Obama’s Plan Vs. Ryan’s: Who Pays?
Friday, April 15, 2011
President Obama offered his own fiscal plan for dealing with debt and the deficit, a plan vastly different from Rep. Paul Ryan's. We examine who would pay for each and look at party differences when it comes to taxes.
ALISON ST. JOHN: Turning to a budget debate that is national but affects every single one of us, so it is as local as any other story. President Obama gave a speech this week that drew a line in the sand over what he is and isn't willing to do to compromise with Republicans. His vision is now being compared with the one proposed by Republican Paul Ryan. Since today is tax day, let's talk about the tax differences between the two plans.
Bob Kittle, director of news planning and content, KUSI
Andrew Donohue, editor of voiceofsandiego.org.
Alisa Barba, assignment editor, Fronteras project, NPR
ST. JOHN: President Obama gave a speech this week that drew a line in the Sunday over what he is and isn't willing to do to compromise with Republicans of his vision is now being compared with the one proposed by Republican, Paul Ryan. Since today is traditionally tax day, let's talk about the tax defenses between the two plan, and bob, kick us off a bit, and explain what are the different tax strategies in the plan that distinguish these two plans?
KITTLE: Well, just very briefly, president Obama wants to eliminate the bush era tax cuts for people making over $250,000 a year. Paul Ryan's plan would essentially reduce taxes for nearly all Americans in the long-term, and cut spending much more. The president is not emphasizing spend cuts, although he talks about the need for them. Ryan would cut entitlement programs such as Medicare and Medicaid, he's not touching Social Security. Really, no one is going after Social Security, which is the largest entitlement program. So they both sort of strive toward the same goal, which is cutting the deficit by about $6 trillion over -- the debt by over six trillion over the next ten years.
ST. JOHN: Is it 6 or 4?
KITTLE: I believe it's six. But just consider this, we've added 3 trillion dollar in fresh debt in the first three years of the Obama administration, you know, it was basic pump priming during the recession. So we've got to back off the precipice now and figure out a way to have a sustainable federal budget. And right now what we're doing is not sustainable.
ST. JOHN: So from what I understand, the text implications of Obama's plan would raise taxes and add 1.3 trillion over 12 years to the federal budget, whereas Ryan's plan would add almost three trillion to the deficit by cutting taxes on the wealthy. So how can Ryan justify cutting taxes by almost three trillion and cutting them on the wealthy and corporations?
KITTLE: Well, he maintains the tax structure as it is today. That is, while he's talking about some fresh tax cuts that are relatively targeted, the reality is --
ST. JOHN: I believe he's lowering the top tax rate for the wealthy, and lowering the corporate tax quite dramatically.
KITTLE: That's right. But the real solution here is -- what started the debate is beginning to enter into this, which is tax reform, real reform in the tax code to eliminate the trillions of dollars in loopholes, if you want to call them that, and broaden the tax base while at the same time lowering the marginal rates for everybody. And that kind of tax reform is what economists love, because that looks to be a real way to stimulate the economy over the long-term and make the American economy more competitive.
ST. JOHN: So but if in fact the bulk of the taxes that we're heart attack about are for people at the top of the income spectrum, how can he justify that? What is the economic justification for that?
BARBA: Tax reform. Tax reform. That's what he's talking about. And that's where it gets scary. He's talking about reducing or cutting out the deductions for mortgage, for your home mortgage, he's talking about cutting out the deductions for charitable donations. A lot of the so called loopholes are deduction that the middle class and the upper middle class absolutely rely on when they pay their taxes. So that kind of tax reform, that kind of rationalization of the system, bringing the tax rates down, he believes that that's gonna help jump start the economy and bring more money into the economy.
ST. JOHN: So where is the evidence that more jobs have been created by cutting taxes especially at the top.
KITTLE: Well, I think the bush era shows that we had a real spurt of economic growth after the Bush tax cuts were adopted. I'm old enough to remember the Reagan tax cuts which also brought the country out of a bad recession and provided about a decade of growth.
ST. JOHN: Now, in the last few years, we have not seen much of growth, now, whether that's because of tax cuts or because of that changing global employment situation, it's hard to say, but I mean, is there still really a viable argument that cutting taxes at the top, even more, might stimulate job, do you think, Andrew?
DONAHUE: Well, this is sort of the standard conversation that we've been having for decades. And nothing's really changed. This is approximate two fundamentally different visions for government and different visions for the world. The Republican Ryan, you know, the Republican plan push bide Ryan is one that privatizes entitlement programs and really puts more of the costs on seniors of the Obama one is one that raises taxes on the wealthy. This is -- these are the sort of same old debates that we've been having for a long time.
