Paul Jacob

Give the President his due. He rightly notes that the bulk of government is Social Security, Medicare, Medicaid, and what used to be called the War Department. “I guarantee that if we don’t make any changes at all,” said Obama, “we won’t be able to keep our commitments to a retiring generation that will live longer and face higher health care costs than those who came before.” Moreover, he argues against the fantasy that “solving the problem is just a matter of eliminating waste and abuse.”

And yet, Obama doesn’t specify any substantive cuts to entitlements and suggests minuscule cuts to military spending. He objects to proposals to devolve Medicaid to the states, and refers to Ryan’s Medicare reforms as a “voucher” program that will leave some people uncovered. Heartlessly.

Instead, Obama offers to perform the future miracle of bending, like the man of steel, the medical care cost curve. “Our approach,” the president asserts, “lowers the government’s health care bills by reducing the cost of health care itself.”

How? “We will reduce wasteful subsidies and erroneous payments,” he argued, and “drive greater efficiency” and “demand more efficiency and accountability” and “new incentives” and “reduce unnecessary spending while protecting access to the services seniors need.”

In short, “Magic!” The Obama Administration will win the future by cutting the very waste and abuse Obama admitted in his speech wouldn’t be enough to solve the problem. Just wait a decade and see for yourself.

No mention, from Obama, of an obvious truth about health care — that government regulation and subsidy provides much of the reason so many folks cannot afford medical insurance. Instead, the president clings to the canard that Obamacare will accrue to the Treasury $1 trillion in savings over the next ten years and other never-before-successful tinkering will pay off, too.

Obama did mention his opposition to “more than $1 trillion in new tax breaks for the wealthy.”

Funny, that even with all their income tax cuts and tax breaks, the top five percent of income earners paid 59 percent of federal individual income taxes. Half of Americans, roughly, pay no federal income tax.

And then came the corker: “In the last decade, the average income of the bottom 90 percent of all working Americans actually declined. The top 1 percent saw their income rise by an average of more than a quarter of a million dollars each. And that’s who needs to pay less taxes?”

Wow. America’s wealthiest merely “saw their incomes rise”? They didn’t actually do anything for their gains?

Maybe Obama was napping while others were working.

Obama’s idea that taxing the rich more by closing itemization “for the wealthiest 2 percent of Americans” will go a long way to reducing the deficit is belied in the very sentence he advances it, for, as he says, it would “reduce the deficit by $320 billion over ten years.” That might seem like a respectable showing for a first-year reduction, but stretched over ten years? Awfully thin.

Democrats in Congress need to tax their brains, first. (Republicans, too.) Taxing rich folks (and they are folks) at higher rates comes at a cost. It reduces the incentive to invest and to dream up new ways to satisfy consumers’ demands in the market and, in the process, to create jobs.

This is not a myth. It’s simple economics. It’s been known for a long time. We ignore it at our peril.


Paul Jacob

Paul Jacob is President of Citizens in Charge Foundation and Citizens in Charge. His daily Common Sense commentary appears on the Web and via e-mail.