This column by ACRU General Counsel and Senior Fellow for the Carleson Center for Public Policy (CCPP) Peter Ferrara was published April 11, 2012 on The American Spectator website.
Barack Obama’s address on April 3 at the Associated Press luncheon in Washington D.C. demonstrated why our politics and our country today are seriously dysfunctional, and only the American people can fix it at the ballot box. Find the transcript online and print it out as I did.
I will show below why it reveals that the President, in fact, does not understand the major issues facing the country, indeed, he actually can’t even discuss them intelligently. Moreover, he is hopelessly, abusively dishonest about what he does understand. Thirdly, what he is demanding as policy is irreconcilable left-wing extremism.
Fourthly, what the speech shows is that Barack Obama is very angry. He is angry because he has been completely shown up by Paul Ryan, who stepped up in his budget and provided the leadership that Obama promised America in 2008, and America so badly needs, but that Obama has not only failed to deliver, but refused to deliver. In fact, he has delivered just the opposite. What the speech says to me is that Obama has internal polls showing him getting creamed in public opinion by Paul Ryan. Republicans may have those same internal polls, explaining the surge of interest in Ryan for VP.
What Ryan did most of all that has Obama actually feeling embarrassed if not humiliated is propose in his budget both pro-growth tax reform with bipartisan support, and fundamental entitlement reform that enjoys bipartisan support as well.
Obama Makes It Up
Hence Obama’s shameful, transparently dishonest attack on Ryan’s budget in the speech, which has only further backfired on Obama. Obama said that under Ryan’s budget:
The year after next, nearly 10 million college students would see their financial aid cut by an average of more than $1,000 each. There would be 1,600 fewer medical grants. Research grants for things like Alzheimer’s and cancer and AIDS. There would be 4,000 fewer scientific research grants, eliminating support for 48,000 researchers, students and teachers.
Investments in clean energy technology that are helping us reduce our dependence on foreign oil would be cut by nearly a fifth. [O]ver 200,000 children would lose their chance to get an early education in the Head Start program. Two million mothers and young children would be cut from a program that gives them access to healthy food.
There would be 4,500 fewer federal grants at the Department of Justice and the FBI to combat violent crime, financial crime, and secure our borders. Hundreds of national parks would be forced to close for part or all of the year. We wouldn’t have the capacity to enforce the laws that protect the air we breathe, the water we drink, or the food that we eat.
Cuts to the FAA would likely result in more flight cancellations, delays and the complete elimination of air traffic control services in parts of the country. Over time, our weather forecasts would become less accurate because we wouldn’t be able to afford to launch new satellites and that means governors and mayors would have to wait longer to order evacuations in the event of a hurricane.
But the speech itself reveals where Obama got these fairy tales, because he didn’t get them from Ryan’s budget. The above litany of woe is preceded in the speech by this line: “I want to actually go through what it would mean for our country if these cuts were to be spread out evenly,” and this caveat: “If this budget becomes law, and the cuts were evenly applied starting in 2014…”
In other words, Obama’s speech itself tells us this is all made up. Obama’s minions calculated the percentage of total spending cuts in Ryan’s budget, and then applied that same percentage to every politically sensitive line item in the budget. But as Ryan has said publicly, that is not what his budget does. The long overdue spending cuts are outlined in hundreds of pages on the House Budget Committee website.
What Ryan’s budget does is just return federal spending to its long-term, historical, postwar average at 20 percent of GDP, which prevailed for 60 years before President Obama and his runaway spending. With that manageable federal spending, America prospered as the richest and mightiest nation in the history of the planet.
But President Obama hysterically and falsely claims just doing that will lead to all of the above disastrous results, and further that “by the middle of the next century funding for the kinds of things I just mentioned would have to be cut by 95%,” which is another fabrication. Just returning to that long term, historical, postwar average of federal spending as a percent of GDP, Obama claims, is “really an attempt to impose a radical vision on our country… thinly veiled social Darwinism… antithetical to our entire history as a land of opportunity and upward mobility.” This from the long-time radical who ran on fundamentally transforming America, not restoring our history. Obama’s wild, false rhetoric is not even an honest, intelligent discussion of the budget issues.
