CE Week #5: “Clinton, Obama promises sidestep budget realities”
Candidates’ spending proposals aren’t matched by funding sources
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Kevin G. Hall and Margaret Talev
McClatchy
February 24, 2008
HOUSTON – Hillary Clinton and Barack Obama champion fiscal responsibility on the campaign trail, but both Democratic presidential hopefuls are promising massive new spending without providing details on how they’d pay for it.
The nation already will face unprecedented fiscal challenges as the baby-boom generation – about 76 million Americans born from 1946 to 1964 – reaches retirement age and begins straining the federal budget as never before.
The federal budget deficit is projected to exceed $400 billion next year. Deficits are paid for by borrowing. The gross federal debt, the sum of what our government owes, is in the neighborhood of $9 trillion.
That means there’s less room to borrow to deal with the growing budget pressure as boomers retire.
By 2017, Social Security is expected to begin paying more out in benefits to retirees than it collects from workers. And the number of Medicare recipients will grow from 44 million last year to 58 million over the next decade.
Increased spending on health and welfare programs for the boomers will start to crowd out other federal spending. That’s why the two Democrats’ mounting campaign promises raise concern among budget experts, who aren’t hearing much about where the money would come from.
Clinton has proposed new spending in excess of $200 billion, much of it annual. Obama has surpassed her, promising annual spending of at least $210 billion.
Both have offered expensive plans to get to universal health-care coverage, either through incentives or by government mandate. They’ve proposed spending big money to help avert housing foreclosures nationwide and to help refinance mortgages for borrowers in trouble.
Both are counting on savings from reducing the U.S. presence in Iraq and rolling back some of President Bush’s tax cuts, which are scheduled to expire after 2010, to pay for their new programs. Both expect that expanded use of electronic health records and other advances in medical information technology will defray some of the cost of moving to a universal health-care system.
Neither, however, has proposed a fix for the biggest near-term strain on the federal budget, the alternative minimum tax, or explained how they propose to balance the cost of their campaign promises with the looming expense of the aging baby boomers.
During a speech Tuesday night in Houston, Obama rattled off a list of promises: lower insurance premiums for all families, subsidized premiums for those who can’t afford them, tax cuts for Americans who earn less than $75,000, no income tax for retirees who earn less than $50,000, inflation-linked increases in the minimum wage, a $4,000 tuition credit for every college student and unspecified investment in early childhood education, roads, buildings and hospitals.
To pay for it, he cited without specifics higher taxes on the wealthy and corporations, billions of dollars from “polluters” to pay for alternative energy and ending the Iraq war, which is costing an estimated $9 billion a month.
“We can invest that money in rebuilding roads and bridges and hospitals right here in Houston – building schools, laying broadband lines, putting people back to work, employing young men and women in our inner cities, in our rural communities,” he said to cheers.
That $9 billion in war spending, however, is largely borrowed money, much of it from China and Japan. If Obama intends to redirect war spending to domestic needs, it still would be deficit spending.
“That’s sort of a problem: switching priorities rather than fixing the budget problem,” said Robert Bixby, the executive director of the nonpartisan Concord Coalition, a budget watchdog organization. “I couldn’t help but think, ‘Where is he going to get the money to pay for these things?’ ”
And the U.S. military can’t just pack up, turn off the lights and head home. There’ll be a troop presence in Iraq for some years, and the nation will be paying to replace worn equipment and heal the bodies and minds of returning service members for years.
“It is getting a little bit discouraging that promises that are on the wrong side of the ledger … are starting to add up. It gets more and more difficult to see how any of the candidates can meet the full portfolio of promises” they’ve made, said Maya Macguineas, the president of the Committee for a Responsible Federal Budget, a bipartisan group that advocates balanced budgets.
The most obvious problem, which Clinton and Obama have acknowledged – but which neither has addressed – is the unpopular alternative minimum tax.
The AMT wasn’t indexed to inflation decades ago, when it was targeted at income levels then considered wealthy, so it now threatens to ensnare millions of American families with annual incomes of $75,000 to $200,000.
Abolishing it could cost the Treasury as much as $2 trillion over the next 10 years, just when the government will need more money to pay for programs for boomers. Expanding the AMT, however, could allow it to hit as many as 52 million taxpayers by 2018.
Neither choice is attractive, and because the tax still affects a limited number of Americans, the candidates can duck the issue.
“If you were to repeal the AMT, it would just add to the deficit. It is a serious problem, and none of the candidates is talking about it very seriously,” said Len Burman, the director of the Tax Policy Center, a policy-research group run jointly by the centrist Urban Institute and the center-left Brookings Institution.
