Skip to main content

As I'm sure you've heard, Obama will announce a spending freeze for discretionary spending. This is understandably disappointing to many progressives. Billions of dollars  for education, infrastructure, and health care will not be provided. Bridges will fall into disrepair. Schools will be underfunded and understaffed. Fewer underprivileged people will get the assistance for housing that they need.

However, despite these unfortunate realities, this is a good decision.

More below the fold.

Our government has been on a long and unsustainable road to financial insolvency. We started n this road during the 'fiscally conservative' Reagan administration, where taxes were slashed, yet more programs were created, and military spending increased exponentially. Apparently, Ronald Reagan and his term of supposed experts could not understand that if you cut taxes, and increase spending, there's going to be deficits. And if you keep cutting taxes, and keep increasing spending, there'll be more deficits. And if you keep doing that for decades and decades, you'll go bankrupt. It is simple math.

Republicans don't seem to understand this, however. In their world, you can cut taxes as much as possible, and keep starting more wars, and giving away more no bid contracts, and keep funding more useless programs, and somehow everyone will be happy and we'll just cut taxes into surpluses.

Certain progressives, unfortunately, also have a similar belief. If you keep spending more, and keep taxing the rich, eventually, you'll become solvent. Despite the wishes of many, this is not correct. Our budget deficits for the next decade are in the order of hundreds of billions. Taxing the rich, while an important step in the alleviation of our deficit crisis, will not solve it alone, or come anywhere near alone.

In FY 2007, the top 5% payed 60% of the income taxes. The tax rate on this top 5% is around 33% and up. The federal income tax brought in around 1 trillion in FY 2007. Even if we doubled the income tax on the top 5% (making them pay around 70% in federal income tax alone, not taking into account payroll, state and local taxes), that would still give us 'just' 600 billion extra. It sounds like a lot of money. But it's not enough.

 title=

Even if this impossible tax hike passed, we would still likely be in a deficit every single year for the next decade and beyond. And as I'm sure you know, thanks to the nature of this country, such a tax hike will never occur. Ever.

So, keeping that in mind, how do we balance the budget? We will need to either raise taxes on the middle class, or cut spending. As I'm sure many of you know, the former option is not very appealing, and would be completely catastrophic politically for at least the next three years and probably beyond. It's off the table for now.

Keeping that in mind, let's explore the second option. Spending cuts. The first, and most obvious place, is the military. Our combined spending on the military, DHS and the wars nears a trillion dollars. It's a bloated, unnecessary, mess. However, we are fighting two wars currently. While I disagree on whether we should be fighting them, the fact is, we are, and in the case of Afghanistan, we'll likely be fighting there for years and years to come.

Keep in mind the political realities of this country as well. The GOP and other military apologists in the Democratic party would spin it as Obama hating the troops, wanting them dead, and making Americans unsafe, and it would be effective with the American people. It is an inconvenient truth (heh) but a truth it is. We have to take military cuts off the table for now.

How about entitlement cuts? Well, it would certainly help the deficit more than any other cut or tax hike, but it would leave millions of poor and elderly out on the streets and dying, and it would completely devastate our society. That's off the table for, well, basically, eternity.

So that leaves us with one more area. Discretionary spending. Yes, much of this is extremely important, and I recognize it's importance. Money for infrastructure, education, energy independence, national parks programs, labor unions, green jobs, community investment, and thousands of other projects that greatly enhance our country.

But despite the benefits that these projects and programs provide to our country and our communities, many of them are overfunded, not vital, wasteful, or ineffective. Much of our discretionary spending is just throwing money at a problem.

For example, as important as education funding is, providing a failing school with a renovated building, computers for every student, pay hikes for teachers, and state of the line, well, everything, will not solve the problem alone, and we cannot pretend it will.

So to get back to my original point, when you look at all of the various options for reducing the deficit, it is fairly clear which one we can start with in the near term, and that is discretionary spending. Obama and his advisers realize this, and so they have taken action.

That action, though, is not even as radical as some on here seem to be indicated. It is not a budgetary cut. It is a budgetary freeze. All it does is ensure that no increases in our already bloated discretionary budget will occur. It is a simple, efficient and obvious way to make certain that our nation will begin addressing the dire and looming threat of our unsustainable deficits, and debt.

(sorry if this is incoherent, it's my first diary)

Originally posted to Raineee on Mon Jan 25, 2010 at 06:24 PM PST.

Poll

What do you think of Obama's decision to freeze discretionary spending?

19%22 votes
10%12 votes
15%17 votes
8%9 votes
10%12 votes
27%31 votes
7%8 votes

| 111 votes | Vote | Results

EMAIL TO A FRIEND X
Your Email has been sent.
You must add at least one tag to this diary before publishing it.

