You cannot reduce a $1.6 trillion deficit by taking a scalpel to it. Yet that is exactly what the president wants to do. Please consider Obama to Offer Details of Plan to Reduce U.S. Budget Deficit
President Obama will lay out a long-term deficit reduction plan later this week that will take “a scalpel, not a machete,” to programs like Medicare and education and try once again to extract more taxes from the wealthiest Americans, his senior adviser said Sunday.
Appearing on several Sunday morning television talk shows, David Plouffe, Mr. Obama’s senior adviser and former campaign manager, laid out few of the contours of the deficit-cutting plan but sought to distinguish it from a Republican congressional plan announced recently by Paul D. Ryan Jr. of Wisconsin, the chairman of the House budget committee. He said the Republican plan “would give the average millionaire $200,000 in tax cuts” but double the health care costs of senior citizens “$6,000 a year down the road” and trim “energy investment at a time of record gas prices.”
That is disingenuous because Ryan did not propose new tax cuts. The president is referring to tax cuts that came about under the Bush administration. In other words, the president wants tax hikes, not that Ryan is proposing new cuts.
As far as energy goes, the best thing to do is let the free market sort it out.
On CNN’s “State of the Union,” he [Plouffe] also claimed that the deal reached with Republicans protected 800,000 children from being dropped from Head Start, the preschool program for children in poor families, and safeguarded the student loan program.
“Obviously, we need to look at all corners of government,” Mr. Plouffe said. As he said previously, his health care law is $1 trillion in deficit reduction over the next two decades, but we have to do more there. We have to look at more spending here, carefully. As he said, we have to use a scalpel not a machete. And, obviously, this is a distinction with the congressional Republican plan that was announced this week.”
Obama Safeguards the Plague
It is hard to comment on details because Obama did not provide many. Supposedly more are coming. In the meantime, I can comment on student loans because Plouffe specifically mention "safeguarding" them.
Bragging about safeguarding student loans is like bragging about safeguarding the plague.
Student loans have done four things, all of them bad.
- Jack up the cost of education
- Make students debt slaves for the rest of their lives
- Unjustly hand over huge profits to schools like the University of Phoenix at taxpayer expense
- Add to the national debt
The best thing to do with student loans would be scrap the program entirely.
- A Remarkable Comparison: Affordable Student Loans vs. Affordable Housing an email from Eugene Holloway, a Maryland Attorney, on the rising cost of college education.
- Debt for Diploma Schemes: Debt for Diploma Schemes and the Cookie Monster Principle
- Off-Balance-Sheet Budget Fraud: Budget Deficit Accounting Fraud and the Off-Balance-Sheet Student Loan Scam; Time to Scrap Entire Student Loan Program
- Pell Grants Turn Students into Debt Zombies: For Profit Schools Turn Students Into Debt Zombies; It's Time To Kill The Entire Pell Grant Program
- Subprime College Loans, Who is to Blame?: Subprime Goes to College; Students Buried in Debt; Who is to Blame?
Reflections on a Wise College Major
Scalpel and Machete Both Wrong
We do not need to take a Scalpel or a Machete to the student loan program. The student loan program should be scrapped in entirety. Indeed there are entire departments that should be scrapped entirely, including the department of education and department of energy.
Perhaps there are a few items of some merit in those departments such as the strategic energy reserves, but such functions could be moved elsewhere if needed.
Mike "Mish" Shedlock
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Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.