Steve Rattner: Math Errors Taint Both Obama and GOP Fiscal Cliff Plans

Thursday, 06 Dec 2012 11:27 AM

By John Morgan

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The glaring problem with the deficit reduction plans of both President Barack Obama and Republican leaders is that their math does not add up, according to Steven Rattner, a private equity investor and former Obama advisor.

Rattner told The Fiscal Times that neither plan attains the generally agreed upon goal of slashing the debt by $4 trillion over the next decade.

His analysis concluded Obama’s plan would achieve only $3.4 trillion of deficit reduction, while the version touted by House Speaker John Boehner, R-Ohio, saves only $3.6 trillion. Obama’s plan is generally regarded as relying more heavily on tax increases to reach his goals, while Boehner’s rests more on spending cuts.

Editor's Note: Economist Unapologetically Calls Out Bernanke, Obama for Mishandling Economy. See What They Did

“You could easily see a compromise if you increase the amount of revenue relative to the Boehner plan and you increase a little of the spending cuts relative to the Obama plan and you end up at $4 trillion,” Rattner told The Times. “But that’s not always the way negotiations progress.

The government’s debt-to-gross domestic product ratio has grown from 36 percent in 2007 to 73 percent currently. Rattner, the “auto czar” who helped lead the auto industry bailout during the first Obama administration, said the ratio needs to come down, or “in an imperfect world,” at least stop growing.

Rattner said he agreed with Obama that cutting discretionary domestic programs too deeply could harm the economy further.

Obama has proposed about $600 billion in entitlement savings, while Boehner has called for $900 billion in entitlement savings.

“I just think Obama is too light on [entitlement savings], and I don’t think the Democrats will ever accept the magnitude of what Boehner is talking about,” he noted.

“I’m certainly worried about going over the cliff, but I’m just as worried, maybe more worried, about them chickening out and not doing something as robust as what we need to address the problem.”

Separately, CBS News reported Thursday the president and Boehner spoke on the phone for the first time in nearly a week.

A deal looked more elusive after Obama insisted this week that Congress raise the debt ceiling without any spending cuts attached. The ceiling now stands at $16 trillion and is set to expire in February.

But Senate Republican Leader Mitch McConnell, R-Ky., is demanding deficit reduction.
"History shows that the only major deficit cutting deals we ever do around here, ever, come after debates over the debt ceiling,” he told CBS News.

“It may be a good idea if you don't care about the debt, but it's a non-starter for those of us who do," McConnell said.

Editor's Note: Economist Unapologetically Calls Out Bernanke, Obama for Mishandling Economy. See What They Did

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