Can Obama pay for his proposals?

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Obama's Plan Adds Up, Probably

By David Wessel

Let's face it. Hillary Clinton is a wonk. Barack Obama is a phenomenon. As his eloquence and charisma propel his candidacy, scrutiny of the policies behind his speeches will and should intensify.

One challenge is to tally up his tax cuts and spending increases to see whether they're matched by tax increases and spending cuts, as he says they are. To skip to the bottom line: Sen. Obama's probably do.

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Obama's Plan Adds Up, Probably

February 28, 2008; Page A2

Let's face it. Hillary Clinton is a wonk. Barack Obama is a phenomenon. As his eloquence and charisma propel his candidacy, scrutiny of the policies behind his speeches will and should intensify.

One challenge is to tally up his tax cuts and spending increases to see whether they're matched by tax increases and spending cuts, as he says they are. To skip to the bottom line: Sen. Obama's probably do. Capping carbon emissions and auctioning off tradable rights to emit carbon, as he proposes, can raise a lot of money if the next president has the political moxie to implement such a program.

This is a difficult exercise. Campaigns don't provide the precision of presidential budgets. Political strategists counsel candidates to limit details to avoid handing ammunition to opponents. No candidate has an incentive to be more rigorous than the competition. "There is no reward for relative virtue," one campaign veteran quips.

Campaign promises do matter -- sometimes. President George H.W. Bush's vow -- "Read my lips: No new taxes" -- delayed deficit reduction for two years, and breaking that vow may have cost him re-election. But promises aren't always kept. President Bill Clinton ditched his middle-class tax cut with no lasting political harm. It's too soon to know which is the precedent for Sen. John McCain's vow, on ABC's "This Week," that he wouldn't raise taxes under any circumstances.

Sen. Obama isn't specific enough for a spreadsheet-wielding reporter to dissect his plans. Sen. Clinton makes it easier, putting more numbers at the bottom of her fact sheets. Both rely on some squishy savings.

The Clinton universal pre-K education plan, for instance, is financed by "ending the abuse of no-bid contracts and cutting the number of contractors working for the federal government by 500,000 over the next 10 years through an executive order, saving $10 billion to $18 billion a year." In July, Sen. Obama ticked off his agenda for cities and said, "It can't be done on the cheap. It will cost a few billion dollars a year....But we will find the money to do this because we can't afford not to."

Similarities between the two Democrats' proposals and projected savings are greater than their differences; no surprise because they rely on many of the same experts. Sen. Clinton says she'd squeeze enough costs out of the health-care system so she'd need $54 billion a year from elsewhere for her health plan; he says he'd need between $50 billion and $65 billion. Both would spend more on Democratic priorities from clean energy to early-childhood education; both vow to squeeze corporations, particularly those with big foreign operations.

Yet Sen. Obama's fiscal burden is heavier: He offers a $1,000-a-family tax cut to the American middle class that he says will cost $80 billion to $85 billion a year. She doesn't.

He doesn't promise to balance the budget. His vow is to pay for what he's proposing. Is that credible?

Start by extrapolating today's policies: Extend the Bush tax cuts, eliminate the estate tax, patch the alternative minimum tax to prevent it from reaching deeper into the middle class, withdraw troops from Iraq gradually and increase appropriated spending at the economy's growth rate. That would leave a deficit in 2012, based on Congressional Budget Office estimates, of roughly $475 billion, or 2.8% of the economy.

Sen. Obama's proposals to pay for his programs can be grouped into four baskets.

Return the top two tax brackets -- for couples with incomes above $200,000 a year -- to pre-Bush levels, boost the capital-gains and dividend-tax rates to somewhere above 20% but below 28% (he isn't specific), tax estates worth more than $7 million, squeeze more out of corporations. Based on estimates by the Tax Policy Center, a number-crunching joint venture of two think tanks populated by Democrats, this yields better than $100 billion a year in round numbers. He also favors lifting the ceiling on wages subject to the Social Security payroll tax, but isn't specific; aides say that is meant as part of a Social Security fix so it isn't counted in this exercise.

Auction off pollution rights as part of a "cap and trade" response to global climate change. Sen. Clinton backs this; Sen. McCain is sympathetic. It could raise between $50 billion and $100 billion a year net, even after using some money to cushion the blow on Americans who would face higher energy costs.

Wind down the war in Iraq. This is a compared-to-what question that can breed boring arguments over budget base lines. But measured against the starting point described above, this could free up $60 billion or more.

Squeeze other spending by $30 billion or $40 billion a year, including trimming subsidies to the Medicare Advantage private-insurance plans and companies that make student loans and by ending no-bid contracts. This is the standard fare of presidential candidates who are shocked, shocked, shocked to propose savings on the campaign trail only to discover that official budget scorekeepers won't count all the savings from promised efficiencies.

"Those four more than pay for everything he has proposed in both tax cuts and spending increases," says Austan Goolsbee, Sen. Obama's economic adviser. That's plausible, though it can't be verified without more specifics than Sen. Obama's speeches and Web site offer. Mr. Goolsbee says the senator's goal is to finance initiatives with roughly equal proportions of reduced spending and higher revenue.

All this offers a sharp contrast to Sen. McCain, who would extend the Bush tax cuts and enlarge them by cutting corporate-tax rates. He would thus rely on tighter restraints on government spending than Sen. Obama would.

And, in the end, there are parallel risks, particularly if the next president inherits a weak economy. It isn't just about adding up promises; it's about implementing painful parts as well as pleasant ones. Sen. Obama will have trouble keeping his pledge to be fiscally responsible and keep his promises, particularly that middle-class tax cut, unless he can get Congress to raise taxes on upper-income Americans, including on capital gains and dividends, and implement a cap-and-trade plan that amounts to a tax. And Sen. McCain will have trouble delivering on his tax promises unless he can get Congress to embrace stiffer spending cuts than it has so far.

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Oh goody. Robin Hood's back. I just love him. He's gonna steal from all those bad rich guys and give it to us poor helpless lazy ass Americans. It the current admin's fault for letting the big bad rich people keep more of our, oops, I mean, their money. This guy is a left wing wind bag. The only thing he really proposes to do is tax the s*** out of us. And like he'll be better at curtailing congresses spending. Follw the new Robin Hood. He'll save us.

"We are not standing on the brink of recession because of forces beyond our control," Obama told a town hall forum in Austin. "This was not an inevitable part of the business cycle. It was a failure of leadership in Washington — a Washington where George Bush hands out billions of tax cuts to the wealthiest few for eight long years, and John McCain promises to make those same tax cuts permanent, embracing the central principle of the Bush economic program."

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Oh goody. Robin Hood's back. I just love him. He's gonna steal from all those bad rich guys and give it to us poor helpless lazy ass Americans. It the current admin's fault for letting the big bad rich people keep more of our, oops, I mean, their money. This guy is a left wing wind bag. The only thing he really proposes to do is tax the s*** out of us. And like he'll be better at curtailing congresses spending. Follw the new Robin Hood. He'll save us.

"We are not standing on the brink of recession because of forces beyond our control," Obama told a town hall forum in Austin. "This was not an inevitable part of the business cycle. It was a failure of leadership in Washington — a Washington where George Bush hands out billions of tax cuts to the wealthiest few for eight long years, and John McCain promises to make those same tax cuts permanent, embracing the central principle of the Bush economic program."

Left-Wing Nut Link

A new Clinton generation of "I ain't got to work, government's got my back"