The Brass Ring: What Obama Needs To Do

From President Obama via the Atlantic:
"...Health care is a classic situation where it may cost money on the front end and save enormous money on the back end and what we're going to have to figure out is what can we do now to start getting that ball rolling, because the longer we put that off, the worse off we are financially. Medicare and Medicaid on their current trajectory cannot be sustained. And the only way I think we're going to fix it is if we see those two problems in the broader contest of bending the curve down on health care inflation....

I should add one more thing and that is a budget process that starts bending the deficit curve down. I think that all these goals are complementary. I also think that the American people understand we won't get everything done overnight. The U.S. government and the U.S. economy are enormous ocean liners, they're not speedboats. So what we will do this year is to try to get them on the right trajectory and hopefully that means at the end of my term you'll look back and you'll say we're at a different place than we would have been had we not made these changes."

TW: President Obama has an opportunity rarely available to a POTUS. If he is bold and aggressive and politically astute to the level of an FDR or Lincoln, he could transform American fiscal policy for a generation. The various initiatives are costing trillions of dollars. Many are rightly concerned about the impact of this spending on our future fiscal health. They are wrong to suggest a Hooverite approach of not spending to combat the economic crisis, but they are right to ask how we address our fiscal challenges.

Correspondingly, and regardless of the current economic contraction, we face looming fiscal challenges associated with social security and especially health care costs. Obama's challenge is to formulate policies in the short-run effective in mitigating the current economic contraction while in the longer-run creating a framework for reducing our fiscal deficits.

Obama is hosting a summit on the fiscal situation today. Such summits are merely symbolic gestures the proof will be in the pudding of his actual proposals. The Republicans are petrified that the current crisis will provide cover for Obama to define policies of his choosing to redraw our fiscal future. I hope their fears are justified.

These are the type attributes I would like to see in his plan
1) rescind all Bush tax cuts (inc. cap gains) for those making more than $200,000
2) restore the estate tax with the prior exemptions indexed to inflation (future post coming on this)
3) reduce social security benefits by tweaking downward the annual growth factor by roughly 10%
4) reduce medicare benefits through combination of higher deductibles and tighter eligibility standards for high cost treatments
5) create a new higher marginal tax bracket indexed to inflation for those making over $1,000,000 (5% over current top rate)
6) initiate planning to reduce American out of pocket expenses in Iraq and Afghanistan by 50% in current $ over the next 5 years

If Obama can articulate a viable plan by which to reduce the American fiscal deficits near surplus within five years, then he will:

1) Create an environment in which financing the current stimulus measures should be non-problematical as internationals lenders would see the U.S. as a superior investment opportunity
2) Create an environment in which inflation should remain contained and provide the basis for low interest rates and relatively strong economic growth going forward
3) Cut the knees out from under hypocritical Republicans who talk fiscal responsibility but live fiscally irresponsibly by initiating unnecessary wars, cutting taxes for the wealthy and paring the occasional immaterial spending items.

The suggested measures would be controversial on both the left and the right but if Obama is to be a truly transformational leader these are the tough decisions he must initiate. Others speak of making tough choices, these would be tough choices. Do enough Americans trust Obama to take these steps?