By Nick Mann | 11 April 2013
US President Barack Obama’s 2014 budget proposal represents a ‘potential bridge’ to reaching political agreement on a long-term fiscal plan, according to former US comptroller general David M Walker.
The budget, which was tabled in Congress yesterday, includes a package of spending cuts, tax reforms and reductions in subsidies. Together they are expected to reduce the US deficit by an additional $1.8 trillion over the next ten years. This comes on top of $2.5trn of deficit reduction measures already signed into law by the president.
In particular, $580bn in additional revenue will come from closing tax loopholes and reducing tax benefits for the wealthy. Another $400bn in savings will come from changing the way the cost of living is calculated when working out the Social Security payments received by senior citizens.
Obama also proposed to save a further $400bn from the Medicare bill by reducing payments to drug companies and care providers and also potentially increasing health care costs for more wealthy people over 65.
Further multi-billion pound savings are proposed by reducing farm subsidies, reforming federal retirement benefits, cutting department budgets and lower interest payments on the federal debt as it begins to fall.
Walker said that, while the Budget fell ‘short in several important ways’ it also represented ‘a potential bridge to a fiscal Grand Bargain’.
‘For the first time, the president formally proposed reforms to Social Insurance and Medicare, which demonstrates a willingness to compromise with Republicans. He also continued to press for more tax revenue, which has to be part of any Grand Bargain.
‘It is a good sign that partisans on both the Right and Left are enraged by elements of the President's budget – after all, there has to be real compromise if we're going to reach a worthwhile deal.’
Walker noted, however, that while the Budget plans would reduce the US debt to 73% of its gross domestic product by 2023, it did not include the type of reforms needed to prevent this from increasing in the future.
In particular, Walker, who is now chief executive of the Comeback America Initiative, called for a gradual increase in the eligibility age for Social Security, ‘genuine and comprehensive’ tax reform by entirely eliminating loopholes in the system and reining in the ‘exorbitantly expensive’ health care system.
‘The president has shown some leadership by presenting a budget that opens the door to more compromise. Now he needs to step forward and finish building a bridge to a Grand Bargain – before the clock runs out on us,’ he added.
In his speech, Obama stressed that he was meeting the Republicans ‘halfway’ on deficit reduction. ‘I don’t believe that all these ideas are optimal, but I’m willing to accept them as part of a compromise – if, and only if, they contain protections for the most vulnerable Americans.’
The leader of the Republicans in the House of Representatives, John Boehner, said that Obama deserved ‘some credit’ for the benefit reforms proposed in his budget. But he added: ‘I would hope that he would not hold hostage these modest reforms for his demand for bigger tax hikes.
‘The president got his tax hikes in January, we don’t need to be raising taxes on the American people. So I’m hopeful in the coming weeks we’ll have an opportunity, through the budget process, to come to some agreement.’
The president’s Budget proposal will now be considered by Congress, although it is unlikely to be passed without revision.
