“Massive Tax Breaks For The Rich”: GOP Budget Plan To Reduce The Debt Actually Makes The Debt Worse
House Budget Committee Chairman Paul Ryan (R-WI) released the GOP’s new budget this morning, and in doing so, he touted it as a plan to make America’s level of debt more sustainable. “We’ve shared with Americans a specific plan of action that cuts spending, pays off the debt and gets our economy back on the path to prosperity,” Ryan said.
The problem with Ryan’s rhetoric is that his plan fails to match it. By giving massive tax breaks to corporations and the top one percent and preserving unsustainable levels of defense spending, the House GOP’s plan to reduce the debt would fail to reduce the debt. In fact, because it assumes levels of revenue that are pure fantasy under his tax proposals, the plan would actually increase the debt, according to an analysis by Center for American Progress Tax and Budget Policy Director Michael Linden:
But the House budget’s entire claim to deficit reduction is built on the foundation of those fantasy revenue levels. Without them, the debt goes up, not down. In fact, with all the House budget’s tax cuts properly accounted for, revenue would average just 15.3 percent of GDP from 2013 through 2022, not 18.3 percent. The result: deficits would never drop below 4.4 percent of GDP, and would rise to more than 5 percent of GDP by 2022.
The national debt, measured as a share of GDP, would never decline, surpassing 80 percent by 2014, and 90 percent by 2022. By comparison, President Barack Obama’s budget proposal, released in February, would stabilize the debt by 2015, and bring it down to 76 percent by 2022.
As Linden notes, the GOP’s “debt reduction” isn’t just based on fantasy levels of revenue — it’s based on “massive, unrealistic” spending cuts as well. Medicaid would face $1 trillion cuts in the first decade, while education and workforce training programs would get cut in half and transportation funding would be reduced by nearly 25 percent. The plan, which also ignores previous deals and increases defense spending, would also require deep cuts in other vital domestic programs.
“If you agree it’s morally wrong to ignore the most predictable crisis in U.S. history, this is your budget,” Ryan tweeted yesterday. Apparently, though, it seems Ryan and his Republican colleagues got so wrapped up in creating a budget that benefits the top one percent, they forgot to actually reduce the debt.
By: Travis Waldron, Think Progress, March 20, 2012
“A Platform To Revitalize America”: An Idiotic Wish List Of Conservative Senate Tea Party Caucus Policies
When Bill Clinton left the White House just 12 years ago, the federal budget deficit was quite literally gone, and the nation was running a surplus for the first time in a generation. After Republicans approved two massive tax breaks, expanded Medicare, put two wars on the national credit card, and crashed the economy, the fiscal mess Clinton had cleaned up was back.
We’ve seen some modest progress on this front, but even under the most optimistic of scenarios, a balanced budget is nowhere in sight.
That is, unless we adopt a new plan from three far-right senators, who’ve mapped out a way to get us back to 2001 figures in a hurry.
Members of the Senate Tea Party Caucus on Thursday announced a plan to balance the budget in five years, cutting spending by nearly $11 trillion compared to President Obama’s budget.
The plan, dubbed “A Platform to Revitalize America,” is a wish list of conservative policies, none of which have any chance of passing the Democratic-controlled Senate or being signed into law by a liberal Democratic president.
The ambitious blueprint would achieve a $111 billion surplus in fiscal year 2017.
“The whole point here is to show we can reasonably balance the budget within a five-year period,” said Sen. Jim DeMint (R-S.C.), one of the sponsors of the plan.
Well, “reasonably” is a subjective term.
The plan, also endorsed by Sens. Rand Paul (R-Ky.) and Mike Lee (R-Utah), would produce a surplus by 2017 by effectively repealing most of the 20th century.
The “Platform to Revitalize America” has it all figured out: Medicare would be privatized out of existence; Social Security eligibility would be restricted; while Medicaid, the State Children’s Health Insurance Program, food stamps, and child nutrition programs would all be gutted through state block grants.
The federal departments of Commerce, Education, Energy, and Housing and Urban Development would also all be eliminated. Pentagon spending, by the way, would not be touched.
