So we have Obama out on the campaign trail trying to drum up support for his economic plan to bring down the deficit. His plan…tax the wealthy.
And the more class warfare he can drum up the better.
The thing is, raising taxes won’t fix the deficit. It’s not enough. Everyone in the financial world knows it’s not enough. Take, for example, the S&P:
Standard & Poor’s on Monday downgraded the outlook for the United States to negative, saying it believes there’s a risk U.S. policymakers may not reach agreement on how to address the country’s long-term fiscal pressures.
“Because the U.S. has, relative to its ‘AAA’ peers, what we consider to be very large budget deficits and rising government indebtedness and the path to addressing these is not clear to us, we have revised our outlook on the long-term rating to negative from stable,” the agency said in a statement.
In an interview with CNBC, David Beers, S&P’s global head of sovereign ratings, said the agency has been “struck increasingly by the difference in how other governments are dealing with fiscal consolidation.”
Little wonder Obama and crew tried their best to persuade the S&P against the warning:
The Obama administration privately urged Standard & Poor’s in recent weeks not to lower its outlook on the United States — a suggestion the ratings agency ignored Monday, two people familiar with the matter said.
Treasury Department officials had been discussing with S&P whether the ratings agency should change its outlook on the United States to “negative” from “stable,” an indication that the country could lose its crucial AAA rating in coming years over its soaring debt levels.
Treasury officials told S&P analysts that they were underestimating the ability of politicians in Washington to fashion a compromise to curb deficits, a Treasury official said. They argued a change in ratings was not needed at this time because the debt was manageable and the administration had a viable plan in the works, the official said.
But S&P analysts told Treasury officials on Friday that they were unmoved — and released a report that expressed skepticism that the political parties could come together on how to bring spending in line with revenue.
The “debt was manageable” and the administration had a “viable plan in the works.”
Yeaaaah. We heard his plan last week, and again yesterday, when he did his best to scaremonger and make absurd assertions:
Businesses will leave our shores…not because of high taxes and regulation but because of POTHOLES? Wow! (and don’t forget about our bridges collapsing)
Did you hear anything in that little speech that would make you believe he will cut spending?
It’s simple really. The Obama plan (if you can call it a plan) relies on higher taxes and the assumption of unrealistic growth. There isn’t enough wealthy to put a dent in the deficit, our economy won’t be growing enough to stave off the debt:
The Obama Framework likely uses the same higher growth assumptions as Obama’s February budget. When CBO re-ran that budget using its own gloomier forecast, it found the Obama plan raised $1.7 trillion less than it claimed. Ryan uses the CBO numbers. So a back-of-the-envelope estimate — adjusted for similar economic assumptions — finds the Obama Framework would only save $3 trillion vs. $6.9 trillion for the Ryan Path over ten years. And nearly 2/3 of Obama’s savings comes from higher taxes (net interest).
And once Obama starts to tax the middle-class (which they will have to do once they realize the wealthy can’t fix the problem) our economic growth will only get worse.
But hey, actually doing something about our deficit and spending might cost votes, that’s all that matters to Obama.
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