NCPA - National Center for Policy Analysis

Obama's Alternative Sequester Plan Is Horribly Unbalanced

March 11, 2013

In the wake of the sequester, President Obama and his administration have claimed that they have a fairer, more balanced budget alternative that calls for serious spending cuts, serious entitlement reforms and goes right at the heart of the long-term deficit problem. But instead of actually addressing the long-term deficit problem, President Obama's plan just addresses its imbalances, says Michael Tanner, a senior fellow at the Cato Institute.

  • The president's plan would replace the $85 billion in sequester cuts with a larger deficit-reduction package that favors spending cuts to tax increases 2:1.
  • The president's alternative would reduce the deficit by cutting spending by $930 billion while raising taxes by $680 billion.
  • An additional $200 billion in savings from not paying interest on a greater amount of debt suggests that the Obama plan would cut an estimated $1.8 trillion over the next 10 years.

Despite these claims, the president's plan is far less balanced than he makes it out to be. As usual, the spending cuts are incredibly vague.

  • Obama calls for $200 billion in discretionary cuts through 2021, split equally between defense and domestic spending, but fails to suggest what exactly would be cut.
  • The plan does agree to adopt a chained Consumer Price Index, which would reduce cost-of-living increases for Social Security recipients.
  • Again, the plan is vague about entitlement reform, other than to say that $400 billion will be saved.

Many of the spending cuts Obama is calling for are actually revenue increases, like the $140 billion in "reduced payments to drug companies," which actually means the drug companies will be paying back rebates to the government. The plan includes similar savings in unemployment insurance and postal service reforms but a large portion of these savings comes from new fees.

After accounting for the fiscal cliff deal in December, which raised taxes by $600 billion, and ObamaCare, which will raise taxes by roughly $1 trillion, adopting Obama's alternative plan to sequestration would result in a total of $2.6 trillion in new taxes or other revenues and only $6 billion in true spending cuts. The president's idea of balanced cuts is apparently a $4.30 tax hike for every $1 in spending cuts.

Source: Michael Tanner, "Treating the Symptoms," National Review Online, March 6, 2013.


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