"President Obama has no plan to reduce the deficit, let alone pay down the debt."
Connie Mack on Thursday, September 6th, 2012 in an op-ed in 'The Hill'
Connie Mack says Obama has no plan to reduce the deficit or pay down the debt
U.S. Rep. Connie Mack IV, R-Fort Myers, has made runaway government spending one of his top campaign themes.
Mack, who is challenging Democrat U.S. Sen. Bill Nelson, recently took aim against President Barack Obama in an op-ed in The Hill.
"Under President Obama, we’ve had four consecutive years of trillion dollar deficits … ," Mack wrote on Sept. 6, the date that Obama spoke at the Democratic National Convention. "President Obama has no plan to reduce the deficit, let alone pay down the debt. His idea of a solution is to raise taxes—even though out-of-control spending that is the key driver of debt—and he ironically calls this a ‘balanced approach.’"
Was Mack correct to say that "Obama has no plan to reduce the deficit, let alone pay down the debt?"
Obama’s plan to reduce the deficit
Obama released his budget proposal in February 2012, which he said achieved $4 trillion deficit reduction. The plan included discretionary spending caps, reductions in the growth of defense spending and reforms to Medicare, Medicaid, and other health programs over 10 years.
The Center for Budget and Policy Priorities,a left-leaning think tank, estimated that the president’s combination of spending cuts and tax increases would lower deficits by $3.8 trillion over a decade. That total included the $1 trillion in reductions that the president and Congress agreed to in 2011.
According to the center, about 46 percent would come from higher revenues; about 54 percent of the reductions would come through spending cuts.
To raise revenues, families making over $250,000 a year would pay more, but Obama also has an extensive list of tax breaks he would eliminate. They can be arcane: For example, Obama would repeal last-in, first-out (LIFO) method of accounting for inventories.
On the spending side, the president proposes $580 billion in cuts to a number of programs that range from agricultural subsidies to rental assistance to airport construction.
The Obama campaign claims that over 10 years, it would trim deficits by $4 trillion. Some have questioned that estimate, though, so we rated their $4-trillion claim Half True. We noted that different think tanks and federal agencies have different methods for estimating deficit reduction and that Obama’s plan counts savings that Congress agreed to last year. (Read our previous fact-check for more details on these differing methodologies.)
The bipartisan Committee for a Responsible Federal Budget has said that Obama’s plan is a good start but too modest in its goals.
Obama takes the right approach with "a gradual and thoughtful deficit reduction plan," the committee wrote in recent report. "However, the proposals in the President’s budget do not go far enough to put the debt on a clear downward path over the next ten years and to control the long-term debt trajectory by reining in the growth of health care and retirement costs."
Still, while experts might differ on how much Obama’s plan reduces the deficit, it is a plan. That’s counter to Mack’s assertion that Obama doesn’t have one.
What happens to debt under Obama’s plan
There’s a critical distinction between the deficit and the debt. The deficit is the difference each year between the money the government takes in (taxes, income and fees) and what it spends (defense, Social Security, Medicare and every other government spending program). The debt is all the money the government has borrowed. In other words, it’s the accumulation of those deficits.
So while Obama reduces the deficit, because he’s not eliminating it, he’s not really chipping away at the overall debt.
We contacted several budget experts who work for groups across the political spectrum about Obama’s plans and Mack’s statement that "President Obama has no plan to reduce the deficit, let alone pay down the debt."
Some economists told us Obama can make a credible case that he’s reducing debt if he’s reducing its proportion to the size of the overall economy, usually measured as a ratio of debt to the Gross Domestic Product, or GDP, which is a measure of the overall economy.
Jim Horney of the left-leaning Center on Budget Policy and Priorities used the analogy of a family: The key isn’t the amount of money a family owes on their monthly mortgage, but how much that mortgage is as a proportion of a family’s income. That shows whether the family can afford the monthly bill.