ST. JOHN: So in fact Obama's speech was more about vision than specific details. He called Ryan's vision, he said it was not about closing it is deficit but about changing the social contract with America. So do you feel that this is something which could be like a turning point in a way to the social contract in America?
DONAHUE: Well, I don't know. I feel like this is, like I said, this is a conversation we've been having for quite a while. This is a big -- this is going to be a huge, huge showdown, but I think we're also gonna have to see how this mays out over the 2012 election. Because frankly, a lot of the things that the Republicans are pushing right now have never been popular with the voting populous. They're certainly not going to be popular with seniors who are a major constituency in the GOP. So we could very well see a lot of this fizzle out after voters have spoken.
BARBA: They're putting Medicare out there, they're putting medicate out there, and those two programs account for a huge amount of the deficit, and Obama and the Democrats are not dealing with that. They're saying we're gonna whittle around the edges and we're gonna reform here, and we're gonna keep the prices down. But the Republicans are saying, we cannot afford this. And we there are that, and the same goes with Social Security, which is not being touched of it's politically impossible. Let's go back to the conversation we were just having. Why does, you know, Sanders comes into office, and he says I'm gonna make it all better, and in the end, he spends six years doing quick fixes and not making any fundamental change because politically, it is nearly impossible. And I think Paul Ryan deserves some kudos for basically throwing those sacred cows out into the middle of the street and saying we need to deal with that. Will we? I profoundly doubt it. But I have to say that the Obama administration's approach is kind of a -- kind of a same old same old. And it's not gonna result in the kind of bringing deficit down that our economy absolutely needs.
ST. JOHN: Bob?
KITTLE: And if you look at where the deficit is, I just saw an interesting statistic. 24 percent of the gross domestic product. 24 percent of the total economy. That's what spending is. However, revenues are only 15 percent of the GDP. The gap, that nine percentage point gap is the deficit. Well, that is simply not sustainable. And I think even Obama recognizes that this is -- needs to be a temporary situation in order to stimulate the economy, and you can argue whether all this federal spending helps get us out of this recession or not. But there is certainly a consensus that we cannot continue with this kind of a budget deficit.
ST. JOHN: Right. But when you look at the income disparity that's really growing in this country and the threat to the middle class, when people say that Ryan's plan is like a blue print that will win them the election. Do you think that's true or do you think that this idea of again benefitting those at the top might actually count against the Republicans in the end?
BARBA: Well, I think you're kind of throwing out some assumptions out there --
ST. JOHN: Devil's advocate.
BARBA: -- that it's only gonna benefit those at the top. I think he and the republicans would argue that it actually creates a -- it would bring the higher levels down, it would bring the lower levels up, everybody in the end would pay less taxes by reforming -- I'm arguing from a different side than I usually do, but I'm saying that I think it puts the argument out there, and it puts it out there in clearer terms than we've been willing to have for pay long long time. I think that Obama at the same time in his speech this week, he put out his vision of what it should be, and ultimately it's gonna have to be some place in the middle.
DONAHUE: Well, let's be clear too. Obama's plan is built on the idea of trying to reduce the deficit as well. But his is built on that idea that you can preserve these programs and you can shift the cost of that over to a different constituency. So it's not like one of them's just about reducing the deficit, and the other is about just sort of keeping the status quo. They're both built around reducing the deficit, just going about it in very different ways.
ST. JOHN: I'm under the impression that the Ryan plan would in fact reduce revenues, thereby opening the deficit gap more, and thereby requiring more cut -- well, more changes to Medicare and Medicaid.
BARBA: Well, I think that he puts a cap on spending for Medicaid, and he basically eliminates Medicare as an entitlement program and moves it over to the private sector, is my understanding.
KITTLE: Well, a sort of a voucher type limit on what you could spend.
BARBA: Which will never fly.
ST. JOHN: Let's take a call here. 1-888-895-5727 is the number to join the editors here at the round table. And former assembly woman Lori Saldaña is on the line. Go ahead, Lori.
NEW SPEAKER: Well, good morning. I get frustrated when I hear the entitlement discussion because the Department of Defense is never brought in, the other major cost driver. We are waging three wars, and the only time we have had these types of record deficits in the past have been when we were at war time. Difference is, in World War II, we didn't cut taxes on top of our war time spending. And the only time in recent years we've had surpluses was in the Clinton administration, and I'm wondering if the changes that were made then would be supported by some of your editors in terms of what was done to bring us not only into a balanced budget but a surplus by the end of Clinton's administration.
ST. JOHN: Any reactions to that? Alisa.
