Budget Bust

There is a correction to my previous comment.  The Ryan budget proposed for next year is a 3% actual cut from this year.  The following year is another cut of about 1.5%.  Over the 10 year period the budget does rise on average about 3.3% a year.  It could be characterized a continuation of big government.


The proposed budget in 2013 is $3.53 trillion.  Compared to 2007 budget of $2.73 trillion.  2007 was the last time there was a Republican congress.  So Ryan's budget represents about a 30% increase from that time period.  Hardly draconian cuts.  And in reality more very big government.


During each year revenue gains are forecasted due to reduced tax rates and the closing of loopholes.  Now one can argue about this but there is good reason to believe that the tax revenues will occur.  The main driver of tax revenues is not the tax rates but the level of GDP.  If GDP returns to its normal growth trajectory, something it has done in most pass recessions except this one then the government will be awash in money.  If that is so then I doubt even Ryan's proposals will hold up as politicians push for their favorite ''re elect me'' programs.

I have a few comments:

''''According to McGuiness, the budget seems driven merely to ''serve the rich.''  


An opinion guaranteed to develop a rational discussion about the budget. 


''At the same time, the oldest and frailest Americans, and those who are living on the edge, will see their lives impacted by dramatic cuts.  If that isn’t the strong preying on the weak, I don’t know what is.''  


More rhetoric that is intended to raise emotions.  Just what are the actual proposed budget levels compared to 2006 and each year since then.  The word cut when applied to budegets are often misleading.  For example if the previous budget calls for a 7 % increase next year, and the final amount is only a 2% increase that is referred to as a 5% cut even though more money is being spent.  It is best to get some actual numbers and compare them to the pass before passing judgment.  


''For the 1%, it provides more than 3 trillion dollars of tax cuts for the rich and wealthy companies;'' 


I understand the past Ryan recommendations were to reduce the top rate to 25% but it was to be more than made up with the closing of loop holes and deductions.  Again rhetoric and we should see just what is being proposed 


''The cuts [Ryan proposes] are deep and there's no increase proposed in revenue, '' 


 There is plenty of history to show that tax cuts and closing loop holes can actually generate more revenue and that raising  rates actually reduces revenue so the statement that  no increase proposed in revenue is probably not accurate.


There are many more aspects of this OP that should be discussed but these are a few. 

Two things:

First, it is indeed false that tax cuts increased revenues.  Even Greg Mankiw, Bush, former chair of economic advisors, abandoned that.  Rush likes to propgate this lie, but that's what it is.  In terms of the increase in federal collections during the 80s, 75% of it was FICA, which greatly increased rates in 856.  The rest was all due to increases aftre the original cut in 81.  Between 81 and 82, collections plummented.  Also, there was 9% population growth,.  It's just a lie, always was.


Also, a 3.3% increase over a defined time period can indeed and is often a cut.  Newt used this lie dueing the mid 90s.  Bob Sommerby has shown what a lie it was at http://www.dailyhowler.com/article_1.shtml



THE FACTS: IN ITS 1995 BUDGET PROPOSAL, the GOP proposed spending $6700 per Medicare recipient in the year 2002. At the time, the Republican-supervised Congressional Budget Office was estimating it would cost around $8000 per recipient to keep running the current Medicare program in that year.
Hence, the GOP proposed spending $6700 per person in a program it would cost $8000 just to maintain. Throughout 1995, this was a proposal Speaker Gingrich described as a "40% increase in Medicare."
Gingrich sustained this comic distortion by presenting only two parts of a three-number story. Throughout 1995, Gingrich compared then-current spending in the Medicare program ($4800 per recipient) to proposed spending for the year 2002 ($6700). This comparison was used to create the impression of a massive "increase in the Medicare program."
Never mentioned was the ongoing CBO estimate of what the program would cost by 2002. Needless to say, the GOP's $6700 proposal takes on a vastly changed aspect when compared to the $8000 CBO estimate. Inexcusably, it is a comparison the press corps has virtually never made in the course of the past two years.
Current numbers: at the end of the 104th Congress, the GOP was proposing to spend $7100 per Medicare recipient in the year 2002. The current CBO estimate? It will take $8090 per recipient to run the current program in that year. There is virtually no likelihood that, at the GOP spending level, Medicare "will continue to grow."
In fairness, the GOP has proposed reforms for the program that are intended to make it more cost-effective. It is at least conceivable (though far from obvious) that the GOP could provide something resembling current Medicare services for $7100 in 2002.