Add keywords that describe this diary. Separate multiple keywords with commas.
Tagging tips - Search For Tags - Browse For Tags

?

More Tagging tips:

A tag is a way to search for this diary. If someone is searching for "Barack Obama," is this a diary they'd be trying to find?

Use a person's full name, without any title. Senator Obama may become President Obama, and Michelle Obama might run for office.

If your diary covers an election or elected official, use election tags, which are generally the state abbreviation followed by the office. CA-01 is the first district House seat. CA-Sen covers both senate races. NY-GOV covers the New York governor's race.

Tags do not compound: that is, "education reform" is a completely different tag from "education". A tag like "reform" alone is probably not meaningful.

Consider if one or more of these tags fits your diary: Civil Rights, Community, Congress, Culture, Economy, Education, Elections, Energy, Environment, Health Care, International, Labor, Law, Media, Meta, National Security, Science, Transportation, or White House. If your diary is specific to a state, consider adding the state (California, Texas, etc). Keep in mind, though, that there are many wonderful and important diaries that don't fit in any of these tags. Don't worry if yours doesn't.

You can add a private note to this diary when hotlisting it:
Are you sure you want to remove this diary from your hotlist?
Are you sure you want to remove your recommendation? You can only recommend a diary once, so you will not be able to re-recommend it afterwards.
Rescue this diary, and add a note:
Are you sure you want to remove this diary from Rescue?
Choose where to republish this diary. The diary will be added to the queue for that group. Publish it from the queue to make it appear.

You must be a member of a group to use this feature.

Add a quick update to your diary without changing the diary itself:
Are you sure you want to remove this diary?
(The diary will be removed from the site and returned to your drafts for further editing.)
(The diary will be removed.)
Are you sure you want to save these changes to the published diary?

Comment Preferences

  •  Tip Jar (17+ / 0-)

    What matters is not wealth, or status, or power - but how well we have loved, and what small part we have played in bettering the lives of others. - Pres. Obama

    by Raineee on Mon Jan 25, 2010 at 06:24:58 PM PST

  •  we should nationalize the banks (1+ / 0-)
    Recommended by:
    Floande

    and use their money to pay off our debts. Plus put all the bankers in jail while we're at it. This is bullshit!

  •  Quit the war. Tax the rich. (13+ / 0-)

    My six words just closed the fiscal gap.

    Gentlemen, you can't fight in here! This is the War Room!

    by bigtimecynic on Mon Jan 25, 2010 at 06:31:36 PM PST

  •  freeze will be armor against Gorn attacks when (3+ / 0-)
    Recommended by:
    crankyinNYC, MRA NY, EdgedInBlue

    sweet sweet reconciliation HCR bill passes. (fingers crossed!) :)

    I ♥ President Barack Obama

    by ericlewis0 on Mon Jan 25, 2010 at 06:32:54 PM PST

  •  If cuts are made to programs (1+ / 0-)
    Recommended by:
    happymisanthropy

    that would mitigate global warming, they endanger America far worse than cuts in military spending.

    Same thing for infectious diseases.

    A narrow view of national defense is liable to kill us.

    [message deleted] - Barack Obama

    by Bob Love on Mon Jan 25, 2010 at 06:34:25 PM PST

  •  We cannot ignore the specter of hyperinflation (0+ / 0-)

    if we keep spending the way we are going.  All we need on top of everything else is a monetary crisis to make what little money I am making now suddenly worth less and less every month.

    We need to think about the long term implications of the current spending.  While we need people to have jobs, the government cannot become the employer of 200 million people, the private sector needs to be energized to start creating jobs again.  Overspending by the federal government needs to be at least on the table as an issue of concern.

    •  I would have to agree, unfortunately (0+ / 0-)

      And for the rest, I so wish military spending were on the table, more than anything you can imagine, but fact is it's a political nightmare, or at least currently.

    •  We can indeed ignore the specter (3+ / 0-)
      Recommended by:
      decisivemoment, HeavyJ, Minerva

      of hyperinflation. We have had low-single digit inflation for two decades. Maybe we should worry about hyperinflation once we actually start seeing inflation.

      I'm in the pro-Obama wing of the Democratic Party.

      by doc2 on Mon Jan 25, 2010 at 06:38:57 PM PST

      [ Parent ]

    •  With our economy the way it is (2+ / 0-)
      Recommended by:
      jabney, scotths

      Hyperinflation -- at least the mid 1970s British version (20 percent or so) -- would be a good thing right now.  It would dramatically reduce the cost of all dollar-denominated debts, and it would reduce the value of the dollar and finally cut back on the flood of imports and make American exporters competitive again.

    •  Yeah, I'm super concerned about hyperinflation (1+ / 0-)
      Recommended by:
      jabney

      As actual unemployment hovers around 18%.

      And cutting government spending is wicked invigorating to the private sector. Grover Norquist told me so.

