How to Cut $4 Trillion

What kind of country do the Americans want, and what is the right government for that country? President Barack Obama got down to these issues, specifically the debate over the U.S. deficit. The adjustment he proposed — $4 trillion in 12 years — is the same as the cut defended by the Republican opposition. But the two plans are very different in regards to the authors’ political ideas. Obama’s message was presented not only in his words on Wednesday at George Washington University, but first in the title of his speech: “The Country We Believe In.”

It is not about whether it is necessary to seek a balanced budget. That point is moot. Obama merely remarked that there was a successful adjustment effort in the 90’s. Ex-president Bill Clinton left a clean budget and a very well defined deficit reduction program. Accounts went red again during Republican George W. Bush’s two terms. Obama avoided a tone of criticism on this point. He was not looking for controversy, but trying to sell a plan.

But it wouldn’t be possible to cover the issue without comparing the two ways of thinking. A small part of his speech was dedicated to a technical matter. Almost two-thirds of the budget is allocated to medical assistance programs, Social Security and national security. Another 20 percent goes to unemployment insurance, student loans, veterans’ benefits and tax credits for working families. The rest is divided between interest costs and the 12 percent allocated to everything else, like education, research, sanitation, environment and infrastructure.

It does not make sense to concentrate cuts on those 12 percent, but the plans presented up until then proposed just that, Obama clarified. That kind of adjustment would abolish several governmental functions. It is about knowing, the president argued, if Americans are willing to accept a 70 percent reduction in clean energy plans, 25 percent in education spending and 30 percent in transportation investment — if they think it is all right to deprive 50 million people of medical assistance to balance the budget.

The U.S. became a great country, the president insisted, because the government always performed certain functions that were considered essential. Just because of that, he argued, he and a good part of the audience were able to have access to education. To preserve a country with those characteristics, it would be necessary to find another way to put public accounts in order. It would be necessary to distribute the cuts, looking for ways to save, even in national security. But the more complicated proposal, politically, would be another. “But we cannot afford $1 trillion worth of tax cuts for every millionaire and billionaire in our society,” the president said. He already accepted the renewal of those benefits once, but that, he promised, would not be repeated. His plan also includes limits for itemized deductions for the richest 2 percent. The plan, in summary, includes cuts of $2 trillion in budgetary costs, a reduction of $1 trillion in interest payments and a gain of almost $1 trillion in tax changes. The idea is to be more generous with the middle class than with the rich.

The plan rejects, at least in great part, a style of tributary policy which began in the Reagan administration. It is a part of the American tradition, Obama reminded, to value equality. Because of that, the rich normally supported more weight than other citizens. It was a little ironic to propose that a redistribution of the tax weights was a return to traditional values. In general, the Republicans, not the Democrats, present themselves as the flag bearers of tradition.

Obama could be able to take advantage of the impetus of the financial adjustment to eliminate agricultural subsidies which are incompatible with international norms. That would avoid conflicts, help the market to function better and benefit developing countries. But it would be a tough battle with agribusiness’s great lobbying power.