 

Let's just parse this one little sentence:

"The budget plan, announced Tuesday, would change Medicare into a voucher-based system"

- This is a categorically FALSE characterization of the WYDEN-Ryan proposal.  Granted, the proposal is a sophisticated plan, so it is easy to get bored with the details and go with the easy headline.  But here are the (quick) facts:  first, the Wyden-Ryan proposal KEEPS the present Medicare program in place as is for those 55 years old and up (as opposed to Obamacare, which currently is slated to take some $4 trillion OUT of medicare in 2014 and shift it to the new system); second, for those younger than 55, the plan would contain several government-guarnateed options that the individual beneficiary can choose from and receive a government subsidy to cover the cost.  This is, of course, what is known as a a "premium support plan," and has had BIPARTISAN support from people like Bob Kerrey, John Breaux and Alice Rivlin (the former Clinton OMB director) for more than TEN years.  ONE of the options that younger people can choose is the CURRENT medicare plan.  NOTE: in not one single proposal is there any kind of creature known as a "voucher."  It is simply lazy and dishonest to continue to describing Ryan's plan as "voucherizing" Medicare.  If you like, the funding mechanism in Ryan's plan would be almost identical to the fudning mechanism proposed by the President in the HHS "accomodation."  Finally, Ryan proposes to means-test the program to ensure that MORE dollars go to the sick and poor than presently does (the plan currently heavily susbidizies upper-income older people).


"drastically overhaul the tax code"

- This is categorically TRUE, and of course his plan draws (AGAIN) on bipartisan proposals that are very simple: INCREASE government revenue by simplifying the tax code, lowering corporate and individual rates, thereby ensuring that people actually PAY taxes.  As Ryan noted on MSNBC yesterday, most "tax shelters" go to upper-bracket tax payers, so eliminating them would actually INCREASE their effective tax rate (which is different, and much more accurate than marginal rates).  It is a tax "Cut" insofar as it lowers individual marginal rates, but the EFFECT of removing the copious loopholes and deductions is an INCREASE in what they pay.  Again, this draws on bipartisan proposals such as the Simpson-Bowles, aka President Obama's Debt Commission.

"repeal Obama's healthcare reform"

- This is true, but Ryan has a detailed healthcare plan that Democrats like Alice Rivlin have expressed some support for that would be more "bottom-up" than the President's own plan, which relies on 15 bureaucrats to squeeze savings out of a plan.


"and scale back many social welfare programs by converting them into block grants."

This is purely hypothetical, as the budget revealed yesterday doesn't contain that many specifics on what would be cut.  I would say two things for sure, though: first, Ryan proposes to means-test many of the social programs now in place to ensure that the dollars go to those who need it most instead of to bureaucratic overhead and not-so-poor recipients (last I checked, that wasn't some nefarious right-wing "survival of the fittest" idea); and second, it is an old political trick to describe as a "cut" what is really a consolodation, i.e. MOVING a dollar from one or several programs and re-allocating it to another is often described for political reasons as a "cut."  This happened, for example, in the last round of budget negotiations, when the GOP proposed collapsing into ONE program, some 10 differend "job re-training" programs.  Now only in some political never-never world is that accurately described as "cutting" social welfare programs, but such is the name of the game.

Finally, I would say to those who are denouncing this plan as the worst of kind of social immorality, that the plan is certainly a lot less immoral than the stick-your-head-in-the-sand approach of many who choose to ignore that Ryan is attempting to grapple with the coming budgetary cliff in which federal expenditures to WEALTHY MIDDLE CLASS SENIORS totally devour every available federal dollar, leaving nothing for the truly poor and helpless.  So I would suggest that Ryan does us a favor by presenting the choices we have instead of ignoring those problems, which are truly immoral.

''First, it is indeed false that tax cuts increased revenues.


