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News Where Was Obama's Plan?

  1. Aug 2, 2011 #1

    russ_watters

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    Staff: Mentor

    During debt negotiations, Obama negotiated with House Republicans behind closed doors on a plan that ultimately House Republicans would submit for a vote - and for CBO analysis. So except for the the soundbyte/rhetoric version, we never really got to see what Obama really wanted for the economy. Particularly since even the plan submitted by the Senate is far from what Democrats typically want, we don't really have much of an idea what Obama intended for us - except of course, for his history. I have a theory on why that is. First, the background:

    Obama submitted budget proposals for FY2010 and 2011 and the CBO analysis can be found in these links:
    http://www.cbo.gov/ftpdocs/100xx/doc10014/03-20-PresidentBudget.pdf
    http://www.cbo.gov/ftpdocs/112xx/doc11280/03-24-apb.pdf

    In terms of the hot topic of the day - the debt - these proposals are little short of disastrous. Graphs on page 1 and 13, respectively, show a drop in the deficit to around $400 billion as the economy recovers over the next few years, then a gradual increase to around $600 billion over the life of the proposals. Overall, the 2011 proposal was worse than the 2010 proposal on that score, projecting to increase the debt from $7.5T (53% of GDP) at the end of 2009 to $20.3T (90% of GDP) at the end of 2020 (page 11). This is also $5T worse than the CBO's baseline estimate.

    But it gets still worse. On page 33, the CBO analyzes Obama's policies vs their baseline assumptions and concluded that while his policies would increase GDP growth over the first 5 years, they'd decrease economic growth over the second five years vs how it would look if his policies weren't implimented (which they weren't, since no budget was passed).

    But it gets still worse. Less than a year ago, before the last election, Obama broached the subject of a second stimulus. That's more spending that didn't show up on the budget proposal and the opposite of what was just agreed to.

    The other side of the 'tax and spend' coin is, of course, taxes. The only tax increase proposal I'm aware of is for those above $250k income and as V50 likes to point out, it is mathematically impossible to balance the budget even by taxing them into oblivion. And back to the first side - despite what Obama says, it is mathematically possible to balance the budget with spending cuts.

    So my theory: I think Obama is aware of the math problems in his proposals. He's a smart guy and I think he's self-aware. He knows that his strength is vague, rhetorical speaches about principles and not specific plans. And he knows that in order to put together a plan that wouldn't get crushed by the CBO when compared to the plans by the House and Senate, he'd have to completely reverse course on some of his major policy stances. So he chose the lesser of three evils: he let himself (not that he had much of a choice) appear get bullied into a plan that is all but the opposite of his actual vision.
     
  2. jcsd
  3. Aug 2, 2011 #2
    I don't think he's capable of developing a "balanced" working plan - what is his experience? Harry Reid made a political deal - nothing more.

    Have you noticed the President, the Dem's and the press are no longer talking about raising taxes on people who make over $250,000 - now it's "millionaires and billionaires", (just) "billionaires", "hedge fund managers", and "corporate jet owners"? The President all but promised to try and raise their taxes in the "next" round.

    If I interpreted their speeches today, both the President and Harry Reid are working on a "jobs stimulus" plan now?:rofl: This of course is not a "balanced" plan.

    If the Republicans don't shoot themselves in the foot in 2012 - all they really need to do is run commercials with strings of President Obama's sound bites - they tell the story of his failures - in his words. He's been talking about jobs being the top priority for about 3 years - even sold "Obamacare" as a jobs bill.
     
  4. Aug 2, 2011 #3
    Well, the demand for health care professionals WILL go up... (even though they're already one of the highest in demand jobs)

    What will that do to the real costs of health care? Isn't this type of logic high school economics?
     
