Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
Netflix - FAANG a Buy, Sell or Hold?, CME Black Swans Chasing Value in Biotech Stocks - 5th Aug 21
We Will See SPX 4600 In 2021 - 5th Aug 21
Revisiting The Excess Phase Stock Market Peak Pattern - 5th Aug 21
Dramatic Divergence between US and European Stock Markets - 5th Aug 21
Budgie Clipped Wings, How Long Before Flight Feathers Grow Back After Clipping, 4 Week Update - 5th Aug 21
Lisa Su's AMD Stock Price Rockets to the Moon! $200 Target, How to Buy for Under $78 - 4th Aug 21
Gold Jumps for Joy Only to Hit the Ceiling… Hard - 4th Aug 21
Is Wise Really The King of Online Money Transfer Services? - 4th Aug 21
Tips for Investing Your Money in Stocks - The Ultimate Guide - 4th Aug 21
Gold is the Key to Financial Wisdom - 4th Aug 21
How to Trade Binance Vanilla Options for the First Time on Bitcoin Crypto's - 2nd Aug 21
From vaccine inequality to economic apartheid - 2nd Aug 21
Stock Market Intermediate Top Reached - 2nd Aug 21
Gold at a Crossroads of Hawkish Fed and High Inflation - 2nd Aug 21
Bitcoin, Crypto Market Black Swans from Google to Obsolescence - 1st Aug 21
Gold Stocks Autumn Rally - 1st Aug 21
Earn Upto 6% Interest Rate on USD Cash Deposits with Binance Crypto Exchange USDC amd BUSD - 1st Aug 21
Vuze XR VR 3D Camera Takes Near 2 Minutes to Turn On, Buggy Firmware - 1st Aug 21
Sun EXPLODES! Goes SuperNova! Will Any planets Survive? Jupiter? Pluto? - 1st Aug 21
USDT is 9-11 for Central Banks the Bitcoin Black Swan - Tether Un-Stable Coin Ponzi Schemes! - 30th Jul 21
Behavior of Inflation and US Treasury Bond Yields Seems… Contradictory - 30th Jul 21
Gold and Silver Precious Metals Technical Analysis - 30th Jul 21
The Inadvertent Debt/Inflation Trap – Is It Time for the Stock Market To Face The Music? - 30th Jul 21
Fed Stocks Nothingburger, Dollar Lower, Focus on GDP, PCE - 30th Jul 21
Reverse REPO Market Brewing Financial Crisis Black Swan Danger - 29th Jul 21
Next Time You See "4 Times as Many Stock Market Bulls as There Are Bears," Remember This - 29th Jul 21
USDX: More Sideways Trading Ahead? - 29th Jul 21
Waiting On Silver - 29th Jul 21
Showdown: Paper vs. Physical Markets - 29th Jul 21
New set of Priorities needed for Unstoppable Global Warming - 29th Jul 21
The US Dollar is the Driver of the Gold & Silver Sectors - 28th Jul 21
Fed: Murderer of Markets and the Middle Class - 28th Jul 21
Gold And Silver – Which Will Have An Explosive Price Rally And Which Will Have A Sustained One? - 28th Jul 21
I Guess The Stock Market Does Not Fear Covid - So Should You? - 28th Jul 21
Eight Do’s and Don’ts For Options Traders - 28th Jul 21
Chasing Value in Unloved by Markets Small Cap Biotech Stocks for the Long-run - 27th Jul 21
Inflation Pressures Persist Despite Biden Propaganda - 27th Jul 21
Gold Investors Wavering - 27th Jul 21
Bogdance - How Binance Scams Futures Traders With Fake Bitcoin Prices to Run Limits and Margin Calls - 27th Jul 21
SPX Going for the Major Stock Market Top? - 27th Jul 21
What Is HND and How It Will Help Your Career Growth? - 27th Jul 21
5 Mobile Apps Day Traders Should Know About - 27th Jul 21
Global Stock Market Investing: Here's the Message of Consumer "Overconfidence" - 25th Jul 21
Gold’s Behavior in Various Parallel Inflation Universes - 25th Jul 21
Indian Delta Variant INFECTED! How infectious, Deadly, Do Vaccines Work? Avoid the PCR Test? - 25th Jul 21
Bitcoin Stock to Flow Model to Infinity and Beyond Price Forecasts - 25th Jul 21
Bitcoin Black Swan - GOOGLE! - 24th Jul 21
Stock Market Stalling Signs? Taking a Look Under the Hood of US Equities - 24th Jul 21
Biden’s Dangerous Inflation Denials - 24th Jul 21
How does CFD trading work - 24th Jul 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Obama's Doomed Deficit-Reduction Plan More Political Than Practical

Politics / US Debt Sep 20, 2011 - 09:10 AM GMT

By: Money_Morning


Best Financial Markets Analysis ArticleDavid Zeiler writes: With the scars from the summer's budget battles still fresh, U.S. President Barack Obama yesterday (Monday) unveiled a deficit-reduction plan that is aimed more at winning votes in the 2012 election than it was to win support from congressional Republicans.

