budget under control, a group of fiscal experts said on Tuesday.
They said Obama should view the financial crisis as an opportunity to make the case that the nation’s changed economic circumstances have made such retrenchments necessary.
Though Obama’s short-term focus can still revolve around jump-starting the economy and fulfilling some of his trillions of dollars worth of campaign promises, current circumstances make it virtually impossible to follow through on a campaign agenda that has largely revolved around increased spending and middle-class tax cuts, the group of experts from the Urban Institute said at a policy forum.
They outlined a range of deficit-shrinking options that include creating a consumption tax on goods and services to pay for medical care, placing new cost controls on the federal Medicare program and changing the way Social Security benefits are indexed for inflation.
“It might be worthwhile for President Obama to treat the American public like they’re not morons. They might be flattered,” said Leonard Burman, an Urban Institute senior fellow and director of the nonpartisan Tax Policy Center.
The warnings reflect a growing consensus in Washington policy circles that Obama should use the severity of the crisis to discard some of his most expensive or unsustainable campaign promises.
Groups such as the Tax Policy Center and the budget watchdog Concord Coalition have noted that the budget already is under unprecedented stress and that Obama needs to sell fiscal restraint as a sensible policy.
During the campaign, Obama pledged a major expansion of health coverage and higher spending on education and the environment while vowing to cut taxes for 95 percent of working Americans. The Tax Policy Center estimated Obama’s health plan would cost $1.6 trillion over a decade.
The Urban Institute experts said such ambitious plans require pragmatic countermeasures to avoid bankrupting the country.
Burman said Obama could find inspiration from former President Ronald Reagan, who decided to follow his 1981 tax cuts with two large tax increases to respond to worsening budget deficits and the near-depletion of Social Security’s trust funds.
The crisis in financial markets could actually make an overhaul of Social Security more politically salable, if it is depicted as helping shore up seniors’ one reliable source of retirement income.
Urban Institute President Robert Reischauer, a former director of the Congressional Budget Office (CBO), suggested setting limits on automatic spending growth and accelerating already scheduled increases in the full retirement age — the age at which Americans can begin receiving full Social Security benefits.
Reischauer also said a case could be made for levying a 1 cent-per-gallon energy tax beginning in 2011 to help pay for the growing backlog of infrastructure needs, including repairing bridges, roads.
Experts Say Obama Needs to Dial Back Expensive Campaign Promises
“In the short run, we can have big deficits and stimulus policies, but they have to be twinned with credible actions . . . to assure restraint later on,” he said.
Burman promoted a proposed “value-added tax” on goods and services that also could go into effect in 2011, predicting it would raise new revenues while discouraging some unnecessary consumer spending.
And he said a case could be made for an overhaul of the entire tax code that would eliminate credits, deductions and special rules for measuring income that make many Americans think they are bearing an undue burden.
But virtually all of these changes would require the consent of Congress, which will be leery of an policies that appear to further burden taxpayers during an economic crisis.
Urban Institute senior fellow Rudolph G. Penner, also a former director of the CBO, suggested Obama could lay a foundation for change by setting broad goals — say, enacting sustainable budgets 25 years from now — rather than rolling out detailed proposals.
“You bargain with Congress, I’d lean toward announcing a process instead of putting specific policies on the street that people aren’t ready for,” Penner said.
Comments
Pull together a group of experts, who happen to be economists or economist-bureaucrats, and what do we expect them to come up with: suggestions for better housekeeping that results in better bookkeeping - at best. Everything they are here credited with having said is probably true. Then, so what? Allow me to suggest these "experts" pull from their bookshelves Gloria Emerson's brilliant chapter, "Experts," from her very wise book, Winners and Losers. Additionally, the experts need to remember that we should only expect expertise from our experts. But from our presidents we rightfully expect wisdom. No one even needs to read Emerson to know expertise may be necessary but is far from sufficient for possessing wisdom. The experts made our economy a loser. If the experts could grasp this simple fact, they could thereby gain a glimpse of how far expertise is from wisdom. Has our governmental business so degenerated that an ordinary citizen can only hope the president-elect's advisors, who have little to offer that the outgoing president's advisors offered, are radically underestimating their boss's capacity to ask what is possible, rather than remain stalled in general questions like 'how can we keep doing what doesn't work but do it better?' Because if they aren't, our economists and their boss really do need to read Leopold Kohr's The Breakdown of Nations.
As a senior citizen, concerned about some of the tax proposals mentioned during the campaign, I would strongly support changes in the way Medicare is managed, and I would eliminate the additional funding that Medicare HMOs receive. All Medicare providers should be treated equally. Furthermore, I would eliminate "means testing" for Medicare Part B. Nothing is more onerous to seniors nor as mean-spirited a piece of legislation as "means testing" for Part B. It is, in effect, a taxation on seniors for their medical care, and grossly unfair. As for social security reform, removing indexing will only result in less income for those seniors who are dependent on social security as their primary source of retirement income. As a remedy, I would increase the overall rate on income tax.
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