Varney Falsely Claims Obama Opposes “Even Modest Spending Cuts”

Varney: S&P “Warning Was Leveled Fairly And Squarely Right At President Obama.” Following a report by Standard & Poor's that the outlook for federal government debt has been downgraded from stable to negative, Fox Business host Stuart Varney appeared on the April 19 edition of Fox & Friends and claimed the report “was leveled fairly and squarely right at President Obama.” Stuart also falsely claimed “so far, President Obama has refused to look at even modest spending cuts of any kind.” [Fox News, Fox & Friends, 4/19/11]

In Fact, Obama Deficit Plan Combines Spending Cuts With Tax Increases On Wealthy

Obama Proposed Spending Cuts In Fiscal Policy Address. In his April 13 address on fiscal policy, Obama proposed increasing tax rates on the wealthy, while also cutting spending. From Obama's April 13 address:

The first step in our approach is to keep annual domestic spending low by building on the savings that both parties agreed to last week. That step alone will save us about $750 billion over 12 years. We will make the tough cuts necessary to achieve these savings, including in programs that I care deeply about, but I will not sacrifice the core investments that we need to grow and create jobs. We will invest in medical research. We will invest in clean energy technology. We will invest in new roads and airports and broadband access. We will invest in education. We will invest in job training. We will do what we need to do to compete, and we will win the future.

The second step in our approach is to find additional savings in our defense budget. Now, as Commander-in-Chief, I have no greater responsibility than protecting our national security, and I will never accept cuts that compromise our ability to defend our homeland or America's interests around the world. But as the Chairman of the Joint Chiefs, Admiral Mullen, has said, the greatest long-term threat to America's national security is America's debt. So just as we must find more savings in domestic programs, we must do the same in defense. And we can do that while still keeping ourselves safe.

Over the last two years, Secretary Bob Gates has courageously taken on wasteful spending, saving $400 billion in current and future spending. I believe we can do that again. We need to not only eliminate waste and improve efficiency and effectiveness, but we're going to have to conduct a fundamental review of America's missions, capabilities, and our role in a changing world. I intend to work with Secretary Gates and the Joint Chiefs on this review, and I will make specific decisions about spending after it's complete.

The third step in our approach is to further reduce health care spending in our budget. Now, here, the difference with the House Republican plan could not be clearer. Their plan essentially lowers the government's health care bills by asking seniors and poor families to pay them instead. Our approach lowers the government's health care bills by reducing the cost of health care itself.

Already, the reforms we passed in the health care law will reduce our deficit by $1 trillion. My approach would build on these reforms. We will reduce wasteful subsidies and erroneous payments. We will cut spending on prescription drugs by using Medicare's purchasing power to drive greater efficiency and speed generic brands of medicine onto the market. We will work with governors of both parties to demand more efficiency and accountability from Medicaid. [White House, 4/13/11]

Washington Post: Obama's Plan “Combine[s] Deep Cuts ... With Higher Taxes On The Wealthy.” In an April 13 article, The Washington Post reported that Obama “offer[ed] a plan to trim borrowing by $4 trillion over the next 12 years by combining deep cuts in military and domestic spending with higher taxes on the wealthy.” [Washington Post, 4/13/11]

Geithner Advocated “Spending Savings” In Addition To Ending Tax Breaks. In an April 17 interview on ABC's This Week, Treasury Secretary Timothy Geithner advocated a “balanced way” of reducing the deficit, including “spending savings.” From This Week:

GEITHNER: But I think, you know, Chairman Ryan's budget helps explain why this is going to be essential, because if you want to extend these tax breaks for the top 2 percent, then either you have to ask me to go out and borrow trillions of dollars from the Chinese or from foreign investors or from Americans, from our children, or you have to cut -- as he proposes to do -- very, very deeply into basic benefits for seniors, the disabled, the poor. And we don't need to do that in order to restore balance for our fiscal position.

CHRISTIANE AMANPOUR (host): Will raising taxes on the wealthy be enough to really make a dent in the deficit? Many economists are saying that you're going to have raise taxes on the middle class as well.

GEITHNER: Yes, very important question, and I'm glad you raised it.

And think about it this way. If you -- it's true we have to bring these deficits down, but if you do it in a balanced way, that includes spending savings, reforms to health care and tax reform, then you can do it in a way that has acceptable costs for the economy, preserves our capacity to invest, and doesn't add to the burden of the middle class.

And the reason why that's true is because a -- we have a huge amount of spending in the tax code, special tax breaks that go disproportionately to the most fortunate Americans.

So it is possible to do this, the president believes we can do this, I believe we can do this, without adding to the burden on the middle class. [ABC, This Week, 4/17/11, emphasis added]

Varney Complains Obama's Speech Was A “Direct Attack On Anybody Who Wanted To Cut Spending At All”

Varney Complained Obama Accused Republicans Of “Starv[ing] The Elderly And Depriv[ing] Needy Children” With GOP Budget Plan. Later in the segment, Varney complained that Obama's “speech on Wednesday was a direct attack on anybody who wanted to cut spending at all. I mean, he was basically telling the Republicans, who were sitting right in front of him, 'Hey, all you want to do is to starve the elderly and deprive needy children.' Well, that's not the way you get some kind of deal on cutting spending and cutting our budget deficit.” [Fox News, Fox & Friends, 4/19/11]

But Economists Agree: GOP Plan Would Impact Health Care Costs To Seniors

Krugman: Ryan's Plan “Would Deprive Many And Probably Most Seniors Of Adequate Health Care.” In an April 7 New York Times column, Nobel Prize-winning economist Paul Krugman wrote that Ryan's budget plan “would deprive many and probably most seniors of adequate health care.” From Krugman's column:

And then there's the much-ballyhooed proposal to abolish Medicare and replace it with vouchers that can be used to buy private health insurance.

