Posts Tagged ‘ Paul Ryan ’

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)

Should we raise taxes or cut Medicare?

Soon America must face a choice. Our government’s status quo taxing and spending policies cannot continue much longer. No, this isn’t based on Obama’s spending over the past few years or Republican intransigence over the debt limit. Those are important to this debate, but they’re not the long-term factors I’m talking about here. Spending and taxing have to change because we, as a society, are getting older and our health care costs are continuing to increase. Those two factors alone mean that our traditional rates and methods of taxation cannot support the traditional benefits given out by our government. The following graph shows that the effects of an aging population will mean that our country must spend 3.5 percent more of its GDP on Medicare by 2035 than it does today. The fact that health care costs grow faster than the economy as a whole means an additional 2 percent of GDP will have to go to Medicare by 2035.

via Ezra Klein

The very predictable rising cost of aging and health care leads us to a societal choice: either we give up the social contract that America has maintained for the past 50 years, or we raise taxes AND reform our programs to support the Baby Boomers just as the Baby Boomers supported their parents in retirement.

Republican lawmakers, by and large, have chosen the first option. Most have voted for Paul Ryan’s budget plan, which gets rid of traditional Medicare by changing it into a voucher program which only covers a third of seniors’ healthcare costs. That is the path you have to take if you do not want to raise taxes or get rid of tax loopholes to pay for the cost of Baby Boomers growing old. The most important thing to most Republicans is to protect the rich from increased taxes. If their vision wins out in the future, (tax revenues stay where they are right now) the government will have to shift costs onto seniors, undoing the social contract that we have in this country. Instead of the government covering seniors’ health insurance through Medicare, seniors will have to pay out of pocket to afford private insurance. If seniors living on fixed incomes can’t afford to buy private insurance with their voucher, then too bad for them. If the government doesn’t raise taxes, it cannot afford to help them.

There is another option though. If taxes are raised, or if we just clean up the tax code so that there are not so many loopholes, we do not have to face a world of seniors dying in their homes of diabetes or cancer because they could not afford private insurance. Its also important to emphasize that this is not a complete either/or question. We can still reform Medicare to make it cheaper while raising taxes to help pay for the inevitable additional costs the program will incur. This is generally the Democrats’  position.

Either we increase taxes (by raising rates or cutting loopholes), or we have to get rid of our Medicare program. The only other option is to adopt a complete system of socialized medical insurance  to keep our costs down. Those are our options. Americans must choose.

How Obama wants to bring down our debt.

Everyone in Washington has released their own plan on how to close down our debt over the next 10-12 years. Progressives, conservatives, Paul Ryan, the Democratic caucus (due to release today) and the President. Throw all those plans out the window because none of them will likely ever become law. Big plans put out by partisan interests have very little chance of going anywhere and mostly serve as talking points and political footballs for debate. The plans that actually get passed are generally determined by the politics of the moment, deals worked out, and compromises made to placate special interests. You think it would be awesome to replace our  payroll taxes with a carbon tax? So do a lot of people, but it isn’t gonna happen. The two big events that will shape our debt debate will be the fight over the debt ceiling and the fight over the Bush tax cuts in Dec. 2012.

Most thinkers agree that the US needs to enact a plan that cuts $4 trillion in debt over the next decade or so. Let’s see how Obama is probably angling to get there, keeping in mind the two critical junctures we have coming up.

Republicans have forced a political crisis over raising the nation’s debt ceiling. Their demands are for about $2 trillion in spending cuts before they will agree to do what has  to be done anyway and raise the debt ceiling. This provides us with a political situation where debt reduction seems to be required. Obama has accepted Republicans’ terms on the condition that there also be $400 billion in revenue increases gained by getting rid of tax loopholes and tax breaks for the richest of the rich. Its obviously Obama’s intention for this plan to go through- $2 trillion in spending cuts and $400 billion in revenue increases for a total of $2.4 trillion in debt reduction this year.

So if that plan passes (which is far from certain) Obama is over halfway to his goal. The next test comes when the Bush tax cuts are up for renewal in December 2012. Note: this analysis assumes (as Obama certainly does) that Obama will be re-elected in 2012. Obama has all the power in December 2012 to say that he will not agree to renew Bush’s tax cuts for the top 2% and will veto any bill that tries to do that. That is what his base wants him to do and is likely what he will campaign on. At that point, Republicans have a choice- allow tax rates to rise on the top 2% or allow income tax rates to rise on everyone else. If they pick the first option, as is Obama’s intention, then there is another $830 billion in debt reduction, bringing Obama’s total to about $3.2 trillion in debt reduction. If the Republicans decide that everyone else’s rate should go up if they can’t get their precious tax cuts for the rich extended, then that would be $2.4 trillion in debt savings (we’ll call it 2.8 trillion including interest). $2.8 trillion would solve our debt problems by bringing Obama debt-reduction total to $5.2 trillion.

