29 May 2017

Obama Paints Picture of a Tough Slog

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White House focuses on boosting workforce as key part of effort to address budget strains posed by retiring baby boomers. The White House has a new tack for dealing with rising deficits: try to boost the workforce and its productivity in the hopes of muddling through the surge of retirees that will strain the social safety net for the next 20 years. Rather than seek to balance the budget and sharply reduce the debt, President Barack Obama ’s economic advisers now say the focus should be to stabilize it until most of the baby boomers, or those born roughly between 1946 and 1964, retire.  
 
The argument, amplified in Mr. Obama’s annual economic report to Congress on Thursday, is aimed at blunting criticism that the White House has recoiled from the kind of unpopular entitlement curbs both parties have said will be needed to cut deficits as a wave of retiring workers demands more federal spending while shrinking the tax rolls. Over the past month, the White House has unveiled a series of programs designed to shore up workforce participation, which has steadily dropped over the past decade. Several proposals reflect ideas percolating in both parties, such as an expansion of the 40-year-old Earned Income Tax Credit to childless workers and tripling a tax credit that covers child care.
  

Republicans have advanced similar tax-relief incentives in the past to lift stagnant labor-force participation. But they say it is disingenuous for the White House to suggest productivity-boosting measures in President Obama’s budget can substitute for comprehensive overhauls of entitlement programs such as Social Security.

Other White House agenda items—such as an overhaul of the corporate tax system and the immigration system, a transportation spending bill and new foreign trade deals—aren’t new. But advisers are touting them as major output boosters. The White House forecasts that its budget will reduce the publicly held national debt to around 73% of gross domestic product over the next 10 years, from 75% today. Under current law, it forecasts the debt would rise to 81% of GDP.

Administration officials have largely conceded that the type of “grand bargain” that achieves more than $2 trillion in lower deficits with an array of spending cuts and revenue increases, which officials pursued four years ago, now looks out of reach.

Treasury Secretary Jacob Lew told lawmakers this month that while the administration’s budget isn’t balanced over 10 years, it achieves what’s known as “primary balance,” in which the deficit is rising only to service past debt, and not because of new spending. “I’m not saying that this is the end of the discussion on fiscal policy,” he added.

Despite evidence that individual workers’ wages have flattened out since the 1970s, middle-class household incomes continued rising in the 1980s and 1990s as more women entered the workforce. Household incomes are now back to levels last seen in the late 1990s. The administration has proposed a new $500 tax credit for married couples when both spouses work that could help offset child care and commuting costs. It has also proposed tripling the child-care tax credit, to as much as $3,000 per qualifying child.

White House officials reject criticism that they aren’t doing enough to find savings in entitlement programs. They say their health-care overhaul has helped to stem rising health costs, which are a major driver of deficits. They have proposed $400 billion in savings from changes to Medicare.

Click here to access the full article on The Wall Street Journal. 

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