The point here is that privatizing Medicare does nothing, in itself, to limit health-care costs. In fact, it almost surely raises them by adding a layer of middlemen. Yet the House plan assumes that we can cut health-care spending as a percentage of G.D.P. despite an aging population and rising health care costs.

The only way that can happen is if those vouchers are worth much less than the cost of health insurance. In fact, the Congressional Budget Office estimates that by 2030 the value of a voucher would cover only a third of the cost of a private insurance policy equivalent to Medicare as we know it. So the plan would deprive many and probably most seniors of adequate health care. [The New York Times, 4/7/11]

CEPR's Baker: Ryan's Budget Would Force Seniors To Spend Much Of Their Income On Health Insurance. According to Center for Economic Policy Research co-director Dean Baker:

Representative Ryan would replace the current Medicare program with a voucher for people who turn age 65 in 2022 and later. This voucher would be worth $8,000 for someone turning age 65 in that year. It would rise in step with the consumer price index and also as people age. (Health care expenses are higher for people age 75 than age 65.)

According to the CBO analysis the benefit would cover 32 percent of the cost of a health insurance package equivalent to the current Medicare benefit (Figure 1). This means that the beneficiary would pay 68 percent of the cost of this package. Using the CBO assumption of 2.5 percent annual inflation, the voucher would have grown to $9,750 by 2030. This means that a Medicare type plan for someone age 65 would be $30,460 under Representative Ryan's plan, leaving seniors with a bill of $20,700. (This does not count various out of pocket medical expenditures not covered by Medicare.)

According to the Social Security trustees, the benefit for a medium wage earner who first starts collecting benefits at age 65 in 2030 would be $32,200. (This adjusts the benefit projected by the Social Security trustees [$19,652 in 2010 dollars] for the 2.5 percent annual inflation rate assumed by CBO.) For close to 70 percent of seniors, Social Security is more than half of their retirement income. Most seniors will get a benefit that is less than the medium earners benefit described here since their average earnings are less than that of a medium earner and they start collecting Social Security benefits before age 65. [CEPR.org, 4/6/11]

AP: “CBO Said Over Time Future Retirees Would Pay Much More.” The Associated Press reported on April 6:

Most future retirees would pay considerably more for health care under the new budget proposed by House Republicans, according to an analysis by nonpartisan experts for Congress that signals problems ahead for the plan.

The fiscal blueprint would put people now 54 and younger in a different kind of health care program when they retire, unlike the Medicare that their parents and grandparents have known. Instead of coverage for a set of benefits prescribed from Washington, they'd get a federal payment to buy private insurance from a choice of government-regulated plans.

“A typical beneficiary would spend more for health care under the proposal,” the nonpartisan Congressional Budget Office estimated in an analysis released late Tuesday.

The CBO said over time future retirees would pay much more, partly because the Medicare benefits package would be more expensive to deliver through private insurers. By 2030, the government payment would cover only about one-third of the typical retiree's total health care costs, the budget office said.

The sweeping fiscal plan by House Budget Chairman Paul Ryan, R-Wis., would reduce total federal spending, deficits and debt, saving money for federal taxpayers. But it would be tempered by a cost shift to future retirees. [The Associated Press, 4/6/11]

Economist Blog: “Ryan's Plan Ends The Guarantee That All American Seniors Will Have Health Insurance.” An April 5 post on The Economist's Democracy in America blog stated:

PAUL RYAN'S plan to replace Medicare with a system of vouchers for seniors to buy health care on the private market has only been vaguely described, as of this writing. But there is one thing about it that's fairly clear, regardless of what's in the details Mr Ryan will announce today: Mr Ryan's plan ends the guarantee that all American seniors will have health insurance. The Medicare system we've had in place for the past 45 years promises that once you reach 65, you will be covered by a government-financed health-insurance plan. Mr Ryan's plan promises that once you reach 65, you will receive a voucher for an amount that he thinks ought to be enough for individuals to purchase a private health-insurance plan. (Mr Ryan insists that his plan doesn't entail a “voucher”, but there is no meaningful distinction between getting a voucher with which to pay for insurance, and having the government send a payment to the insurer you choose.) If that voucher isn't worth enough for some particular senior to buy insurance, and that particular senior isn't wealthy enough to top off the coverage, or is a bit forgetful and neglects to purchase insurance, there's no guarantee that that person will be insured. It's up to you; you carry the risk.

[...]

Mr Ryan's proposal to privatise and voucherise Medicare attempts to reintroduce the incentive to cut costs by dumping that risk back onto individual seniors. And the greatest risks will fall on the poorest, sickest, or least savvy elderly; they will be the ones most at risk of going uncovered. [Economist.com, Democracy in America, 4/5/11]

CBPP's Van De Water: Ryan's Plan Shifts “Large Health Care Costs Onto Seniors.” In an April 13 podcast, Paul Van de Water, a senior fellow at the Center on Budget and Policy Priorities (CBPP), stated:

[T]he Ryan plan would gradually replace traditional Medicare with a system of cash-vouchers, which seniors and persons with disabilities could use to help them to purchase private health insurance coverage. While this would save the government money, it would do so by shifting large health care costs onto seniors.

The Congressional Budget Office has estimated that when this program goes into effect in 2022, a typical 65-year-old, who would now be in the new system, would have to pay about $12,000 out-of-pocket for his or her health care spending rather than just about $6,000 as would be the case if traditional Medicare were to continue.

I might add that these costs would continue to rise even more in later years because the value of the vouchers would gradually shrink as years go by in comparison to the rising costs of health coverage. [CBPP, 4/13/11]