    •  Inflation has to be high before out of control (0+ / 0-)

      We have little to none and we don't seem to be looking at deflation. We already know we'll see inflation when the interest rates start rising. And if we start earning more it may rise a bit as well. But there are so many measures to keep it in check between here and hyperinflation, that notion is more superstition than fact.

  •  So blow the whole budget on DoD and spiraling... (1+ / 0-)
    Recommended by:
    happymisanthropy

    ...healthcare entitlements for a change.

    Change you can believe in, that is!

    This'll bring all those youth voters back out in November!

    There is no planet B

    by Minerva on Mon Jan 25, 2010 at 06:41:25 PM PST

  •  Why we have a huge deficit? (0+ / 0-)
    1. Social Security is only funded by a tax on the first $102,000 of your income so the rich don't get taxed causing a huge shortage in revenue

    2.The inherent inefficiency of Medicare and Medicaid which probably waste over $300 billion a year in tax payer dollars.

    http://newpapyrusmagazine.blogspot.c...

    1. Two foreign wars now costing more that $180 billion annually.

    That's why we have a huge deficit. If we don't address those three fundamental problems then a spending freeze on other budget items is like shuffling chairs on the Titanic!

    Marcel F. Williams

    •  and we are? (0+ / 0-)

      The health care plan will attempt to address the inefficiencies in Medicare and there are plans in place to wind down the wars. Hopefully taxes will be increased on the wealthy as well.

      I suspect a program like cap and trade which forces energy producers to spend money without funneling though the federal government could be helpful in stimulating the economy without increasing spending as well.

  •  I suggest reading other articles on this (3+ / 0-)
    Recommended by:
    deaniac83, Elise, EdgedInBlue

    subject.  Money won't be cut.  And only a small portion of the money would be subject to the freeze.

    "Nothing in all the world is more dangerous than sincere ignorance and conscientious stupidity." --M. L. King "You can't fix stupid" --Ron White

    by zenbassoon on Mon Jan 25, 2010 at 06:50:12 PM PST

    •  $447B - right? (1+ / 0-)
      Recommended by:
      EdgedInBlue

      and how did we arrive at this conclusion:

      Billions of dollars  for education, infrastructure, and health care will be cut. Bridges will fall into disrepair. Schools will be underfunded and understaffed. Fewer underprivileged people will get the assistance for housing that they need.

      Didn't Obama just increase infrastructure spending and spending for education - among other things?

      Please help StopRushLimbaugh. Because hate should not be profitable.

      by marabout40 on Mon Jan 25, 2010 at 06:55:20 PM PST

      [ Parent ]

  •  Republican opinions shoudl be irrelevant (1+ / 0-)
    Recommended by:
    TERM LIMITS

    Obama is choosing to perpetuate the Military Industrial Complex at everyone else's expense.

    BTW, your statements about income are not valid about wealth. Bill Gates pays little if no income taxes.

  •  Cut all the subsidies the govt pays to big (3+ / 0-)
    Recommended by:
    Noodles, PsychoSavannah, scotths

    corporate interests like the oil companies that get $15 to $35 billion per year, corn growers and other big agriculture interests that get so much money, corn is sold for less than it costs to grow, and that pay farmers to not grow crops, etc., etc., etc.

    If you really dig through the budget with a magnifying glass, you could probably find $50 billion + of pure corporate giveaways. Cutting all that would be just fine by me.

    And letting all the Bush tax cuts expire should start the deficit rapidly declining. And a war tax might not be a bad idea to pay specifically for the $1 trillion Iraq war - call it the "George W. Bush Slam Dunk Iraq war tax".

  •  It's a good idea when Krugman says so (1+ / 0-)
    Recommended by:
    aggieric

    Until then, I think it's idiotic.

  •  Your first paragraph concedes too much (0+ / 0-)

    On what basis do you think we'll have any of those problems because of this announcement?

    Enrich your life with adverbs!

    by Rich in PA on Mon Jan 25, 2010 at 07:22:51 PM PST

    •  I'm new at this (0+ / 0-)

      I realize now that my messaging, particularly in the first paragraph, is off base for this situation.

      However, I would still say it is somewhat necessary to do some cuts that would do what I describe, or at least if we don't cut defense spending or raise taxes (possibly on the middle class) in around 4-6 years.

  •  "...such a tax hike will never occur. Ever."? (0+ / 0-)
    The tax rate for those making a mil or so during Eisenhauer was 90%.

    Just saying.

    Also we can increase capital gain taxes from 15% to what working people pay. That's a pile of cash. And we can increase the pittance that corporations are paying in taxes. And we can close their loop[holes. Plus we can charge a transaction tax for financial trades. And we can expand medicare and social security taxes beyond the capped income at which it is levied now.  

