Posts Tagged ‘ budget ’

Paul Ryan has a debt-reduction plan like Bush had a plan for post-Saddam Iraq

That is to say, Republican Representative Paul Ryan has no debt-reduction plan. He has a wish list, an outline maybe. There are certainly bullet points. But Paul Ryan and his Republican Party have no plan to make a dent in our debt.

So why isn’t Ryan’s much-discussed budgetary “Roadmap” a “plan”? Because it doesn’t actually say how it will achieve the debt-reduction it promises! Like Bush, Ryan will give you all the good stuff up front: “Saddam’s military will be no match for the US” or “We’re giving out big tax cuts!” but when it comes to the next step, they’re both a bit clueless: “Wait, we have to do something with Iraq after Saddam’s dead?” and “Wait, I have to pay for my tax cuts and then find trillions more to reduce the debt?”

Ryan is very specific about how he will increase the debt. He says that he will vastly lower taxes for the richest Americans. For example, Ryan would reduce Mitt Romney’s tax rate to about 0% by getting rid of the taxes on capital gains. Ryan is very detailed and specific about this how to increase debt and income inequality. But when it comes to getting rid of debt, Ryan’s got nothing. Ryan is the Donald Rumsfeld of budgets.

Ryan promises a total of about $5 trillion in tax cuts for the richest Americans over the next decade (in addition to the Bush tax cuts). He says he will pay for this with……. well, he doesn’t actually say how he would pay for it. He says that his plan “eliminates nearly all existing tax deductions, exclusions, and other special provisions” to pay for itself. Really? Which ones? There are a lot of tax breaks that are very near and dear to voters in the country. But of course Ryan won’t say which ones he will eliminate. Its a long road to eliminating an astounding $5 trillion in tax breaks but Ryan won’t say how he plans to get there. Not even a hint.

The weirdest part of Ryan’s budget is his goal to cut spending. Ryan wants to cut spending by $5.3 trillion more than President Obama over the next decade. Only, whenever anyone tries to figure out what, exactly, Ryan is going to cut, Ryan becomes defensive and extremely ambiguous. You see, the trick in Ryan’s budget is that he never actually names programs that he wants to cut. Like with getting rid of tax breaks, Ryan has a broad goal for spending reduction, but few plans to get there.

Turns out, this technicality is a big advantage for Ryan. He can say the popular thing: “I’ll make massive cuts in spending” and whenever anyone asks: “Well wait, will you get rid of my favorite program?” Ryan can respond: “No! We’ll get rid of another program (but I’m not telling you what it is).”

As comical as this sounds, this is actually how Ryan is framing his budget “plans.” Recently, President Obama gave a speech outlining how Ryan’s plan would affect major federal programs saying,

“If this budget became law and the cuts were applied evenly … over 200,000 children would loose their chance to get an early education in the Head Start program,” Obama said. “There would be 45,000 fewer federal grants at the Department of Justice and the FBI” to combat violent crime.

Obama said hundreds of national parks would close.

Predictably, Republicans responded by saying “Where did Obama get these specifics? He imagined them.” Well, yea, what was he supposed to do when handed a plan that makes radical changes to America but contains no specifics? In fact Obama anticipated this come-back and said:

“Republicans may say, well ‘we’ll avoid some of these cuts,’” Obama said. “But they can only avoid some of these cuts if they cut even deeper in other areas.”

Which is exactly right. Eventually the hammer has to fall somewhere or not at all. And for every program you protect, another gets hit twice as hard. Either you’re cutting spending or you’re not. If you are, then real people are going to be hurt and if not, then then you’re not actually reducing the debt. If Paul Ryan is serious about his budget then he needs specifics. For an example of a serious budget with specifics, here’s a good starting point.

(For a overview of Obama’s a Ryan’s budgets, look here)

(Here’s more on Ryan’s spending cuts conundrum from Ezra Klein)

Comparing the budgets of Obama and Republicans

Recently, Congressional Republicans and President Obama released their budget proposals for this year and coming years, as Ezra Klein notes, “budgets are a moment when the two parties can’t hide,” where “we can see the decisions the parties make when they’re forced to choose between competing priorities and constituencies.” They are important documents, in other words. So without further ado, here is my summary of Obama’s and Congressional Republicans’ budgets:  (Obama’s is available here and Republicans’ is available here)

Obama’s Budget

Obama’s  budget is cautious but probably does enough to stabilize America’s debt through a mixture of tax hikes on the wealthy and some already agreed-to spending cuts. Mainly, Obama’s budget consists of three parts: 1) some increased spending on infrastructure and education 2) spending cuts to domestic spending and defense totaling $2.7 trillion 3) $1.6 trillion in new tax revenue from corporations and the wealthiest 2% of Americans.

First, the increased spending will go to areas where, by all accounts, the funds are sorely needed. The American Society of Engineers has given the US a grade of a “D” overall for the condition of its infrastructure, which once led the world. Obama has proposed spending billions more to upgrade the nation’s roads, bridges, railways, passenger rail systems and internet connections over the next six years. This money will put Americans to work building systems that will repay our investment many times over.

