Obama Offered Politics, Not a Plan - U.S. Economic Fate Will Hinge on 2012 Election

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by: Tom Lindmark

Well at least we now know the source of our fiscal imbalances — George W. Bush. We were on the road to endless surpluses until he cut taxes and gave seniors coverage for their drugs. If not for that bounder, Barack Obama would not have had to stand up in front of the nation and declare that he was just kidding when he presented his 2012 budget a couple of months ago.

But stand up he did and after fixing blame for the mess we’re in, he proceeded to give a preview of his 2012 campaign stump speech. To be gracious, one might characterize what he said as a presentation of policy or perhaps philosophy but it decidedly was not a plan in any sense of the word. Short if not devoid of specifics, it reiterated Democratic talking points.

After the traditional bow to reigning in discretionary spending and suggesting that he would whack the Department of Defense for $400 billion, somehow, someway he proceeded to get to the crux of his proposal: Tax the rich and no quarter on ObamaCare.

Trying to tie his wagon to Simpson-Bowles, he proposes taking a couple of shots at rich people. First, never again will he agree to an extension of the Bush tax cuts for the rich. They are going back where they were plus the add-ons in his health care plan. Second, he’s going to pare back their deductions. Exactly how much he plans to wring out of these unfortunates wasn’t said.

If you wonder how that relates to the recommendations of the Deficit Commission, welcome aboard. They proposed reducing rates, eliminating tax expenditures and overall broadening the base. I guess that he thinks that cutting back deductions for those who fall into the wealthy category amounts to keeping faith with the Commission. If you have a better explanation let me know.

At least when it comes to Medicare we have a bright line. Ryan wants to rely on individual choice and market forces to control costs. Ryan’s plan adjusts payments based on CPI+1%. Obama is sticking by the central planning concept embodied in his health plan. He’s more tolerant of increases in costs, accepting GDP+0.5% as his breaking point -- probably the only clear delineation of policy that he offered and a clear difference for voters to select.

There was nothing in this speech that invited compromise. The president, to the extent he presented any coherent plan, was in defiant take it or leave it mode. Clearly he wants to fight this out in the 2012 campaign and undoubtedly believes that he will prevail. Given the stakes and the import the final decisions are going to have for the basic economic life of Americans, that is where the debate properly belongs.

So, we will no doubt reach some accommodation on the debt ceiling, though it may well go down to the wire. Then we can hash out where we go with this economy via probably one of the more consequential elections in this country’s history.