  5. Aug 2, 2011 #4
    Let's not forget the thousands of IRS agents they plan to hire - to enforce the mandates.
     
  6. Aug 3, 2011 #5
  7. Aug 3, 2011 #6
    Perhaps msnbc prepared this list to help him organize a plan to deal with the next problem - otherwise he might come to be known the "big dipper"?
    http://www.msnbc.msn.com/id/43946055/ns/business-us_business/t/signs-double-dip-recession-has-begun/
    "10 signs the double-dip recession has begun "
     
  8. Aug 3, 2011 #7

    mheslep

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    Nicely done. Yes I agree your theory fits, though who knows, making for a very lame Presidential legacy if true.

    Here's what I think he (not me) might have done: propose to kill or nearly kill one entire federal department, say one of the low hanging fruit departments like Commerce or Education, merge NASA and the FAA, or kill a redundant law enforcement agency like ATF; it is an apropos target given the imbecilic Fast and Furious scandal. He could spin it with some "I have always said"s about cutting the old to seriously invest in the future. Use the saved money to both cut the deficit immediately far more than the Republicans had proposed and throw a bone with whats left to shoring up Medicare or SS. Such a move would have put him out front of Boehner as one who's willing to confront the spending problem, and in return such a move would have given him something real to bargain with to get what he wanted most: his tax increases. Would have been a tricky game though (for him): he can't mention a department that can go without getting the tax increases first, else the dept becomes admitted dead weight.
     
  9. Aug 4, 2011 #8

    Vanadium 50

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    Only by cutting entitlements, though. The deficit is larger than the entire discretionary budget.
     
  10. Aug 4, 2011 #9

    russ_watters

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    Understood, V. I'm not a person for whom the term "entitlement" (or "mandatory spending") is an acceptable label for any government program.
     
  11. Aug 4, 2011 #10
    I agree - spending is spending.

    On the tax side, the re-distribution of taxes through EITC (for instance) is a cash outlay - an expense of 100% of the amount. A tax deduction is not a payment of cash and is not a 1:1 relationship - a $100 deduction might only be worth $35 in taxes - lot's of misinformation in the political rhetoric - IMO.
     
  12. Aug 5, 2011 #11
    Obama's plan was to concentrate first on to getting the economy out of the recession, let it grow and reduce unemployment. That not only helps the economy right now, but is in the short term the only way to help reducing the deficit or at least let it not further to grow.

    Cutting government expenses in fragile economy prolongs the recession, or even leads to depression. Open every macroeconomics of your choice which exactly will tell you that.

    Note: Important is the ratio debt/ GDP and the interest on existing debt. not the stock of debt alone.

    You can even keep borrowing and have a sustainable deficit over the longer term as long as the real growth rate of the economy is higher than the real cost of debt.

    In times where that's not the case, you have a primary deficit, which requires that in economical better times a surplus is needed to go back to the sustainable debt/ GDP ratio.

    But again, and that is the most important lesson to learn from this deficit issue: it is the stock of debt, growth of GDP and interest rates together which tell you how bad the deficit situation is.

    The strange thing is every economist will tell you that, but many people rather believe in this nonsense that government cuts in a recession will make the economy grow and the deficit smaller. The opposite is true.

    To make things super-worse, on top of the dim growth prospect, one political party choose to frigthen the financial markets even more by suggesting not paying government debt. The consequences can be seen now at Wall Street and the likehood that real interest rates will go up and deficit problem gets much, much worse...
     
  13. Aug 5, 2011 #12
    Actually... my Economics textbook explains how you have to increase the value of money by slowing inflation to get out of a recession. So how does stacking debt do this when we're printing fiat money to do so?

    The textbook specifically states that CONSUMER spending on real goods is what helps relieve a recession (money becomes useful again). Again, how does government spending and taxing (reducing consumer worth) do this?

    Actually, most of the blame for the stock dip the last 2 days has been because of the jobs report, not the 'debt issue'. This type of random fluctuation has happened positively and negatively the last few months of US labor reports. We'll see what happens in an hour or so. The outlook was supposed to be 'positive' the last few months, but when the report came out it was mixed. Now, it's supposed to be not so good, so the market is already reacting.