The government publishes data and it is available for everyone to puruse.  For an analysis of the Reagan years see the discussion almost a year ago on this topic here.  It supports there was dramatic growth in both gdp and tax revenues after the Reagan tax cuts.


http://www.americamagazine.org/blog/entry.cfm?blog_id=2&entry_id=4247


The analysis compares both revenues with and without social security.''


I have tax revenues for every year since 1913 as well as income levels and what really affects income and subsequent taxes is the capital gains tax rates.  When they are lowered the amount of taxes collected goes up as the rich pay more taxes.  So raising them is a sure way to collect less tax revenue.


And yes, a 3.3% avarage annual increase is an increase unless someone wants to introduce the bogus policy of base line budgeting.

"Bending the cost curve can make Medicare affordable" is left-wing voodoo economics. Just like "Lowering taxes can increase revenues." The reason we're in such a huge fiscal predicament is that people are too willing to believe nonsense and politicians are too willing to talk it.

Standardizing computerized medical records will save about two cents on every ten thousand dollar procedure. Death panels are not a third way, they're the second way; a way of deciding who will get less health care.

Undermine best to respond briefly. If you're not satisfied, feel free to declare victory. I used to spend a far too much time is was healthy for my sole political debate on the Internet, and gave it a few years ago, and certainly don't want to renew that during Lent.

But this was a debate long since established. In fact, Republican officeholders have not espouse the fraud of the Laffer curve for about 12 years. I seem to have found one of the links being updated. Others may not be updated, is this the stuff I say from years ago.


Others have  raised the Laffer Curve argument before, parroting Rush and the WSJ, who state it  
Here’s why it’s false. 
 
Historical tax collections are available here:
http://www.irs.ustreas.gov/pub/irs-soi/98db09co.xls
 
These aren’t in constant dollars, which I will address below.  Columns 4 and 5 are operative.  You will note that individual collections actually http://www.huppi.com/kangaroo/TaxTimeline.htm
 
In 82 dollars (use the 96.5 multiplier from here - http://resurgent.virtualave.net/Inflation&CPI.htm, the path from 82 to 89, broken down by Income tax rates, which Reagan originally cut (and subsequently signed bills which partially reversed), and FICA rates, which were consistently raised, shows that income tax collections dropped in the two years following the cut.  After the 84 and 86 partial repeals, collections increased again, but still no increase like the Laffer Curve predicts, and this doesn’t even account for an approximate 9% increase in the workforce, which skews it even farther.  FICA collections jumped significantly, more than double that of income tax rates.  Over 2/3 of the “increase” in collections that WSJ and Rush tout occurred here.  But that’s the exact opposite of supply-side theory, as FICA rates were  
In short, the Laffer Curve was debunked in the 80s, by empirical data you can check yourself.  The statements made above are deliberately intended to deceive.  If you want to sell your plan honestly using other stimulative effects (Keynesian), or just an  As for whether the Medicare 'plan' (I'm conspicuously not using the word 'reform'), will allow same level of basic services to be provided, you have to look at the CBO baselines. In years past, I would've gone the energy to look it up, but I'm not going to. I would just note that the rate of inflation for medical care traditionally far outpaces the core rate of inflation, as exemplified at 
http://www.californiahealthline.org/articles/2010/10/26/health-care-expenses-outpace-overall-rate-of-inflation-study-finds.aspx


 
Per capita health care costs increased by 7.32% on average over the previous 12 months ending in August, which is above the 1.1% overall inflation rate for the same period, according to a recently released Standard & Poor's study, HealthLeaders Media reports.

The statistics are consistent with a decade-long trend of rising health care inflation.
 

From August 2000 to August 2010, health care inflation increased by 48%, while the Consumer Price Index rose by 26% across the same period, according to Bureau of Labor Statistics data.

In response to Rick Fueygo's comment that "Plainly, all he wants to was actually reduce marginal rates for the wealthy, and the language regarding closing loopholes is the proverbial Trojan Horse, or whatever appropriate metaphor there is, to conceal the actual purpose, which is usually the primary purpose by anything that Rep. Ryan or his ilk opposes, which is to benefit the wealthy.  That is their motivation"

It really is difficult to respond to an ad hominem which impugns the motives of many people, but I would suggest that the value of Ryan's plan is that, unlike the President who is consistently vague about his policy preferences, except for the most abstract, poll-tested fluffs such as "millionaires should pay more taxes than their secretary," Ryan has actually put out the numbers he wants.  True he has not filled in which deducations he would eliminate in this budget, but he is fairly consistently clear on which he would support removing, as anyone who is familiar with his views can tell you.  But, again, the implication in the comment that his budget amounts to an elaborate ruse to simply accomplish a policy goal of robbing peter to pay paul is inaccurate.

