Wednesday, April 13, 2011

Obama's Speech: In Conclusion

President Barack Obama made a resounding case for an active government in his speech at George Washington University today and he forcefully responded to the Republicans' attempt to privatize our entitlement programs by replacing social security and medicare with private vouchers. He rigorously defended the role which government plays in providing unemployment insurance to those who unexpectedly lose their jobs, college loans to middle class families who want to ship their children off to college, the paved roads which we drive to work on, and the social security and medicare entitlement programs that allow us to retire without losing our access to affordable health care. In this respect, the president offered a vision for our country that is far more preferable to the one offered by his Republican counterparts in the House of Representatives.

To pay for this vision, a vision once shared by Republicans (like President Dwight D. Eisenhower) and Democrats alike, Obama proposed to shift the tax burden back onto this nation's "millionaires and billionaires." I don't know if we can limit any tax increase to America's "millionaires and billionaires" in order to pay down our debt but no plan that does not include such tax increases can be treated seriously if we want to preserve those governmental programs that provide middle and working class Americans an opportunity to "live the American dream."

The president's failure to hold the line in December, however, raises some questions about his commitment to pay the debt off with a tax cut. The president could have let the Bush tax cuts, which primarily benefit the wealthiest Americans, expire last December.

At that time, Obama said that he did not want to burden the middle class taxpayers with the increase they would have felt in the midst of a slow economic recovery had those tax cuts expired. The Republicans, he said would not offer a clean bill that preserved the tax cuts for those earning $250,000 a year or less while letting the tax cuts expire for those who earned more. A measure to let the tax cuts expire on millionaires and billionaires was defeated as well. There is no reason, however, to believe that the Republicans' negotiating tactics will change within the near future and there is no reason to believe that the economic recovery will be strong enough to withstand the increase in middle class tax cuts within the next two years. President Barack Obama, once again, will have to decide whether he will let the tax cuts for all Americans expire or whether he will let the filthy rich keep the tax cut that would allow them to purchase a sixth home.

The president did not specifically offer any cuts in Medicare. He presumably would find some savings from a shift from a fee-for-service payment plan to a fee-for-results payment plan, with a stronger emphasis on preventive medicine. He would also find some savings by opening the market for more generic drugs and using Medicare's purchasing power to drive down costs. It is a credible plan, but one that would require the hard-balling negotiating skills that the president isn't known for. Doctors, health insurance companies, hospitals, and pharmaceutical companies presumably would see their profit margins cut drastically by this approach so one can expect their lobbyists to fight against this plan vigorously. I believe we may need to means-test medicare as well. What's good for the goose is good for the gander. CEO's should have to pay their own way.

The president should have used his time to offer his plan for saving social security from insolvency as well. Yes, it isn't in trouble now and so yes, reforming it can wait a year or two, but at some point this will need to be addressed and his failure to offer up a plan exposes him to some opportunistic yet warranted criticism from the Republicans who will inevitably claim that he is pushing this problem down the road. The president could have proposed to either lift the cap on the payroll tax and/or offered to increase the retirement age. He did not.

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