Tax Analysts Blog

Beyond Healthcare Reform: Obama's Vision

Posted on Jul 23, 2009

In an interview with the Washington Post, President Obama reveals how he wants to lay a "foundation" for deficit reduction "either at the end of this year or early next year." He is looking to reform Social Security first and then move on to a revenue-raising tax reform that lowers tax rates and broadens the tax base. Some sort of commission would probably be part of these efforts, and he would like to lock in "a pledge for action" before the 2010 election. The interview is highly worthwhile reading as Obama is more open and articulate than any of his economic advisors. Here is an excerpt:

POST: [A]s you know, the 10-year budget shows the government raising 18 or 19 percent of [gross domestic product] in 2019, and spending 24 or 25 percent --

OBAMA: We have a structural gap that has to be closed.

POST: So can I ask you how you think about the timing and politics of closing that structural gap?

OBAMA: What I think has to happen is if we can show that we have a disciplined health care reform package that is serious about cost savings and is deficit-neutral, you combine that with the pay-go rules that we have been promoting and I believe that we can get through Congress, and you are imposing some discipline on the appropriations process . . . then I think we're in a position to be able to, either at the end of this year or early next year, start laying out a broader picture about how we are going to handle entitlements in a serious way. It may start with Social Security because that's, frankly, the easier one. And I think that it's possible to also look at tax reform and think about are there ways that we can maybe even lower marginal rates but eliminate all the loopholes and have that a net revenue generator. I think there are going to be a bunch of things that we can take a look at, but I think health care reform combined with pay-go, combined with how we deal with appropriations bills over the next six months will help lay the foundation for us to be able to make some of these broader structural changes.

POST: So but you'd start that in an election year?

OBAMA: Well, probably what you end up having to do in terms of structural reforms realistically is you probably have to set up some sort of commission or mechanism that reports back with the prospect of maybe locking in a pledge for action, post election. I just think that's probably the most realistic thing that we can do.

And as I said before, the truth is you wouldn't want anything that would take effect until the economic recovery is much -- on much firmer footing anyway.

POST: And you'd be willing to look at a commission -- I mean, beyond Social Security that sort of puts everything on the table?

OBAMA Yes, I think everything is going to have to be on table.

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