What this means is Obama adamantly opposes restoring traditional, long-term control over federal spending, and won’t do that if reelected. Instead, on our current course under Obama and the Democrats, according to CBO, federal spending soars to 30 percent of GDP by 2027, 40 percent by 2040, 50 percent by 2060, and 80 percent by 2080. Actually, it would be higher than that, as GDP would collapse under that burden. Add in another 15 percent of GDP for state and local spending, and we are at full-blown communism.
This is the choice facing the American people in the 2012 elections. Restoring traditional American prosperity and federal spending to their long term, postwar trends, with Ryan’s budget, or go backwards to Obama’s outdated Marxist socialism, or worse.
Obama’s Tax Ignorance = The Coming Crash or 2013
What Obama wants to do is raise taxes dramatically to fund that explosion of federal spending. His budget assumes that federal income tax revenues will double by 2020, federal corporate tax revenues will double by 2017, and federal payroll taxes will double by 2022.
Indeed, most people do not know that Obama has already enacted into current law increases in the top tax rates of virtually every major federal tax for next year, as the Obamacare taxes go into effect, and the Bush tax cuts expire, which Obama refuses to renew for the nation’s small businesses, job creators, and investors.
And in his speech on the Ryan budget, Obama proposed still more tax increases. He proposed what he is calling the Buffett rule, named after Warren Buffett, the lifelong operator of the largest tax shelter in America, Berkshire Hathaway. Obama’s argument is that high-income investors should pay the same tax rates as the middle class.
What he doesn’t understand is that under our tax system the earnings from capital investment are taxed not once, but multiple times. First, by the corporate income tax, then again by the individual income tax through the tax on dividends, then if you sell the capital investment, through the capital gains tax, then when you die, by the death tax. When he complains that the rich are not paying their fair share, he is just looking at the rate on any one of these taxes, and not considering all of the others. So he wants to raise them all to what he considers the tax rate paid by the middle class.
As a result, he would double the top capital gains tax rate, double the dividend tax rate, increase the top two income tax rates by nearly 20 percent, and increase the death tax rate by 60 percent, while the corporate tax rate remains the highest in the industrialized world.
His tax increases would apply to the top 3 percent of taxpayers, singles making over $200,000 a year, and couples making over $250,000. He says the increases are needed for the rich to pay their “fair share.” But as the Wall Street Journal noted on Feb. 14, those top 3 percent already pay more in federal income taxes than the bottom 97 percent combined!
Indeed, before President Obama was even elected, official IRS data shows that in 2007 the top 1 percent of income earners paid 40.4 percent of all federal income taxes, almost twice their share of income. That was already more than paid by the bottom 95 percent combined. The top 5 percent of income earners paid 60 percent of all federal income taxes. The top 10 percent paid 70 percent.
So if the rich are not paying their fair share, Mr. Obama, what would that fair share be? Obama’s cheap rhetoric on this issue is again not even an honest, intelligent discussion of the issues.
The problem is that President Obama’s simple-minded, community organizer ignorance of how the tax code works will end up hurting working people the most. Next year when all of those tax increases go into effect, and the multiple taxation of capital is multiplied by tax rate increases on everything, the result will be renewed, double-dip, recession. The capital flight from the U.S. will slash jobs and wages further, with the return of double-digit unemployment.
Moreover, the tax increases will not nearly raise the revenue expected. Indeed, with renewed recession revenues will decline rather than rise. Budget deficits and federal debt will soar further.
In sharp contrast, Ryan has proposed individual tax reform with just two rates, 10 percent for couples making less than $100,000 a year, and 25 percent for those making more, while abolishing the death tax. He proposes corporate tax reform reducing the federal corporate tax rate to the international average of 25 percent, restoring American competitiveness. Under these reforms, the long overdue recovery will finally take off, and the economy will boom, just like it did after the Reagan tax cuts of the 1980s. That is why this tax reform enjoys bipartisan support.
Unlike Obama’s budget. When Obama’s proposed budget was put to a vote in the House, it got exactly zero votes. Not a single Democrat would vote for it. The House passed Ryan’s budget instead. Last year, when Obama’s budget was put to a vote in the Senate, it got the exact same zero votes. That is why Obama is so angry, and embarrassed.
