“I am not exaggerating. These are facts.”
— President Obama, April 3, 2012
With President Obama’s speech before the Associated Press on Tuesday, one can say the 2012 presidential contest has begun in earnest. For the moment, we will ignore some of his stylistic bloopers — “the Republicans running Congress right now” ignores the fact that the Senate is still in Democratic hands — and instead concentrate on how the White House backs up some of his claims about the House Republican budget. As usual, we will not judge the politics of the speech — just the facts. In this initial look, we will not award Pinocchios but simply explain how these figures were reached. We will also delve more deeply in other parts of the speech, such as the Medicare portion, later in the week.
“These proposed tax breaks would come on top of more than a trillion dollars in tax giveaways for people making more than $250,000 a year. That’s an average of at least $150,000 for every millionaire in this country — $150,000.”
The House Republican budget includes changes in tax rates, reducing the top rate to 25 percent, and also unspecified loophole closings. That possibly could result in a big tax cut for the very wealthy, but no one really knows because the House Budget Committee is leaving the precise plan up to the tax-writing committees.
But this $150,000 figure (for people with income of more than $1 million) comes just from the impact of making the George W. Bush tax cuts permanent ($105,000) and repealing Obama’s health care law ($46,000 in Medicare and other taxes.) A senior administration official said Obama was assuming that the House Republican tax plan would not cut taxes more for the wealthy, though by White House calculations even eliminating every possible tax break for the wealthy, the lower rate would still result in an additional $107,000 tax break for the wealthy.
Of course, these are just averages. The figures at the higher levels of income are skewed by the tax breaks for the super-wealthy (ie, billionaires), who after all pay a large share of income taxes already.
“If this [Republican] budget became law, by the middle of the century, funding for the kinds of things I just mentioned would have to be cut by about 95 percent. Let me repeat that. Those categories I just mentioned we would have to cut by 95 percent.”
Here, Obama is talking about spending on things such as highway spending, medical research and other items annually appropriated by Congress. This figure is based on a projection by the Congressional Budget Office of the House Republican plan, showing that discretionary and certain mandatory spending would amount to 3.75 percent of the nation’s economy in 2050. If enacted, Obama is correct that it would result in a major reordering of spending priorities. (By way of comparison, today just defense spending amounts to 5 percent of the gross domestic product.)
Obama assumes that under the GOP budget, defense spending would at least stay at 3 percent of the GDP, leaving just peanuts for everything else.
In comparison, the equivalent figure in Obama’s budget, for discretionary and other mandatory spending in 2050, would be 7.8 percent, according to Table 5-1 in the budget’s office’s analytic perspectives volume. The administration official said that Obama’s budget assumes spending sticks to the targets in last year’s Budget Control Act, which would represent a cut of about 5 percent.
Even so, one page before that table (page 58) there is a chart that shows publicly held government debt soaring to above 140 percent of GDP under Obama’s budget.
In any case, making such predictions for 40 years from now is a bit of a fool’s errand, since there are so many variables open to question.
“The income of the top 1 percent has grown by more than 275 percent over the last few decades to an average of $1.3 million a year.”
This is accurate but an interesting sleight of hand. Usually, in tax policy, the top 1 percent (or other income categories) are expressed in terms of the entry point. In other words, to get in the top percent of income, one needs an income of more than $350,000. By using an average, Obama is able to cite a much higher figure.
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