President Obama released an economic growth and deficit reduction plan that he says would reduce the deficit by around $3 Trillion over 10 years. The plan is notable for its call to increase taxes on higher income persons (making over $1 million), reduction of war spending, and a variety of other spending reductions including changes in Medicare payments to certain providers as well as increasing Part B premiums on higher income beneficiaries and increased co-pays for things like home health.
The President's rhetoric today that raising taxes is not class warfare but math is correct. Taxes received as a percent of GDP will have to rise and spending will have to fall if we are ever to have a balanced budget again. I give the President credit for laying out a credible plan with about twice as much deficit reduction as what the Super Committee must identify, while also providing a plan to attempt to increase economic growth. We need to spur the economy in the short run while charting a path to a longer range balanced budget.
I have long preferred to have a Social Security fix sooner rather than later, mainly becasue it must be done some day, there is no guarantee progressives will be in a better position politically later, and most importantly because if we managed to agree to a fix it would work as planned, allowing us to focus on health reform and addressing health care costs which will have many mid-course corrections. My book lays out these arguments in great detail.
However, given the debt limit talks, it is not clear that the House Republicans would vote for any grand compromise in any event. This plan won't pass, but by drawing clear distinctions with Republicans, it may paradoxically make such a compromise more likely down the road. Here's hoping, but I am not holding my breath.