Obama's Spending Cuts
"For my energy plan, my economic plan, and the other proposals you'll hear tonight, I've offered spending cuts above and beyond their cost."
--Barack Obama infomercial, October 29, 2008
Barack Obama has outlined a series of new spending initiatives ranging from health care to education to the war in Afghanistan that could end up costing $1 trillion over his first term, according to independent experts. In his half-hour infomercial on Wednesday evening, the senator from Illinois repeated earlier assurances that he had "offered spending cuts" to pay for every cent of the post-election bonanza that he plans to shower on his fellow Americans.
Do Obama's figures add up?
Obama's claim is artfully worded. Note that, in contrast to his Republican rival, he does not claim that he will balance the federal budget after four years. That seems a virtually impossible task -- given the fact that he wants to extend most of the Bush tax cuts (for everybody making less than $250,000 a year) beyond their expiration date of 2010. The independent Tax Policy Center projects a budget deficit under Obama of $520 billion in 2013, compared to a presently projected deficit of $147 billion.
What Obama does say is that he will pay for his new spending plans with even bigger spending cuts.
Whether you believe that he will deliver on this pledge depends on how much weight you give to politicians' promises that are not supported by detailed explanations of how exactly they will be put into effect. On paper, the Land-of-Lincolner might be correct, says Maya MacGuineas, president of the Committee for a Responsible Federal Budget, which has analyzed the two candidates' spending plans. By her calculations, Obama has promised $990 billion in new spending over his first four-year term -- to be offset by $989 billion in spending cuts.
The problem, however, says MacGuineas, is that Obama "is very specific on his spending proposals, but much less specific on his savings proposals." Furthermore, the Illinois senator has not made his new spending proposals contingent on securing the corresponding spending cuts.
Put another way, Obama's new spending plans are very concrete: a new College tax credit ($134 billion in 2013), expanded health care coverage ($115 billion), a refundable tax credit for workers ($72 billion). Many of his proposed spending cuts belong to the pie-in-the-sky category.
Take the proposal to cut health care costs by $2,500 per family per year through the adoption of new technologies, improved management techniques, and so on. "That's a real stretch," said John Sheils, senior vice president for the Lewin Group, a consultancy company that has studied the health care plans of the two candidates. By the Lewin Group's calculations, the savings are more likely to be in the region of $700 per family, based on the plans outlined by the Obama campaign.
"If you are going to be definitive about the savings, you have to be equally definitive about how you are going to achieve them," said Sheils. He said that Obama had "some interesting ideas" for health care savings, but had failed to outline enforcement mechanisms for patients and medical staff that fail to follow his guidelines.
Similar caveats apply to Obama's other savings promises, including reforming government spending ($17 billion in 2013), elimination of waste and obsolete programs ($50 billion) and a phased withdrawal from Iraq ($156 billion). Some of these cuts will depend on events at least partially outside Obama's control (like the war in Iraq), while others (such as the slashing of earmarks) will require concessions from Congress that no previous president has been able to achieve.
"Every president has a list of programs they would like to eliminate, but every one of those programs has a massive lobbying system in place to preserve it," said Thomas Schatz, president of Citizens Against Government Waste, a taxpayer watchdog group. "Members of Congress will readily create new programs, but they are very reluctant to cut old ones."
Schatz cites the example of Economic Development Administration, which Obama has talked about eliminating. The agency, which has the mission of generating jobs, has been slated for the chopping block for years. When it last came up for re-authorization, in 2004, the House voted 388-31 to keep it. Only one Democrat voted against.
The Pinocchio Test
Promises to cut government spending are pretty much worthless unless accompanied by convincing explanations of how precisely they will be implemented. Obama has failed this basic test. Vague targets are insufficient, particularly when there is no real link between the promised spending cuts and the new spending programs.
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