In response to Kevin Clarke's comments, my response to the word "voucher" is that it is an inaccurate description of Ryan's plan, no matter who uses it.  There simply is no creature like a "voucher" in the plan, or any of the varieties of a premium support system out there (hence, both Ryan and Alice Rivlin have rankled publicly when their plans are describes as "vouchers").  Certainly part of it is that Democrats and liberals have used "voucher" as a derogatory way of saying that under a premium support plan, seniors are "on their own" when it comes to medical costs.  Second, I'm a bit astonished at your comment to the effect that the "vast majority" of people would elect the existing Medicare plan.  I suppose making the statement is fine, but you must know that there simply is no evidence to support the statement, as AKiv Roy points out in this post at the Atlantic http://www.theatlantic.com/business/archive/2012/03/liberals-are-wrong-free-market-health-care-is-possible/254648/

''There is no history of tax cuts increasing revenue a la the Laffer Curve or “dynamic scoring.”  Just the opposite.  That is a falsehood that used to be advanced by many on the Right, but of recent even they have become too embarrassed to make the claim.''


I haven't been paying attention to this thread so I just saw this.  The above is nonsense.  There is evidence that tax cuts in the early 1920's, after WWII, in the 1960's, the Reagan tax cuts in the 80's, the capital gains tax cuts in the late 90's and the Bush tax cuts in 2001 and 2003 all generated more revenue.  No one knows the the optimum tax rate for max revenues and it could change as the economic situation changes but tax cuts have been effective numerous times.


The hysteria in this OP is off the charts.  Ryan's plan actually increases the budget for next year and raises it to 4.9 trillion in 10 years or a 3.3% yearly increase.  It is only 13% less than Obama's plan for 10 years from now.  Now go figure how the language in the OP is justified based on that.  At best the Ryan plan proposed modest reforms when much more is needed but you won't get that from anyone here.


There are so many lies and distortions in this OP that one can only wonder why it was written as it was.  For example, 


''The cuts [Ryan proposes] are deep and there's no increase proposed in revenue,''


Both out right lies.  How can a budget that increases each year by 3.3% be one that has cuts that are deep and how can a reworking of the tax code to be more efficient be one that does not increase revenue.  Let the Bullies win.  Who is being the bully here?

Would that America transmitted Catholic teaching with as little demurral as they do the press releases of the Soros-funded Center for American Progress.

Sorry, David, but "justice" is not a political term, but a deeply religious one that goes way back.  The Hebrew word for justice is tsedaqah:

The English word justice is thin broth compared to the favored Hebrew word for justice, tsedaqah. I experienced its emotive strength one time when I traveled from New York to Washington on a train with a charming old rabbi. We had a lively conversation about all the goods and evils of the world and I sensed in him a strong moral passion for justice, a passion seasoned with a very gentle spirit. As we parted, I said, “Sir, you have in your heart the true tsedaqah.” And he winced. I wondered about that wince for a long time. But the more I studied tsedaqah the better I knew that what I said to him was, “Sir, you have beating in your chest the very heart of God.” And his humble wince said, “Too much, too much.” That’s the power of the word.

page 41, “A Moral Creed For All Christians”, Daniel Maguire c. 2005 Minneapolis

The Hebrew word "tzedakah" means "righteousness." The Hebrew word for "justice" is "mishpat." Anybody who thinks the definition of "justice" is straightforward should take another look at Plato's Republic.

The Ryan budget is an opening salvo in the budget battle. In the initial stage of the budget battle, both sides always go big. In the negotiations, they compromise.

But one key question will have to be decided by democratic principles: Medicare as we know it is prohibitively expensive and getting worse all the time. Either taxes will have to increase a lot, or some people will get less health care in old age. Which is it to be, and if the latter, who should get less health care and what should they get less of?