    It's fatalistic journalists that are spewing and trying to continue the 'debt crisis' as a policy/market management tool. Talk about manufacturing a crisis - the left and liberal media is getting their full value out of this. Like you even said yourself, the debt isn't really that big of an issue - so a few life-long debaters getting their jollys paying off some interest is going to have no real impact on the markets. Wall Street and the world are too smart for that, they understand the crisis was mostly manufactured by the collectivists in Washington trying to paint the republicans into a corner.
     
    Last edited by a moderator: Aug 5, 2011
  14. Aug 5, 2011 #13
    Let me get this straight. You want to cut real income for poor, low-income and middle-income people ( that what it comes down to if you cut 2 to 4 billions in 'entitlements') and not raise taxes for high-income people and expect from that a net growth in consumption?

    That's hilarious at best.

    If you need more tax revenue but at same time do not want to hurt consumption (on which the US economy heavily relies) than of course you rather get money from people that spend proportional less of their income on consumption, which are the higher-income people.

    Again, basic economics.
     
  15. Aug 5, 2011 #14
    Not that I agree with it, but the (general) conservative argument is that by lowering taxes on the rich (i.e., those who have money to invest), more of their money is available for investment, which spurs job growth, which creates more taxpayers, which brings in more money than if taxes weren't lowered. Combined with the lowering of spending, this lowers the debt.
     
  16. Aug 5, 2011 #15
    Then his plan was a total failure - wasn't it?
     
  17. Aug 5, 2011 #16
    Actually - the goal is for them to get jobs that are not funded with tax revenues - this will create new tax revenues.
     
  18. Aug 5, 2011 #17
    You have posted 3 times thus far - yet not a single comment is supported.
     
  19. Aug 5, 2011 #18
    What did I say about rich vs poor? All consumers need to be able to spend. The 'rich' invest most of their capital into companies to allow them to keep their prices down and the not-rich spend most of their money on goods (made cheap by the former investing). Even if the wealthy aren't spending, their money and capital is sitting in a bank allowing others to lend against it.

    If the government keeps on spending (via printing money) then the poor are going to be hurt even worse because their fiat money loses value. Prices continue to rise, but wages do not. So, according to your logic - the proper solution is to give people more money (which intrinsically devalues it). Money is worthless is everyone is a millionare when applied to the current market.

    And you still didn't address the other points - what is President Obama's plan, specifically? Lots of ideas of what he wants to happen in the end, little specifics on how to get there has been the general perception of him IMO.
     
  20. Aug 5, 2011 #19
    If the economic prospects for the coming periods are bad, companies are very hesitant to invest, no matter how much the tax is lowered. On the opposite, companies cut production and eventually cut staff.

    The government, as I just expalin in another post, smoothens the downturn with automatic stabilizer (look it up at wiki), which also includes that companies pay less taxes if profits are bad.

    In addition, if the recession is very hard, government must and will make more stimulus fiscal policy, by for example investing in infrastructure, etc.

    As far as private investment, there is enough private money ready for investment, no need to slash taxes for that. Companies and banks are just very reluctanct to invest or want simply a higher rate of return of investment that they won't find if the whole economy is down.

    Also, look at the balance sheets of the pension fund, hedge funds, the cash reserves of big companies, or just the private capital wealth of US citiziens. There is no shortage of money for investment, only a reluctuance to invest in the US.

    As far as Obama, I gave you his plan, which was to grow the economy and guarantee that the burden and benifits are shared equally.

    He prevented the economy 2009 to slip into full blown depression, regulated the financial market so that a crash will not repeat, he gave the last western industry nation universal health care and he intended to keep a sustainable debt/ GDP ratio (as explained in an earlier post), but was kept from doing that by the Republican party...
     
  21. Aug 5, 2011 #20
    Still no support for your posts? If you don't care to follow the rules and support - please label all of your unsupported comments OPINION - or retract.
     
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