Our fiscal challenges are so great that it’s very unlikely we could balance the budget anytime soon, said Jason Peuquet, research director for the Committee for a Responsible Federal Budget. "The best we can hope for over the next 10 to 20 years is to first stabilize debt as a share of the economy and then put it on a downward path to levels that are safer for the economy," he said.
The bipartisan Committee for a Responsible Federal Budget’s analysis of Obama’s plan states his budget would result in debt levels rising from 73.5 percent of GDP in 2012 up to a peak of 78.6 percent in 2014 and then gradually falling to 75.1 percent by 2022.
Beyond a decade, Obama’s plan would allow debt to rise as a share of the economy as Baby Boomers retire, spiking up expenditures for Social Security and Medicare and due to rising healthcare costs, Peuquet said. And that’s a problem.
Joshua Gordon, policy director of the Concord Coalition, a group that advocates reducing the debt, said he would prefer a lower debt-to-GDP ratio than Obama’s plan.
However, "it is incorrect to say that the Administration does not have a plan to reduce deficits and stabilize the debt. And stabilizing the debt is an appropriate goal for the nation -- since debt is projected to keep growing more quickly than the economy -- which would be detrimental for economic growth."
Some of our experts were more critical of Obama’s plan.
J.D. Foster of the conservative Heritage Foundation said Obama’s plan was not credible. As an example, Obama’s plan claims reductions associated with winding down the wars in Iraq and Afghanistan, but that’s only a savings if we assume the original policy was to continue the wars indefinitely.
"In no year does the government run a surplus, and the deficits are rising steadily toward the end of the 10-year horizon, so it is then axiomatic to say the president lacks a plan to reduce the debt. Reducing the debt requires a budget surplus," Foster said.
Chris Edwards of the libertarian Cato Institute, said Obama has "no plan" to pay down the debt if we’re referring to total accumulated debt over 10 years. And regarding the deficit, "the main ‘plan’ that shrinks the projected deficit over the next decade is that federal revenues are expected to rise as the economy is projected to recover in coming years," he said.
"Both candidates need to do a much better job of providing details of proposed spending reforms and cuts so that America does not go the way of Greece."
We sent an email to Mack’s campaign to ask if he had documentation he wanted us to review and did not get a response.
Mack said that "President Obama has no plan to reduce the deficit, let alone pay down the debt."
Obama has presented a plan that reduces the deficit. Analysts have debated whether it goes far enough. But it is a plan.
However, while the plan reduces deficits, it doesn’t eliminate them. And that means the sheer amount of the debt continues to grow. Obama’s defenders would say that his plan stabilizes the debt and makes the debt smaller in comparison with the size of the overall economy. But this is not the same thing as reducing the debt itself.
So Mack has a point that Obama’s plan doesn’t reduce the debt in dollars. He’s wrong that Obama has no plan to reduce the deficit.
We rate this claim Mostly False.
Published: Wednesday, September 19th, 2012 at 5:38 p.m.
PolitiFact, "Obama says his budget plan will cut deficits by $4 trillion,"Sept. 7, 2012
The White House, The Budget message of the President, Feb. 13, 2012
The Hill’s Congress Blog, "Making the case against four more years," Sept. 6, 2012
Center for Budget and Policy Priorities, How Does the Obama Budget Do in Meeting Deficit Reduction Goals, February 16, 2012
The Committee for a Responsible Federal Budget, Analysis of the FY 2013 mid-session review, July 27, 2012
U.S. Office of Management and Budget, Mid-session review Fiscal Year 2013, July 27, 2012
Interview, J.D. Foster, Senior Fellow in the Economics of Fiscal Policy at The Heritage Foundation, Sept. 12, 2012
Interview, Jason Peuquet, Research Director, Committee for a Responsible Federal Budget, Sept. 12, 2012
Interview, Joshua Gordon, policy director for the Concord Coalition, Sept. 12 , 2012
Interview, Chris Edwards, is the director of tax policy studies at Cato and editor of www.DownsizingGovernment.org,Sept. 12, 2012
Interview with Jim Horney, vice president for federal fiscal policy at the Center on Budget and Policy Priorities, Sept. 12, 2012.
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