NEW figures graphically illustrate the fundamentally unserious nature of the ongoing “fiscal cliff” negotiations in Washington. An analysis by the Committee for a Responsible Federal Budget found that President Barack Obama's proposal would reduce the national debt from nearly 75 percent of GDP to 73 percent of GDP. And that minor reduction would take 10 years!
House Republicans, to their credit, have sought to negotiate a deal doing more to right the nation's fiscal ship. But even their plan would simply lower the national debt to just 72 percent of GDP.
That 1 percent shift might not seem draconian to most people, but Barack Obama isn't most people. Obama dismissed the House proposal out of hand, saying it was “out of balance.” The president wants far greater tax increases and is actually arguing for another round of stimulus spending. Never mind that the last several rounds of stimulus spending have had almost zero positive impact on the economy.
That likely won't sit well with most citizens, who still see spending as a major driver of the deficit for obvious reasons. A recent Politico/GWU/Battleground poll found 76 percent of Americans favored “cutting government spending across the board” to reduce the federal deficit. The same poll found 60 percent favored raising taxes on those earning more than $250,000 to reduce the deficit, which might embolden Obama, but then 69 percent also opposed raising taxes on small businesses earning more than $250,000.
It seems clear the public is torn about tax hikes, and supports them only for actual deficit reduction. Obama's plan fails on that count. A report issued by Republican members of the Senate Budget Committee shows 75 percent of the new revenue generated by Obama's proposed tax increases (about $1.2 trillion) would go toward new spending, not deficit reduction.
In spite of all the high drama, experts say adoption of either Obama's plan or the GOP proposal would still leave the nation at risk for another credit downgrade. Neither plan comes close to the 65.5 percent debt-to-GDP ratio that would have been achieved by the Simpson-Bowles Commission proposal. Experts say a debt-to-GDP ratio above 70 percent leaves the United States on the path to a future European-style debt crisis.
The debt-to-GDP ratio was below 50 percent for decades. Somehow, though, the idea of merely bringing federal spending in line with what was considered extravagant just six years ago is not even being proposed.
Republican House Speaker John Boehner shouldn't be blamed too much for the situation. He has little leverage and is trying to get the best deal possible negotiating with a president more worried about so-called income inequality than economic stability and job growth. This means the final outcome will still likely be a bad deal, but perhaps not as bad as it might have been.
Still, the fact that our nation's leaders pretend that plans which could result in another credit downgrade while leaving the United States on the path to Greece are serious deficit-reduction proposals is an insult to all hardworking, taxpaying families who already struggle to get by in the Obama economy.
The Politico/GWU/Battleground poll found 59 percent of respondents felt the country was on the wrong track. Given the ludicrous nature of the “fiscal cliff” negotiations, who can blame them?