President Barack Obama yesterday announced a plan to cut the national debt by about $3 trillion over the span of a decade. The initiative, much like the jobs plan introduced last week, is no doubt part of Obama's effort to keep his own job come next election.
After last summer's debt ceiling debate, where political gridlock resulted in the United States losing its AAA credit rating, Obama, at first, seems ready to play hardball.
Projected cost cuts in the War on Terror are included in the $3 trillion total, but the two most publicized components of the plan are a tax hike on individuals making more than $1 million a year and a $248 billion Medicare spending cut. Both are steps in the right direction, but this plan does not do enough to address the national debt.
The tax increase on individuals earning more than $1 million per year, which Obama is calling the "Buffett Rule," after billionaire Warren Buffett, who has complained that his secretary pays a comparatively higher tax rate than he does, is, not surprisingly, quite contentious with his Republicans.
Obama is right, though: the super rich are currently under-taxed. It's hard to argue that people earning over $1 million per year should be paying lower tax rates than people earning under $1 million.
However, Obama is not taking these tax increases far enough. Once (or if) the economy stabilizes and moves away from the looming threat of a double-dip recession, across the board tax hikes need to be implemented.
It's not just the rich that aren't contributing enough tax revenue to sustain the federal budget. The current federal tax rate is at about 14.8 percent of the GDP, the lowest in over 60 years.
But this is caused by more than just low tax rates on the wealthy. Countless tax breaks and credits available to all tax payers are doing plenty to drive the country into financial insolvency.
As for Medicare, Obama is showing willingness to go against his own party in proposing large spending cuts. However, his proposed cuts wouldn't go into effect until 2017. Obama mentioned the necessity of acting immediately to address budget problems, but whether he wins or loses next election, Obama will likely be out of office before these changes take effect.
If that's not kicking the can down the road — what is?
Furthermore, Obama did not include reforms of the ticking time bomb of Social Security as part of his deficit reduction plan.
Our leaders, Democrats and Republicans alike, need to face up to the facts: If our budget problems are going to be solved, revenue increases and painful spending cuts alike need to be elements of a real comprehensive plan.