See how easy it is to balance the federal budget in hardly any time at all?
By: Steve Benen, The Maddow Blog, March 9, 2012
“Deficit-Exploding”: Mitt Romney’s Fantasy Tax Cuts
Let’s take a trip back to 1992. Then-Gov. Bill Clinton, in his campaign manifesto, said: “Middle-class taxpayers will have a choice between a children’s tax credit or a significant reduction in their income tax rate.”
By February 1993, President Clinton’s position on a middle class tax cut had morphed into this:
Before I ask the middle class to pay, I’m going to ask the wealthiest Americans and companies, who made money in the ’80s and had their taxes cut, to pay their fair share. And I’m going to cut more government spending. But I cannot tell you that I won’t ask you to make any contribution to the changes we have to make.
To justify the reversal, Clinton cited a budget deficit that was $50 billion larger than what he thought it was before the election. Fast forward to today.
Former Gov. Mitt Romney has pledged to cut income tax rates by 20 percent for every American, not just the middle class. He has also embraced Rep. Paul Ryan’s Medicare reform plan, which would convert the program from a defined benefit to a defined contribution scheme.
Romney emerges from Michigan committed not only to the Ryan plan, but also to a 20 percent cut in tax rates, above and beyond his prior commitment to making the Bush tax cuts permanent. …That’s not the race I’m sure Romney intended to run. But it will be hard to change now.
Yes, hard to change now—and impossible to realize once in office.
Such deficit-exploding tax cuts will never become law. Romney—a sane man—already knows this. There will be no need for Clintonian “evolution.” And, especially if the Senate remains under Democratic control, the odds for which increased with Sen. Olympia Snowe’s surprise retirement announcement, the Ryan plan stands little chance of even reaching President Romney’s desk.
To review: Mitt Romney has set himself up to (ahem) severely disappoint conservatives who already suspect his ideological convictions.
As I see it, Romney could blunt this backlash-in-the-making by picking up the pieces of last year’s aborted Grand Bargain. There is a solid left-right consensus on raising badly-needed federal revenue by reigning in the billions we spend through the tax code. Pair reduction in tax expenditures with modest entitlement reforms and you can see at least the lineaments of restored budget sanity.
This is probably the best outcome our political system can manage these days.
The question is, as president, would Mitt Romney be able to sell it to conservatives who don’t trust him?
By: Scott Galupo, U. S. News and World Report, February 29, 2012
Heads-up: Deficit Reduction Won’t Create Jobs
It’s budget time, and that means that we can expect to hear the Washington elite wailing about the budget deficit for the next several weeks. When hearing the cries about out-of-control deficits, people would be best advised to turn off their television sets, put down their newspaper, and smash their computers. (Okay, don’t smash your computer.)
The economy has one major problem right now and that is a serious lack of jobs. We still have more than 25 million people unemployed, underemployed, or who have given up looking for work altogether because there are no jobs. This should be the issue that everyone in Washington is talking about.
Instead, many politicians and pundits want to distract people’s attention from unemployment by complaining about the deficit. They have deceived many people into thinking that the economy would somehow be stronger and there would be more jobs if the deficit was reduced, either due to spending cuts or increased taxes.
This view makes no sense. There are no businesses that are going to hire additional workers because the government laid off school teachers or firefighters and we cut back spending on food stamps. Businesses hire more workers when they see more demand for their product. All of these actions that reduce the deficit, either on the spending or tax side, translate into less demand and therefore less employment. In short, those who want to cut the deficit now are lobbying for fewer jobs and higher unemployment.
This is only part of the story that they got wrong. The other part is the cause of the deficit. There are thousands of people running around Washington blaming the deficit on out-of-control spending or irresponsible tax cuts. Both sides are way off the mark.
It is easy show from the data that the huge deficits of the last three years are the direct result of the economic plunge caused by the collapse of the housing bubble. The budget deficit was actually quite modest in 2007, and it was projected to remain low in 2008-2010, even before the Bush era tax cuts expired.
