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The President’s Men and Their Plans

Thursday March 22nd, 2012   •   Posted by Craig Eyermann at 6:44am PDT   •  

David Axelrod, the man behind many of President Obama’s political strategies, recently had the following to say on why the leaders of the President’s political party in the U.S. Senate, have failed to produce any budget for the U.S. government in over 1,040 days, despite being legally required to do so and holding a sufficient majority to make it happen during all that time.

Here’s the transcription:

BAIER: Why haven’t Senate Democrats passed a budget resolution in 1,040 days?

AXELROD: Well I think you understand the dynamics in the Senate, Bret, and, uh… you know there are lots of things that we haven’t been able to pass, uh… over the course of the last three years, and a lot has to do with procedural…

BAIER: It doesn’t take 60 votes it takes 51.

AXELROD: Understand. But, uh… we’ve got, uh… uh… we’ve got, uh… deep divisions in the Congress, uh… between the House and the Senate, uh… and, uh… that’s complicated our ability to uh… uh… to, uh… to get these things, uh… done. One hope is that when we win this election, uh… that they’ll be a greater spirit of, uh… cooperation moving forward.

BAIER: You know people sit at home and say ‘I have to do a budget. I have to do a budget about my family spending.’ Why can’t Senate Democrats do a budget if they control the Senate and they need 51 votes to put it through?

AXELROD: Because, uh… they, they also don’t have to deal with the theater of politics, uh… in… in making their budgets. We obviously have to budget and we do budget, uh… and, uh… deal with our, uh… budgetary challenges. The president, uh… has cut, uh… domestic spending, uh… uh… discretionary spending by $1.2 trillion, uh… in order to accommodate, uh… the budget and the, the demands of our budget, and we’re going to continue to do the things, uh… to, uh… live within our means while still moving our economy forward.

The staff of Washington’s Free Beacon looks at the opposite end of Pennsylvania Avenue to see why this excuse making is so troubling:

Democrats currently control 53 seats in the Senate. Last month, White House Chief of Staff Jacob Lew wrongfully claimed that Senate Democrats have not passed a budget due to a 60-vote requirement.

Senate Majority Leader Harry Reid (D., Nev.) has said it would be “foolish” for Democrats to offer a budget resolution.

“There’s no need to have a Democratic budget in my opinion,” he told the Los Angeles Times in May 2011. “It would be foolish for us to do a budget at this stage.”

It might surprise many to find out that President Obama does indeed have a plan to deal with the nation’s runaway national debt – one that the President has seen fit to keep secret. James Pethoukoukis reports:

This is a stunner. In the new book The Escape Artists: How Obama’s Team Fumbled the Recovery, journalist Noam Scheiber uncovers this tantalizing tidbit:

In May 2009, the president asked [White House budget director Peter Orszag] to draft a secret memo laying out the government’s options in the event of a fiscal crisis, in which a runaway deficit sent interest rates spiraling upward. No other member of the Obama economic team was even aware of the assignment.

Using what we know of what the President’s former budget director Peter Orszag has proposed publicly in the past to deal with an out-of-control national debt, Pethoukoukis speculates why the White House would seem to be content for the members of the President’s political party in the Senate to not act:

OK, let’s take this step by step:

1. The Obama administration has already conceded it has no long-term plan to deal with rising U.S. debt, driven for the most part by social insurance spending. Testifying before the House Budget Committee recently, Treasury Secretary Tim Geithner told Chairman Paul Ryan the following: “We’re not coming before you to say we have a definitive solution to that long-term problem. What we do know is we don’t like yours.” Even Obama’s ten-year plan doesn’t keep the debt burden from increasing.

2. Yet, apparently, the White House does have a secret plan to deal with a sudden debt crisis. So instead of developing a long-term plan to avoid the worst-case scenario, it has chosen to plan for the worst-case scenario. (This will certainly be a shock to liberal economists like Paul Krugman and Brad DeLong who insist a debt crisis, as evidenced by the current low level of interest rates, is highly unlikely. In fact, they say, we should be borrowing more to boost the economy.)

3. Then there’s this possibility: Maybe the crisis plan is the long-term plan. Maybe it’s something like this: a) do nothing; b) keep implementing the Obama healthcare and environmental agenda; c) wait for markets to finally freak out over rising U.S. debt; d) break the glass and grab the 2009 Orszag plan.

4. And what exactly is in the Orszag memo? Well, as they say in Washington, personnel is policy. Here’s what we know about Orszag, who now works for Citigroup. He thinks America is undertaxed. Elsewhere in Escape Artists, Scheiber writes that “[Orszag] believed the only practical way to balance the budget was to repeal all the Bush tax cuts, not just the upper-income variety.” That is a $4.5 trillion tax hike right off the bat.

And here is Orszag just last month:

… to significantly reduce the deficit over the next decade, additional revenue will be needed. The administration’s budget proposal projects revenue to reach 20 percent of gross domestic product by 2022, about 1 percentage point of GDP more than what is projected with no policy change. The administration deserves credit for proposing even that, given the antipathy to any tax increases. But in the end more revenue will be needed. And since the administration’s budget probably shows the outer limit of what’s plausible in terms of taxing high-income households, the implication is that middle-income households will have to pay more, too.

And how to best tax the middle class? Like most left-of-center economists, Orszag loves the idea of a VAT:

Although hardly anyone wants to admit it, we’re not going to solve our budget problem over the next decade unless revenue is part of the equation. … One possibility would be to establish a new source of revenue, perhaps through revenue-increasing tax reform, and possibly including a modest value-added tax (that is, a V.A.T. of 5 percent to 6 percent). This approach has many potential benefits, including the opportunity to improve our tax code by cutting back on loopholes and shifting toward a consumption-based tax system.

So I think it’s reasonable to assume that the secret Obama-Orszag memo contains some options on massively raising taxes to send markets a signal that the United States is getting its fiscal house in order, ASAP.

Orszag, when he worked for Obama, was also the guy behind the creation of Obamacare’s Independent Medicare Payment Advisory Board. Starting in 2015, IPAB will have the power to making binding recommendations to cut Medicare provider payments if Medicare costs rise too quickly. As Orszag has put it: “This could well turn out to be as consequential for health policy as Federal Reserve policy was for monetary policy. The commission will put its proposals forward and if Congress does not act on them, or if it votes them down and the president then vetoes that bill, they will automatically take effect. Huge change.”

So perhaps the plan recommends giving the powerful IPAB technocrats even more power, not to just limit Medicare spending, but all healthcare spending in the age of Obamacare, public and private. In effect, use IPAB to fully nationalize U.S. healthcare and then ration care, as they do in the U.K., to reduce spending.

Sound scary? As Pethokoukis notes, what he describes is speculation, which in this case, is based upon the previous public statements of the President’s men. Perhaps if the White House were serious about dealing with a skyrocketing national debt, they would take steps to make the Orszag memo to the President public, which we note might provide the effect of giving the President more credibility with both the public and the markets in his ability to deal with the rapidly escalating national debt.

We’ll conclude by noting that the President’s credibility to deal with the rapidly rising national debt has been seriously damaged by the President’s decision to follow the political advice of the President’s advisors rather than a more honest and principled approach.

President Obama Meets with His Advisors, Including Axelrod and Orszag in 2009

President Obama Meets with His Advisors, Including Axelrod and Orszag in 2009

Image Credit: The White House

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March 2012