Analysis: Obama’s Plan To Cut Debt ‘Falls Short’ of Other Savings Plans

President Obama's deficit-reduction plan "falls short" of plans developed by House Republicans and his own fiscal commission, in part because it would not stabilize borrowing, according to an independent analysis released by the Committee for a Responsible Federal Budget on Thursday, the Washington Post reports (Montgomery, Washington Post, 4/21).

Details of Obama's Proposal

Obama's proposal -- which he unveiled during a speech on April 13 -- would cut the federal deficit by $4 trillion over the next 12 years through a combination of spending cuts and tax increases on high-income U.S. residents.

As part of the plan, $480 billion would be cut from Medicare and Medicaid, although Obama promised that it would preserve the programs. Among its proposals, the deficit-reduction plan would:

• Reduce Medicare growth per beneficiary to the growth of gross domestic product per capita plus 0.5%. The federal health reform law aims to hold Medicare spending growth to GDP expansion per capita plus 1%;
• Strengthen the Independent Payment Advisory Board, which was created under the federal health reform law, and require the board to make recommendations to Congress if spending exceeds the new limit;
• Give IPAB more enforcement mechanisms, including an "automatic sequester" to cut spending;
• Implement stronger efforts to curb abuse and fraud in Medicare and Medicaid filings, as well as stronger incentives for hospitals to reduce medical errors and unnecessary readmissions; and
• Encourage pharmaceutical companies to grant rebates to U.S. residents who qualify for both Medicare and Medicaid, known as "dual eligibles" (California Healthline, 4/20).

New Analysis

However, CRFB's analysis of Obama's plan found that it would require the U.S. to borrow an additional $7 trillion over the next 10 years.

In comparison, House Budget Committee Chair Paul Ryan's (R-Wis.) fiscal year 2012 budget resolution (H Con Res 34), which the House approved April 15, would borrow $5.5 trillion. Recommendations offered last December by the president's bipartisan National Commission on Fiscal Responsibility would have the U.S. borrow about $5.3 trillion, CRFB's analysis found.

However, the analysis noted that Obama's FY 2012 budget proposal, which he unveiled in February, would require the U.S. to borrow more -- $9.5 trillion -- through 2021.

According to the Post, CRFB's analysis was based on the series of proposed spending cuts and tax code reforms offered in Obama's plan.

The White House defended Obama's plan, noting that CRFB's analysis used economic forecasts by the Congressional Budget Office that are less optimistic than forecasts by the White House budget office. In addition, the analysis omitted Obama's proposed "debt fail-safe," which would trigger additional spending cuts if deficit goals are not met by 2014 (Washington Post, 4/21).

Obama Concludes Cross-Country Tour To Promote Plan

In related news, Obama on Thursday concluded a three-day, three-state tour to promote his deficit-reduction blueprint in Reno, Nev., where he hosted another town hall-style discussion about the plan's merits and how it differs from Ryan's FY 2012 budget resolution, The Hill's "Blog Briefing Room" reports (Fabian, "Blog Briefing Room," The Hill, 4/21).

At similar town-hall meetings in Virginia and California on Tuesday and Wednesday, respectively, Obama took the opportunity to criticize the House GOP budget resolution, calling it "fairly radical" but not "particularly courageous."

The House GOP proposal -- which Ryan unveiled earlier this month -- would make $6 trillion in federal spending cuts over the next decade and attempt to repeal and defund the health reform law. The plan would provide Medicare beneficiaries with lump-sum vouchers to purchase private insurance and give states fixed annual block grants of $11,000 per Medicaid beneficiary to use as they choose. Although the House has passed the plan, the Democrat-controlled Senate is not expected to approve it (California Healthline, 4/21).

During Thursday's town-hall meeting, Obama reiterated his argument against extending the George W. Bush-era tax cuts for high-income individuals and highlighted its effects on the federal deficit.

According to "Blog Briefing Room," Obama suggested that the cuts would "blow a hole" in the deficit and make it more difficult to fund health care and other domestic programs. "That's not a good option from my perspective," Obama said, adding, "That's not a tradeoff I'm willing to make" ("Blog Briefing Room," The Hill, 4/21).