Even if only the cuts for the rich are ended, Obama can come up with an extra $800 billion in deficit savings by various methods like simplifying the tax code, enacting a public health insurance option, encouraging greater-than-expected economic growth, cutting down on tax cheats, cutting the military, etc.  He will work out a deal with Congress to save a bit more money. It will be a tough compromise and will burnish the President’s image as a compromiser and neutral arbiter. It would be small beans at that point.

Republicans seem to know that if Obama is re-elected, the scale beings to tilt in his favor, which is probably why they are pushing so hard right now for a completely one-sided debt deal. Its also no coincidence that a huge debt deal right now will hurt our economic prospects over the next few years. A weak economy makes  it harder for Obama to win re-election and if he doesn’t win re-election, the Republicans can basically dictate whatever “debt-reduction” deal they like.

The Government Needs to Improve the Economy

The title of this post may seem to be a no-brainer, and if it is, that’s good. Too much of the thinking in Washington at the moment is focused on the deficit and not on improving the economy. Both the economy and the deficit need work, but which is the more important and most pressing? Clearly, its the economy. No one should be complacent when we have 9% unemployment and anemic growth, but all anybody wants to talk about is the deficit which (shockingly) has nothing to do with unemployment. Sure, if we don’t deal with the deficit, at some point in the future we will have to pay higher taxes or get by with less government spending, but is that an immediate danger? Not at all.

The United States currently finds itself in the peculiar position of having an ever-growing mountain of debt and also having a lot of investors who can’t wait to buy it from us at rock-bottom rates. Under normal circumstances, as the amount that we owe increased we would have to increase the amount we payed investors (in the form of interest interest) to order to get them to buy our debt. But, thanks to a host of factors mostly out of our control (European debt crisis, Japanese economic troubles), we are currently selling our gobs of Treasury I.O.U.s for next to nothing. We are racking up tons of debt almost for free! Now, eventually the interest on our debt will rise and we will have to raise taxes and/or cut spending in order to pay it off, but for now (and probably for the next year or two) the US  deficit can increase almost without consequence.

That leads me back to my original point. Fixing the economy. The burst of the housing bubble wiped out much of Americans’ home equity and forced many into bankruptcy and foreclosure, while the stock market crash wiped out Americans’ savings and the subsequent mass layoffs left  many without jobs. As a result, Americans’ disposable income is at very low levels and that is a very bad thing in an economy that is based  70% off consumption. Without an infusion of money from somewhere, America is doomed to a slow, long slog back to good economic health.

Where could this infusion of money come from? The government of course. Robert Frank lays out the case for a payroll tax cut in the New York Times here. There is a 6.2 percent Social Security payroll tax on employees on every paycheck they receive and a 6.2 percent tax on employers every time they give their employee a paycheck. Cutting these taxes would give employees more money in their wallets which they would spend, buying things to stimulate the economy. Frank says it would also give employers more of an incentive to hire new employees since it would be cheaper for them to do so. While this is true in theory, I’m not so sure about this particular claim. Employers have been very reluctant to add to their workforce even though there are already some tax incentives to do so. Some Obama administration figures have been floating the idea of a payroll tax cut as part of the debt negotiations. This would raise the debt in the short term, but in the long-term, a robust economy is the best way to reduce the debt. And as we have seen, a short term increase in the debt is almost free (for now).

Now, I know what you’re thinking: “Republicans love tax cuts! Paul Ryan’s budget, which almost all Republicans love, proposed lowering taxes on the rich to levels not seen since before the Great Depression. Republican dogma says that cutting taxes is the best way to promote growth. Surely Republicans are the ones pushing for these tax cuts.” If you were thinking that then you are sadly wrong. Republicans aren’t in favor of all tax cuts, just tax cuts for the rich. Republicans fought tooth and nail for tax breaks for the rich in the tax cut deal they worked out with President Obama six months ago and the Paul Ryan budget includes huge tax cuts for the rich, and nothing for anyone else. Payroll taxes primarily affect the working and middle class (they don’t apply to income above about $105,000) so sources say Republicans really aren’t very interested in cutting them.

Its too bad really. The economy needs help and the government is in a position to give it help by injecting money into the economy. But, all anyone seems to want to do is take money out of the economy to fix our debt problems. Oh well.