Why the budget deal is where it is:

First, what the White House has agreed to:

Among the provisions Obama to which Obama had said yes, according to a senior administration official, were the following:

Medicare: Raising the eligibility age, imposing higher premiums for upper income beneficiaries, changing the cost-sharing structure, and shifting Medigap insurance in ways that would likely reduce first-dollar coverage.

Medicaid: Significant reductions in the federal contribution along with changes in taxes on providers, resulting in lower spending that would likely curb eligibility or benefits.

Social Security: Changing the formula for calculating cost-of-living increases in order to reduce future payouts.

Discretionary spending: A cut in discretionary spending equal to $1.2 trillion over ten years, some of them coming in fiscal year 2012.

And why:

Obama and his advisers are looking at the same job numbers as the rest of us. And they think this budget deal could be their best, if not last, chance to get legislation that would boost consumer demand and jobs. According to a senior administration official, Boehner last week had indicated his agreement with an extension of unemployment insurance, some kind of renewal of the payroll tax holiday, and at least some "language" about future funding for highways. Together, those steps would likely have pumped about $160 billion, maybe more, into the economy over the next year.

I checked with a few economists. The consensus was that, very roughly, such a stimulus would lift gross domestic product by 1.5 percentage points. That would translate to about a million additional jobs.

The second reason was concern about the nation's credit ratings and how that factor might influence the economy.

To summarize:

• Obama didn't get a decent stimulus package in 2009. Part of that was because a substantial portion was dedicated to inefficient tax cuts in a misguided attempt to bring Republicans on board.
• The economic recovery has been very weak.
• In order to remedy the situation, significant entitlement cuts that will last for decades are being offered up for a short term economic boost.
• The second-stage "stimulus" is not particularly impressive (UI, FICA holiday, a vague and too-late-to-matter infrastructure program)

How would you feel if you learned that Harry Truman cut back on your current Social Security benefits so that the 1947 economy was given a boost?

Obama is sacrificing long-term programs for short-term gain. That's a bad bargain.


posted by Quiddity at 7/24/2011 10:36:00 AM