The president's deficit reduction plan includes approximately equal amounts of spending cuts and revenue increases to reach its target of $3 trillion over the next decade.

The proposals won't pass - and even if they did, they probably don't go far enough to fix the ailing U.S economy, said Martin Hutchinson, a Money Morning columnist and former global merchant banker who's an expert on how the political process impacts the world economy.

"Most of Obama's proposals are bait for his left wing," Hutchinson said in an interview yesterday. "However, reducing deductions for such things as home mortgage interest and charities, if done in moderation (say, make them deductible only to a 20% tax rate), could yield a lot of income and might even do the economy good, lessening wasteful resources devoted to housing and the nonprofit sector."

President Obama's spending cuts - unveiled in a morning speech - included:

•$1.1 trillion saved from winding down the wars in Iraq and Afghanistan.
•$248 billion from Medicare savings (mostly from reducing overpayments).
•And $430 billion from savings on interest payments.

Revenue-increase proposals include:

•An expiration of some Bush-era tax cuts expire for those making more than $250,000, a move that would yield $800 billion,
•Capping certain exemptions, such as itemized deductions for that same high-income group, which would generate $400 billion.
•A new minimum tax on millionaires to make sure the nation's hyper-wealthy pay at least the same tax rate as average wage earners.
•And closing tax loopholes for certain wealthy individuals and large corporations to bring in another $300 billion.

A Doomed Deficit-Reduction Plan?
Mimicking the strategic obstinance employed by the Republicans during the summer debt-ceiling debate, President Obama said he would "veto any bill that changes benefits for those who rely onMedicarebut does not raise serious revenues by asking the wealthiest Americans and biggest corporations to pay their fair share."

Republicans, who have not backed off their promise to reject any deficit-reduction plan that includes revenue increases, said President Obama's proposals would not help the congressional joint "supercommittee" charged with developing a plan to reduce the deficit by at least $1.5 trillion.

"Veto threats, a massive tax hike, phantom savings, and punting on entitlement reform is not a recipe for economic or job growth - or even meaningful deficit reduction. The good news is that the Joint Committee is taking this issue far more seriously than the White House," Senate Minority Leader Mitch McConnell, R-KY, said in a statement.

By the terms of the deal reached in the debt-ceiling compromise in August, the 12-member Joint Committee has until Nov. 23 to submit its proposal to reduce the deficit. That proposal then must be passed by Congress by Dec. 23, or a series of automatic cuts will go into effect in 2012.

That scenario would result in an arbitrary 2% budget cut to all agencies of the federal government, with a few exceptions - such as Social Security, Medicaid and civilian and military retirement.

Populist Appeal
Although President Obama obviously would prefer that Republicans and Democrats alike on the committee adopt his deficit-reduction plan, his speech yesterday made it clear that he wants to score political points regardless of the outcome. That's why his speech touched on populist themes that would appeal to working-class voters.

"Middle-class taxpayers shouldn't pay a higher tax rate than millionaires and billionaires," President Obama said. "I reject the idea that asking a hedge fund manager to pay the same tax rate as a plumber or teacher is class warfare. I think it's just the right thing to do."

He also devoted part of his speech to making congressional Republicans appear unreasonable.

In a reference to Speaker of the House John Boehner, R-OH, President Obama stated that "the Speaker says we can't have it "My way or the highway,' and then basically says "My way - or the highway.'That's not smart. It's not right. If we're going to meet our responsibilities, we have to do it together."

Daniel Gross, in his "Contrarian Indicator" column on Yahoo! Finance, said that President Obama - by unveiling a plan aimed at resonating with middle-class America - is trying to capitalize on sentiment that favors his position.

"The public tends to favor preserving entitlements in their existing form, cutting spending, and raising taxes on the wealthy and corporations," Gross wrote. "Can President Obama translate those [deficit-reduction-plan] policy preferences into political preferences?"

Source :

Money Morning/The Money Map Report

©2011 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email:

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in