Clinton and Obama generally have good ideas, but clearly do not wish to address the serious issue that is our nation’s budget deficit. U.S. debt is, to say, the elephant in the room; it’s there and we know it’s there, but I am yet to hear a candidate, Democrat or Republican, offer some sort of plan to reduce the deficit. Of course, it would not be very prudent for voters to expect either Democratic candidate to offer a solution to this every-growing problem, because Democratic administrations typically increase the size of the budget and administration. Nevertheless, there are inherent flaws in Clinton and Obama’s plans, the most obvious being where on earth do they expect to find the money to fund these programs? Obama has stated he will lift the cap on Social Security, forcing the rich to pay in more than they will get out, but I just do not see that going over very well in Congress, or the upper echelon, which controls most of our nation’s wealth. Consequently, baby boomers will soon be drawing from the program with fewer workers available to invest into it. A contract between generations, perhaps, but it is turning out to be a fairly one-sided contract. Both Clinton and Obama expect to save significant sums from Iraq troop withdrawals, but, like the article stated, there will be a U.S. presence in the Middle East for years to come, and if not there, than somewhere else. I am also wondering whether the cost of implementing the technology needed to automate our nation’s health institutions will return enough in savings to balance out the cost of establishing universal health care. Furthermore, a tax increase for the wealthy and corporations, both domestic and abroad, could generate more revenue, but this is not a practical plan. In two years, at the earliest, Congress will most likely be controlled by Republicans, and I have a hard time believing that they would want to alienate that particular bracket of constituents.
The federal budget is going to be in a lot of trouble. The expenditures are way greater than the revenue and so the U.S. is in huge debt. The baby boom isn’t helping at all because Social Security and Medicare money is going to be spread thin. Social security was created to provide a minimum level of sustenance to the poor and elderly. Medicare was created to help the elderly attain inexpensive health care. Both Medicare and Social Security are considered entitlements and that means that Congress is obligated to pay a certain amount of benefits to the people qualifying for the programs.
With a lot of federal debt already, I am wondering where the money for Obama’s and Clinton’s programs is going to come from. They say that getting out of Iraq will provide a lot of the funds, but that money won’t just appear right away. Troops will be in Iraq for a while relentless of what Clinton and Obama claim. Some of the other money would come from higher taxes on the rich. Both candidates plan on taking from the rich and giving to the poor- the Robin Hood theory. Obama’s plan is even more drastic than Clinton’s. He doesn’t want the rich to collect their Social Security benefits. It is reasonable that these candidates plan on having a greater budget than President Bush’s due to incrementalism, the belief that the previous year’s budget is a good predictor of what the new budget should be, but I think that they are promising too much. Clinton and Obama are planning budgets that are outrageous and will put the U.S. into even more debt.
NC – Proof ReadI think that nether of these candidates solutions really make since… if you don’t have the money why would you spend it? And it just seems like no matter what the United states keeps spending it! I think that we should work on getting out of debt and then work on the problems because the more we get in debt the less we will actually be able to do… I don’t know were all of the money is going to be coming from ether. I mean I understand that they believe that money will come form us getting out of Iraq but that is not just going to happen over night and also that isn’t just going to make our entire federal debt go away. I also think that the candidate’s theory of taxing the rich more is not a good idea in anyway. I mean they already have very high taxes and don’t really need more. It seems to me that they are just trying to take away from people who do have the money to take it from but still have worked to earn that and don’t really deserve to have over half of what they earn taken from them.
I agree with the posts before me. I believe that this whole universal health care craze is going to be one of the downfalls of the U.S. economy. I like Mike Huckabee’s response to health care. Our focus should be on preventative medicine. I don’t understand why we would give aid to people that don’t take care of themselves. The average American is unhealthy by a medical standard, and we have an obesity problem in this country that’s spreading like wildfire. We eat garbage fast food and drink enough pop that Coke a Cola could flow over Niagara Falls for 24 hours. Personally, I don’t want a part of my pay check going towards some obese woman’s stomach shrinking surgery just because she doesn’t know how to put down the fork. Us as Americans are so lazy instead of actually keeping in shape and eating healthy food we would rather just have other people pay for our poor diet and obesity when we go to get liposuction. When the Democrat gets in the White House our country is going to go on a shopping spree for change and in my opinion it’s going to do a lot more harm than good. Just because the typical American wants to get away from the George Bush America doesn’t mean we make a complete 180 degree switch. It’s going to be interesting when the liberals see how badly their uncontrollable spending hurts the country.
I agree with both Amanda and Brittany. There is no way that our federal deficit will be fixed, with what Obama and Clinton are offering. I believe that they are saying all the things about what they WILL do, just to expand their voter base. What they will be able to accomplish, however, will be a different story. Whatever legislation they propose needs to go be approved by Congress, which will be a very hard thing to do, given that the Republicans will probably take control in this era of split government.
Brittany said that “I think that they are promising too much.” They definitely are, but again, that’s just to get more voters. I think what will really happen is that they will end up raising a whole bunch of taxes just to pay for all, or some of this. Regardless, the federal deficit is a big problem, and won’t be fixed in the next president’s term in office. It took Bill Clinton long enough to get this nation out of debt, I doubt either Clinton or Obama will be able to in two terms. Not even a Republican will be able to do that either. So I dunno.
-Jason Wong