It is an enormously difficult question and it has to be answered immediately. Making the 2012 election about that (instead of, say, contraception mandate exceptions for pseudo-religious non-profits) would be a good idea.

“There is plenty of history to show that tax cuts and closing loop holes can actually generate more revenue and that raising  rates actually reduces revenue so the statement that  no increase proposed in revenue is probably not accurate.”
 
There is no history of tax cuts increasing revenue a la the Laffer Curve or “dynamic scoring.”  Just the opposite.  That is a falsehood that used to be advanced by many on the Right, but of recent even they have become too embarrassed to make the claim.
 
Rep. Ryan’s proposed plan should surprise no one – the preferential option for the wealthy and powerful is a staple of the modern GOP, and gets more extreme every year

"There is no history of tax cuts increasing revenue a la the Laffer Curve or “dynamic scoring.”  Just the opposite.  That is a falsehood that used to be advanced by many on the Right, but of recent even they have become too embarrassed to make the claim."

THis would be an accurate statement IF what Rep. Ryan has proposed were simply a tax cut, i.e. lowering marginal rates.  That, of course, is NOT what Rep. Ryan has proposed.  What he has proposed is based on a number of BIPARTISAN proposals that have been floating around for some time, including most recently the Simpson-Bowles Commission.  These proposals all advocate BOTH lowering the marginal rates while AT THE SAME TIME eliminating costly, inefficient and abusive loopholes, shelters and deductions.  The effect of this, as is shown in the Simpson-Bowles Commission report, is to INCREASE revenue by ensuring that more people (especially ni the upper income brackets) actually pay their taxes.  This is, of course, the difference between a marginal tax rate and the effective tax rate.  Yes, Ryan proposes lowering marginal rates, but the effective rate, i.e. how much people pay, will go up.  This is far different from the Laffer Curve.

It would be more conducive to an honest debate about the federal budget to avoid simplistic pigeonholing of ideas and proposals.

Two things:

First, the comment (as opposed to Rep. Ryan's proposal), did suggest impossible the dynamic scoring which doesn't actually occur in the real world.

I understand the point you were making which can be valid in the abstract, but it's not what Rep. Ryan is actually proposing.  The 1986 tax reform signed by Pres. Reagan is perhaps a paradigmatic example of lowering rates and closing loopholes which can be either revenue neutral or even revenue-producing. Rep. Ryan includes generalized lanuguage to that effect, but he only specifically proposes reductions in rates, with no specific proposals regarding closing loopholes.

It just won't happen, at least not to any significant quantity. Plainly, all he wants to was actually reduce marginal rates for the wealthy, and the language regarding closing loopholes is the proverbial Trojan Horse, or whatever appropriate metaphor there is, to conceal the actual purpose, which is usually the primary purpose by anything that Rep. Ryan or his ilk opposes, which is to benefit the wealthy.  That is their motivation

I just wish to comment on this statement by Amy

"But one key question will have to be decided by democratic principles: Medicare as we know it is prohibitively expensive and getting worse all the time. Either taxes will have to increase a lot, or some people will get less health care in old age. Which is it to be, and if the latter, who should get less health care and what should they get less of?"

I generally agree with the spirit behind the statement, which is, that medical costs, especially when it will cost late in life, are by far the primary driver of our fiscal problems. Far more than anything else, trying to address this issue is necessary if we really want to address the fiscal concerns that Rep. Ryan states.

My only statement is that I believe it is a bit of a false dilemma, because there's more than two choices. Instead of considering whether we wish to either raise taxes or cut the amount of care, our primary goal should be to try to find a way to "bend the cost curve."  That is, to make the rate of inflation for medical services roughly consistent with the overall rate of core inflation, and/or provide the same level of care at a lower cost. If we can do that, we are not trapped on the horns of the dilemma of either raising taxes or cutting the care.

There are a number of measures within the ACA intended to promote this goal, many of which have been profiled by Atul Gawande, some of which should be unobjectionable, such as standardizing a computerized medical records, and some of which have generated controversy, such as the Independent Payment Advisory Board, the so-called "death panel."

There's even been some statistical support for the proposition that level cost inflation has already cooled off a bit, although it is still excessive.  But bending the cost curve, in my opinion, should be our first priority.