Obama Must Lead Deficit Reduction Plan

Having faced the most serious threat of financial default this summer, the U.S. Congress formed a “Super Committee” of 12 Republicans and Democrats to reduce the country’s budget deficit. However, the “Super Committee” has been unable to agree on a deal with only three weeks left before the November 23 deadline. Congress had previously planned to reduce the budget deficit by $1.2 trillion in the next ten years.

For an economically stagnant U.S., the immediate needs are short-term economic bail-outs and a mid- to long-term budget deficit plan. However, the White House has been unable to push through any policies like it did this past summer because the Republicans have been rejecting any forms of tax increase. Even the Democrats, who once advocated for increasing the budget deficit reduction to three trillion dollars, are reluctant to reduce government spending.

Needless to say, the Democrats are doing the best they can. The reduction plan proposed by Congress is more extensive than the previous budget deficit plan proposed by the “Gang of Six” that was made up of six Democrats and Republicans.

Despite all of this, Republican Congressman John Boehner criticized the Democrats on tax increases for the rich. Congress came to a standstill again, and the fear of a credit rating downgrade is shrouding the country.

The baton has been turned over to the White House. On some occasions, good policy makes good politics. President Barack Obama must present a plan to simplify tax laws and reduce government spending instead of just sitting and watching all the bickering in Congress and the Democrats getting criticized.

In return for raising taxes, Obama needs to reduce unnecessary government spending. Every year, the U.S. devotes $1.2 trillion to subsidizing mortgages and health care. Reducing this spending by just ten percent would be enough to meet the Super Committee’s goal of reducing the budget deficit by 1.2 trillion dollars in the next ten years. Reducing spending by one-third would make tax increases unnecessary.

The White House is unlikely to announce anything special before November 23 for now. But even if a deal is struck within Congress, the focus will be on reducing spending. This will be poison to a fragile U.S. economy. If the Super Committee fails to reach a deal, public opinion will rapidly shift to favor reducing the deficit instead of increasing taxes. There is no pressure for the current Congress as the deficit reduction is set to begin in 2013.

Obama has nothing to lose. Instead of hanging and waiting, he must proactively lead the effort to reduce the budget deficit.