Obama’s Debt Speech Doesn’t Add Up

The President’s speech was both encouraging and disappointing. The speech was encouraging because for the first time President Obama, a liberal democrat, actually acknowledged many of the nation’s pressing financial issues. He also presented a nice vision for our nation’s future. The speech was disappointing not because he proposed too many tax increases or spending cuts. It was disappointing because it was full of the normal political tactics (tricks) to scare, mislead and seduce we citizens, and does not solve our problems.

Dissection President Obama’s speech based on a reelection strategy is informative. It shows the speech was more political than substantive, was littered with political tricks, and used as many words attacking the GOP as laying out his proposals. He presented a vision he knew we wanted to hear without any specifics about costs or payments means. He used the “tell them what they want to hear” trick knowing optimism trumps pessimism independent of the truth.

Many more political psychological tricks are in the speech text, but this speech is about the numbers, and numerous financial “number tricks” were applied. Let’s look at the numbers to see if what the President said adds up. He talked about the deficit and debt, but not the bigger unfunded mandates. The estimated federal deficit for 2011 is over $1,500 billion. Any plan must reduce the deficit to zero before any savings can be applied toward the debt. Does the President’s plan bring the deficit to zero and whittle down the debt?

Multiple time spans and deceptive references to numbers were presented. Some numbers are clear but others have to be presumed by what was said. Focusing only on the numbers that would reduce the deficit, here are the average numbers per year. The President’s summary claim is: “I’m proposing a more balanced approach to achieve $4 trillion in deficit reduction over twelve years.” This is an average of $333.33 billion per year only twenty-two percent of the one-year 2011 estimate. So where is the rest of the money coming from? He did not say. What he did say:

Proposal 1: “The first step ….keep annual domestic spending low…. save us about $750 billion over twelve years.” This is an average of $62.5 billion per year.

Proposal 2: “The second step……. saving $400 billion in …. (Defense) spending.” No timeframe was provided so twelve years is assumed resulting in an average of $33.33 billion per year.

Proposal 3: “The third step … further reduce health care spending …… saving us $500 billion by 2023…..” This is an average of $41.67 billion per year. This is claimed to be beyond the President’s claimed Health Care saving of $1 trillion or 83.33 billion per year. Let’s give the President the benefit of the doubt yielding a total of $125 billion per year.

Proposal 4(a): “The fourth step ….. we cannot afford $1 trillion worth of tax cuts for every millionaire and billionaire in our society.” Since the original estimate was $700 billion for ten years by taxing those making over $200,000 per year, let’s assume the number is for twelve years resulting in $83.33 billion per year. Proposal 4(b): “…calls for limiting itemized deductions for the wealthiest 2% …. would reduce the deficit by $320 billion over ten years.” This is an average of $32 billion per year. The total tax increase is $ 115.33 billion per year.

Combining proposals 1 through 3 the total reductions are $220.8 billion per year, and all four proposals total $336.1 billion per year. These numbers are about equal to the President’s summary claimed average $333.33 billion per year over twelve years.

The claim made that $1 trillion savings will result from reduced interest payments is misleading. The interest on the national debt for 2010 was $414 billion. But since the total proposed amount is less than the deficit, there is no savings. Instead the debt and interest payments continue to increase.

The President gave a great “feel good” speech, but in reality it was a great speech filled with partial truths and political tricks used to confuse voters, and once again the proposals do not solve “we the people’s” problems. It seems reelections and party power trumps “we the people” every time. This has to be stop.

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About

Dr. Cleland’s Ph.D. is from Purdue University where he specialized in complex systems theory. His technical training and experiences includes analyses of many types of systems, involvement with numerous federal, state, and local agencies, and management of a broad set of set of professionals, services, and trades people. He has managed scientists, engineers, policemen, firefighters, environment, health, safety and emergency planning experts, building trades and maintenance crafts personnel, and others.

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