Obama Tells IMF He Expects Democrats To Lose Congress So He Can Cut Entitlements While Imposing A Regressive Tax

I think people on FDL and in general should become much more familiar with the IMF and G20/G8/etc as it relates to ongoing legislative issues. Many of the policies that end up in legislation can be traced back to the IMF, which explains why Obama pre-negotiates as much of what gets pre-negotiated follows the IMF script (which not coincidentally the Secretary of the Treasury – Geithner – is a former IMFer). I think people would be surprised to see what the IMF is advocating the US do, which the IMF only a few weeks ago had a review of the US and said that Obama’s proposed $4 trillion in cuts weren’t enough and they were looking for more than $6 trillion in cuts…that does help explain why the S&P cut the outlook as Obama didn’t even deliver on the cuts he was talking to the IMF about, which themselves were way smaller than what the IMF said it was looking for. When you read the IMF review of the United States, you’ll find things both to like and to hate about it, but it shows where these policies originate from…like how entitlement reform entered the picture since the IMF wants the US to cut Social Security, Medicare and Medicaid.

Amongst all the very interesting things discussed, the Obama administration made a statement to the IMF about the 2012 election, which it sounds like they expect a political party to win control of both houses of Congress. My reading of it sounds like they expect Republicans to win (I think Obama is looking at a Clinton redux with Republicans controlling Congress so that Clinton could do what he really wanted to do under the cover of Republicans). I say that because it relates to entitlement reform while also doing a regressive VAT tax…is it more likely Obama thinks cutting entitlements while raising a regressive tax will happen with a Democratic Trifecta Redux or with the Republicans having both houses of Congress? The White House in particular needs to answer this as to what they meant about the 2012 elections getting rid of the split Congress so that entitlements could be cut…we are talking about “fundamental reform” here!!! There really doesn’t seem to be any right answer for why the Obama administration said this as either Obama knows the Democrats are totally lying through their teeth and will be the presiding party over the destruction of Medicare or Obama is rooting for a Democratic rout in 2012 in order to advance his policy agenda:

The deficit reduction plan will need to
include both changes to entitlement
programs and revenue-enhancing
measures, given pressures from population
aging and excess cost in the health care
sector. Administration proposals would
already cut the share of non-security
discretionary spending in GDP to very low
levels. Additional measures (discussed in
Box 3) can include Social Security reform,
additional savings in health care and other
mandatory spending categories, and
reducing tax expenditures (which amount
to 7 percent of GDP according to the
President’s Fiscal Commission). In the
longer term, consideration could also be
given to introducing a national value
added tax (VAT) or sales tax, as well as
carbon taxes. The administration agreed
on the need for broad-based adjustment,
but noted that given the divided Congress,
a fundamental reform of entitlements and
the tax code may need to wait until after
the 2012 elections. Discussions on deficit
reduction measures are ongoing in the
context of the debt ceiling debate.

Oh and here’s Obama in June of last year at the G20 meeting expressly putting Medicare, Medicaid and Social Security cuts on the table:

Even if — the financial crisis made it much worse, but even if we had not gone through this financial crisis, we’d still have to be dealing with these long-term deficit problems. They have to do with Medicaid; they have to do with Medicare; they have to do with Social Security. They have to do with a series of structural problems that are not unique to America. Some of it has to do with an aging population. And we’ve got to look at a tax system that is messy and unfair in a whole range of ways.

Further Reading:

IMF’s Ten Commandments For Fiscal Adjustment

Another Scary IMF Document – Massive Cuts In Entitlements!

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