Bipartisan Entitlement Reform
President Obama explained Ryan’s proposed Medicaid reforms:
We’re told that Medicaid would simply be handed over to the states…. Let’s get it out of the central bureaucracy. The states can experiment. They’ll be able to run the programs a lot better. But here’s the deal the states would be getting. They would have to be running these programs in the face of the largest cut to Medicaid that has ever been proposed… take away health care for about 19 million Americans. Who are these Americans? Many are someone’s grandparents who, without Medicaid, won’t be able to afford nursing home care. Many are poor children. Some are middle class families who have children with autism or Down’s syndrome. Some are kids with disabilities so severe that they require 24-hour care. These are the people who count on Medicaid.”
Barack Obama is like Rip Van Winkle for anything that has happened since 1980, so he does not appear to know about the astoundingly successful 1996 welfare reform of the old AFDC program, passed with overwhelming bipartisan support in Congress, and signed by Democrat President Bill Clinton. Those reforms returned the share of federal spending for AFDC to each state in the form of a “block grant” to be used in a new welfare program redesigned by the state based on mandatory work for the able bodied. Federal funding for AFDC previously was based on a matching formula, with the federal government giving more to each state the more it spent on the program, effectively paying the states to spend more. The key to the 1996 reforms was that the new block grants to each state were finite, not matching, so the federal funding did not vary with the amount the state spent. If a state’s new program cost more, the state had to pay the extra costs itself. If the program cost less, the state could keep the savings. The reformed program was renamed Temporary Assistance to Needy Families (TANF).
With these reversed incentives for state bureaucrats, the old AFDC rolls were reduced by two-thirds nationwide, as those formerly on the program went to work, or married someone who worked. As a result, in real dollars total federal and state spending on TANF by 2006 was down 31 percent from AFDC spending in 1995, and down by more than half of what it would have been under prior trends.
Because of all this renewed work effort, the total income of these low income families formerly on welfare increased by about 25 percent over this period. Ron Haskins of the Brookings Institution reports in his book evaluating the 1996 welfare reforms, Work Over Welfare, “Between 1994 and 2000, child poverty fell every year and reached levels not seen since 1978. In addition, by 2000 the poverty rate of black children was the lowest it had ever been. The percentage of families in deep poverty, defined as half the poverty level…also declined until 2000, falling about 35% during the period.”
Ryan’s budget would just extend these same enormously successful 1996 AFDC reforms to Medicaid, and food stamps. Would it be accurate to describe these 1996 reforms as the largest cut to AFDC that has ever been proposed? Ryan’s Medicaid reforms would benefit the poor on the program enormously, just as the 1996 AFDC reforms did. That is because Medicaid pays doctors and hospitals so badly that today it is really an institutionalized means of denying health care to the poor.
That was the experience of 12-year-old Deamonte Driver, from a poor Maryland family on Medicaid. When Deamonte complained of a toothache, his mother tried to find a dentist who would take Medicaid. But only 900 out of 5,500 dentists in Maryland do. By the time she found one, and got the boy to the appointment, his tooth had abscessed, and the infection had spread to his brain. Now she needed to find a brain specialist who took Medicaid. Before she could find one, the boy was rushed to Children’s Hospital for emergency surgery. After two weeks in the hospital, they couldn’t save him, and he died.
Under Ryan’s reform, the states would each be free to provide the poor with premium support payments they could use to buy the private health plan they chose in the competitive marketplace, paying market rates to doctors and hospitals. The poor would then enjoy the same health care as the middle class, because they would have the same health insurance as the middle class.
Maybe that is why a majority of the nation’s governors support Ryan’s Medicaid block grants, while a majority are suing Obama to strike down the Obamacare Medicaid reforms, another stinging embarrassment for Obama. Obama’s rhetoric analyzes Ryan’s Medicaid reform as if it abolishes Medicaid. Would it be accurate to describe the 1996 AFDC reforms as the largest cut to AFDC that has ever been proposed? 50 percent! Again, Obama does not offer even an honest, intelligent discussion of the issue.
Obama is such a left-wing extremist that he actually says in the speech that if private competition can provide the same services as Medicare for less, he would still oppose that. Obama got elected in 2008 on false pretenses as a bipartisan moderate. He has proved to be just the opposite. This is why he has no prayer of being reelected. America is not Venezuela.