However, the deficits came in much higher than projected because the collapse of the economy sent unemployment soaring and tax revenues plummeting. There is an irony in this situation. Back in the years 2002-2007 some of us were warning about the housing bubble, but our voices were largely drowned out by the big deficit hawks.
Of course now that the bubble has collapsed and the deficit has exploded we are still hearing the same complaints from the deficit hawks. If the country had paid less attention to the deficit hawks back in the bubble years, and more attention to the bubble, then we would not have had such a horrible recession and the deficit hawks would not have a large budget deficit to complain about today.
By: Dean Baker, U. S.ews and World Report, February 10, 2012
“The World We Live In”: Yes, Tax Cuts Increase The Deficit
On Thursday, House Republicans unanimously rejected a resolution from Rep. Gary Peters stating, among other things, that the Bush tax cuts added to the deficit. If you read the text they were voting on, it’s pretty clear that it wasn’t built for bipartisanship: It’s phrased to suggest that Bush was a liar and Republican governance was a fraud. That kind of thing doesn’t pick up votes across the aisle.
But there’s a more important economic debate here. Republicans occasionally flirt with the idea that tax cuts don’t increase deficits. Senate minority leader Mitch McConnell has said this directly. Speaker John Boehner has decreed that tax cuts don’t need to be offset, but spending proposals do. But there’s a very easy way to see that Republicans don’t really mean this: They believe that tax cuts cause deficits when Democrats are behind them.
The ongoing debate over the payroll tax is a good example. When Republicans proposed a payroll tax cut as stimulus in 2009, it wasn’t offset. When they agreed to it in the 2010 tax deal, it wasn’t offset. But since it has become the White House’s favored policy, House Republicans — the same House Republicans who passed the CUTGO rules stating that spending proposals had to be paid for but tax cuts didn’t — are insisting the payroll tax cut be offset.
Then there’s the Bush tax cuts. When Republicans tally up Obama’s deficits over the last few years, they’re adding $620 billion for the two-year extension of the Bush tax cuts. When they project his deficits for the next five years, they’re assuming the extension of the Bush tax cuts. And they’re doing so explicitly. Earlier in the week, I worked with the Center on Budget and Policy Priorities on a column summing up the projected budgetary impact of every single piece of legislation Obama had signed into law. In the end, my numbers showed, Obama has passed policies adding about a trillion dollars to the deficit. But Keith Hennessey, who directed the National Economic Council under George W. Bush, responded that I had ignored the trillions of dollars in deficits “from policies President Obama proposes to enact in the future (like extending most but not all tax cuts rates beyond 2012)”.
And Hennessey is right. Not about my analysis, which was restricted to actual policies, not proposed policies (should I also have subtracted $4 trillion from the deficit because Obama favors a deficit deal of that size?). But about the Bush tax cuts, which will add trillions of dollars to the deficit if Obama extends all or most of them in 2012.
Finally, there is a particularly odd claim you occasionally hear about the Bush tax cuts: Revenue increased in their aftermath. Dan Holler, the communications director for the Heritage Action, tweeted as much at me yesterday. “revenues increased between 2003 and 2007…how does @ezraklein argue Bush policies ‘pushed revenues’ down?”
This relies on mixing up the effects of inflation, economic growth, and taxes. The normal way to measure how much revenues a given tax regime is pulling in is to look at taxes as a percentage of GDP. In 2001, taxes revenues were 19.5 percent of GDP. In 2002, they fell to 17.6 percent of GDP. In 2003, 16.2 percent of GDP. In 2004, 16.1 percent of GDP. Some of that is the 2001 recession. But at no point in Bush’s presidency, and at no point since, have taxes returned to 19 percent of GDP.
Or, to put it slightly differently, if tax cuts actually increased revenues, then it would have been absurd for George W. Bush to propose tax cuts as a way of paying down the surplus. In that world, tax cuts would have made the surplus larger, and given the government even more of the people’s money. We would end up in a fiscal paradox, with the government constantly trying to give back its surplus, but ending up with an even larger surplus as a result. But that’s not the world we live in.
By: Ezra Klein, The Washington Post, February 3, 2012
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