BARBA: I think you're talking about changes in the defense budget. I think Obama's plan -- he has proposed a $400 billion cut to the defense budget this year, which came as a big surprise to the Pentagon, to his own people there. So -- but the bottom line is, we are fighting two wars, and that is draining the Treasury. There's no doubt about that.
ST. JOHN: I think it's interesting that Gates said the defense budget should be based on strategy rather than budget math, but that implies that basically, you know, it doesn't matter what the -- what financial state the country is in, defense always has to have what it needs. You think that's justifiable?
DONAHUE: Yeah, as Rick Klein from the Washington post says, the federal government is essentially security -- or an insurance organization with a military. These are the major things we're dealing with, Medicare, Medicaid, Social Security and defense. And those are the things that our federal government spends its money on.
THE COURT: Okay, Rick is calling us from mission valley with a thought on this, thanks for joining us. Go ahead.
NEW SPEAKER: Yeah, well, I'm gonna continue where Gloria left off and throw that same sacred cow under the bus, which is where are the defense cuts? All our threats right now are very low tach, we don't need a lot of this high tack. There are a lot of DOD cuts that can be made. Off the top of my head, we don't need 12 super carriers. We don't need a whole new generation of fighters that are gonna run in it the megabillions of dollars. And in 15 or so years, we're gonna have the second largest economy in the world, and are we still gonna be able to spend as much on defense as the rest of the world put together?
ST. JOHN: Rick, thanks for that point now. And so that's two callers now, Lori and Rick who have made this point that defense needs to be cut, I don't know what you as editors feel with that, bearing in mind that San Diego's economy is based very much on military spending.
KITTLE: Well, I think the truth is, when it comes to defense spending Congress asserts itself rather heavily. One program that the Obama administration has proposed eliminating is this now expeditionary fighting vehicle for the Marin Corps. It's an amphibious fighting vehicle that takes marines from the ship over the horizon and brings them to the shore where hostilities are going on. Dunk an hunter, the local Congressman is adamant that that will not be cut from the defense budget. The savings is measured probably in the few billions of dollars. Congress, I suspect, is going to thwart the Obama administration on this because of the support in the arms services committee among defense contractors and elsewhere to observe those individual programs. And that's the way to cut the defense budget is program by program, and to me, sort of find programs that are not necessary. Robert Gates, the defense secretary think that this new vehicle is not need, that old vehicles are just fine. But again, the problem of cutting even a relatively modest chunk out of the defense been is politically enormous.
ST. JOHN: Alisa.
BARBA: Well, you said it will save a few billion, I'll take one of those billions, thanks very much. But yeah, that's the whole issue is Duncan Hunter's effort to preserve this expeditionary vehicle, is that based on a strategic vision or is it based on local politics? And we need to be sure that we have the money come back to San Diego. So I think, you know, this is where the -- I keep using the road metaphor, we got sacred cows on the road, and this is where the rubber hits the road. I think in the end basically you have politics, and you have congressmen who will advocate for their district over the overall budget priorities.
ST. JOHN: Serena from Mission Hills has a point she'd like to make. Thanks for calling. Go ahead.
NEW SPEAKER: Good morning. Thank you very much for taking my call. Excuse me, my comment was about Medicare and Medicaid. I don't think it's so much a concern about the entitlement. My concern is in over sight, that there is little or none. And as I said to your screener, I heard a discussion last year on KPBS about healthcare, an 89-year-old woman was in the hospital with heart problems and kidney problems, 89 years old, the hospital performed a Pap smear on here and it was submitted to the insurance company for payment. That leaps right up there with fraud, an 89-year-old woman with a Pap smear.
ST. JOHN: So you're arguing perhaps that if basically just the misuse and fraud in Medicaid were eliminated that that might solve the problem?
NEW SPEAKER: I don't know about solving it, but it would go a long way toward refining it.
ST. JOHN: And Serena, I'm just curious, what's your feeling about these tax proposals since we're at the tax deadline at the moment, so that's the focus? Are you familiar with the differing ways that the budget would know settled with taxes and do you have an opinion on that?
NEW SPEAKER: Absolutely I do. And I must tell you that I'm -- I'm very liberal leaning, I'm very peace and social justice, and I feel that Paul Ryan's attempt to reform the taxes in the country are over bearing. I think they are -- there's a lot of fear mongering going, and there's a lot of disingenuous information that's going out to the American people.
ST. JOHN: Okay, Serena, thank you for your comment, and we did have another comment here from someone who was cashed about taxes. But it looks like we've come to the end of the segment. So thank you so much for calling on that, though, this is such an important topic, and such a turning point for the nation. We'll come back, and we'll be talking about trouble south of the border, coming up next here on KPBS.