Second, Obama will cut spending, mostly by the amounts already agreed to in the as part of the debt ceiling negotiations with Republicans last year. This will cut defense spending, domestic discretionary spending (an umbrella term covering most federal programs), federal pensions and agricultural subsidies by $2.1 trillion. Medicare and Medicaid will also be trimmed for $360 billion, mostly through cuts agreed to in the debt ceiling negotiations and also by changing some tax treatments that will shift Medicaid costs to the states.

Third, Obama will end the Bush tax rate cut for the top 2% of earners, raising their top marginal rate to 39.5% from 35%. He will also implement the “Buffett rule” which states “that no household making more than $1 million a year pays less than 30 percent of their income in taxes.” These small changes are to make sure that the richest Americans pay their fair share for deficit troubles that their tax breaks caused. Obama also proposes a $61 billion “Financial Crisis Responsibility Fee” which would compensate taxpayers for their extraordinary support  of the financial industry in the 2008-2009 crisis. He will also plans to close some tax loopholes for the rich and corporations to make up a total of $1.5 trillion in new revenue (he names some specific ones).

Comparison of taxes and spending cuts in past deficit deals by Ezra Klein

Taken as a whole, Obama’s plan is very moderate. It is more conservative than most past bipartisan deficit deals. It also tries to spread the pain of deficit reduction somewhat evenly across all facets of society. Civil servants, the rich, the poor and the elderly all have their favored programs or tax breaks trimmed to make room for the deficit reduction that experts agree the US needs to undertake. His budget is far from perfect, but it would preserve the American social contract and social safety net, unlike Republicans plan.

Republicans’ Budget

Congressional Republicans’ budget (authored by Rep. Paul Ryan), is a very radical document. Ryan seeks to eliminate basically everything the US government does besides Medicare, defense and Social Security. He would also give out a massive $4.6 trillion tax cut, aimed at the richest Americans. Then, because their first two actions mostly balance out deficit-wise, Republicans would try to eliminate almost every tax break on the books to balance the budget. So let’s pull this apart:

First, Republicans will eliminate almost everything the federal government does except defense, Medicare and Social Security. The military is the only area of the budget that gets larger under Ryan’s plan, everything else goes under the ax. The cuts are painful and they start immediately. By 2050 there will be almost nothing left. Pell Grants-gone. National Parks-gone. Energy and health research-gone. Highway and transportation funding-gone. Homeland Security-gone. Food stamps-gone. Early childhood education- well, you get the picture. Over  the first decade this is how the cuts will fall:

The poor will bear of 2/3 of Republicans’ budget cuts in the first ten years, and more in the years to come. In fact, between 14 and 27 million people will lose Medicaid health coverage in the first ten years of this plan, as estimated by the Urban Institute.

Second, in a sharp contrast to his cuts to the poor, Ryan and the other Republicans plan to give out trillions of dollars to the rich in tax cuts. Ryan’s plan would drop Mitt Romney’s tax rate to near 0% (no wonder Mitt thinks this plan is “marvelous”) and would plaster the rich with money, even as it cuts trillions in spending from the poor. Take a look:

Ryan's tax cuts go overwhelmingly to the rich

So if you make a lot of money, you come out as a big winner in Paul Ryan’s plan. If you don’t make very much, then you are  in for a world of hurt if  this budget gets passed.

Third come the “mystery meat”  in Paul Ryan’s budget, as Paul Krugman says. See, Ryan has a problem because at this point in the budget process he has made the debt a lot worse by passing huge tax breaks and only made up for it with some big spending cuts. Now he has to try to cut the national debt.  So, Republicans propose that we get rid of almost every tax break in the book to pay down the debt. Only, they don’t tell us what breaks they want to cut. They leave those trillions in cuts up to our imagination. Seriously. To get the kind of deficit reduction he promises, Ryan would have to eliminate lots of tax breaks that benefit the poor and the middle class like the child tax credit, earned income tax credit, the tax free status of 401(k) and other retirement plans, the mortgage tax deduction, etc. That means that the last chart I posted will be completely different once Republicans are done.

Most low and middle income earners will probably end up paying more under Republicans’ plans than they do now because their tax breaks will be eliminated. But won’t tax breaks for the rich be eliminated as well? Nope. The biggest tax break for the rich (the lower tax bracket for capital gains) will actually be expanded. Rich people will no longer have to pay anything on their income from stocks, bonds and property, dropping Bill Gates’ Warren Buffett’s and Mitt Romney’s tax rates to about 0.

The only debt reduction in the Republican budget is the elimination of tax breaks and loopholes, which Republicans leave completely unspecified. The rest of the budget is not an attempt to come to grips with our debt, but an attempt to radically remake American government and society. Republicans would literally destroy the American social safety net in order to write huge checks to the millionaires in our country. The losers in Republicans’ budget are clear: anyone who is poor or middle income stands to lose all of their support from the government and see their taxes raised. The winners are the rich. They will see their taxes vastly reduced and all they will have to worry about are those Tiny Tims who come to their door asking for money around Christmas every year.

How we got our debt

So if this is how we got our debt problem, why is the only solution to implement massive cuts to Medicare, Medicaid and Social Security?

Center on Budget and Policy Priorities http://www.cbpp.org

Maybe it would make more sense to end the Bush tax cuts and cut the Department of Defense  before we start talking about dismantling our social safety net.