    And if you really want to get exotic we can legalize pot and tax the shit out of it.

    There's a whole lot that can be done with the tax structure before you start freezing funds to meet basic people needs. It's a cop out to say it can't be done -- especially "ever", IMHO.

    "There's no housing bubble..." - Fed Chief Ben Bernanke, 10/27/2005

    by chuco35 on Mon Jan 25, 2010 at 07:38:38 PM PST

  •  You'll never get on the rec list with (0+ / 0-)

    this kind of common sense.  

    See everything, overlook a great deal, improve a little. John XXIII

    by keeplaughing on Mon Jan 25, 2010 at 07:41:30 PM PST

  •  Please be honest. (0+ / 0-)

    Your statistic is highly misleading:

    In FY 2007, the top 5% payed 60% of the income taxes. The tax rate on this top 5% is around 33% and up. The federal income tax brought in around 1 trillion in FY 2007. Even if we doubled the income tax on the top 5% (making them pay around 70% in federal income tax alone, not taking into account payroll, state and local taxes), that would still give us 'just' 600 billion extra.

    You conspicuously fail to tell us how much of the income in this country is collected by the top 5%.  If it's around 60% of the income, then shouldn't they be paying more taxes?  Given the extreme levels of income disparity in this country (e.g., the top 1% of wage earners bring in 440 times the average income of the bottom 50%), how can we know whether your statistic is fair or not without looking at individual tax rates?

    Further, although the top federal tax rate is "around 33% and up", most of the very wealthy do not in fact pay that much.  In fact those who make less pay a larger fraction:  social security maxes out for those making around $100k, dropping the actual rate by >= 6.5% for those who make more.

    And tax structures are arranged to benefit the wealthy: although Warren Buffet has an income of over $40 million/year, he has commented that his effective taxation rate is 17.7% while his secretary pays 30%.  Tax structures on investments have substantially lower rates than wages; those with very high incomes often receive much of their income as investments rather than direct income.

    These two facts invalidate the conjecture of your last sentence, that doubling the income tax on the wealthiest would bring their rates up to 70%.  The tax rates in fact used to be much higher than this:  in my adult lifetime they were over 70%, and they have been over 90%.

    Back here in reality the wealthiest 10% bring home about 48.5% of the nation's reported income.  Is there any reason they shouldn't pay substantially more than 48.5% of the income taxes in this country?  Is there any reason they shouldn't pay 60% - 70% of aggregate income taxes?

  •  Is he playing 4D chess again? (0+ / 0-)

    He has just cut off his own options for the 2nd half of his presidency. He has found one place to cut, the place of least leverage (although most vulnerability).

    He could have announced a freeze on military spending, or announced that social security and medicare are entitlements but not cast in stone.

    He could look at where spending is for value and where it's not. But no, just freeze everything here, and everywhere else, turn a blind eye.

    Yep. That's got to be the best solution.

  •  Nations can handle debt impossible for us to (0+ / 0-)

    For people or businesses. Do you have any idea what out national debt was after WWII as a percentage of GDP. Over 120%. Yes, that's everything we were worth plus nearly 25% on top of that. But did it bankrupt us?? Did we have the greatest depression of them all?

    No. In a little more than a decade we were the first superpower the world has ever seen. We generated wealth that has nearly been unsurpassed even by groups of nations to this day. Oh yeah, by the way, that debt? It was arguably paid down likely before you ever spent a dime in taxes.

    And how did we do it? Tax investment. Yes, we spent more money! On an interstate highway, Hoover dams, a Marshal plan, public universities, all things they still pay off to this day. We started a space program which generated arguably more money than any other government project ever (hint: the microprocessor likely would not have existed if not for the Apollo program. And that's only one spin off that's generated far more billions than we put into it).

    That is why Obama's decision was as bad as the Supreme Court's ruling earlier in the week.

    Nations with stable governments, a trend toward growth, controlled inflation or deflation can absorb high deficits people or businesses can. Smart government policies expand the tax base so, when times are good, we pay fewer taxes yet take in more revenue than goes out  and recover from them if done prudently.  That does include things like pay-go but plenty of tax money got re-invested during the upswing. And as we saw, FDR's attempt to fight deficits in 1937 restarted the depression and lost more over 70 seats in 1938. We likely have a decade to recover before the debt will start to seriously impact our nation. We have time to pay it off once we get returns.

    It's a horrible, short sighted decision. He destroys any inspiration he'd given so much of his activist base just a little over a year ago. There won't be much wind left in our sails. And after we built 2 sweeps in 2006 and 2008, Washington still doesn't get it. We will have to walk away from health-care I suspect, because without the money for a tax investment in the system, it will not work. Whatever they do will save pennies on the dollar when we could have been generating hundreds.

Subscribe or Donate to support Daily Kos.

Click here for the mobile view of the site