James Stewart has doubled down on his infatuation with Paul Ryan. Ryan's budget, he says, is a viable centrist starting point for budget negotiations, and attacks from "left and right" are mere "partisan rhetoric."
This is several different kinds of crazy. First, Stewart repeats his belief that Ryan's plan would increase taxes on investment income. But that belief has no basis other than Stewart's own belief that it would be a good idea. As I pointed out before, Ryan's own budget argues against raising taxes on capital gains and dividends. The only thing Stewart can find is Ryan's apple-pie platitudes about the need for tax reform. But Ryan's own vision of tax reform, as evidenced by his budget's own words, doesn't include higher capital gains taxes. (In addition, as a signatory to the Taxpayer Protection Pledge, Ryan is sworn to "oppose any and all efforts to increase the marginal income tax rate for individuals and business." That sounds to me like it includes the capital gains tax rate, which is a marginal income rate.) This is further evidence of columnists' ability to project their own fantasies onto Paul Ryan's handsome face.
More generally, Stewart pins high hopes on Ryan's embrace of tax reform. But all Ryan's budget actually says about tax reform can be summed up in two points: tax reform is good; and tax rates should be lower (25 percent for the top individual rate and for the top corporate rate, both down from 35 percent today). This of course allows credulous people to see themselves in Paul's blue eyes (see above). But if you want a serious starting point for tax reform, you should look at Simpson-Bowles or Domenici-Rivlin, both of which spelled out actual tax expenditures they would close (or Feldstein, Feenberg, and MacGuineas, or White House Burning, or any one of many other policy proposals that do the same). Ryan's "tax reform" is nothing more than a few talking points designed to score political points (why else would you specify the lower tax rates but not the closed loopholes), not a starting point for anything.
Stewart also plays the "centrist" card with unprecedented aggressiveness. He cites attacks by the Club for Growth as proof of Ryan's reasonableness. But when it comes to military spending, the Club for Growth isn't attacking Ryan from the right; it's attacking him from the left. Democrats want to reduce military spending as a share of GDP; so does every bipartisan deficit reduction panel; so does the Club for Growth (which thinks that the automatic spending cuts in the Budget Control Act should be respected). Ryan, by undoing the automatic spending cuts to preserve defense spending, is to the right of the budget debate, not in the center. In other words, everyone knows that if you want to reduce the deficit you have to cut defense spending--except Paul Ryan and James Stewart.
Then there's Medicare, one of the few areas where Ryan is willing to spell out his cost-cutting proposals. For Stewart, this shows that Ryan is a brave warrior against entitlement spending. But simply tackling entitlement spending doesn't make you reasonable, centrist, or worth listening to; everyone who talks about the deficit talks about tackling entitlement spending. (Even Simon and I do, although our entitlement cuts are smaller than most other people's.) It's the actual proposal that matters. And Ryan's proposal is only one step from the far-right fringe--that's the step he walked back since last year.
Last year he was going to convert Medicare into a voucher program where you could use your voucher toward insurance from a private company, but the value of the voucher was artificially capped so it would buy less and less health care over time. This year the only difference is that now you can buy insurance from a private company or from traditional Medicare. But in either case, the important points are: (a) the vouchers are designed to grow more slowly than the cost of health care, meaning a huge transfer of cost and risk from the government to individuals; and (b) reliance on the private market to reduce costs and improve outcomes (something it's failed at dismally for the last forty years). Having a Medicare plan shouldn't win you any points; it's what's in the plan that matters. At least for most of us.
This inattention to actual policy is how Stewart can think that "within the Ryan budget proposal is the outline of a grand compromise not all that different from the one President Obama and the House majority leader, John Boehner, reportedly came close to reaching last summer: long-term deficit reduction through tax reform, higher tax revenue and spending cuts." Well, yes, if you're going to stick to the level of abstract generalities, I guess the Ryan budget is similar to the Obama-Boehner deal in that both included tax reform and spending cuts.
In practice, though, the Obama-Boehner deal was nothing like the Ryan budget. We know the tax reform was completely different because Boehner was offering higher tax revenues that were not entirely due to supply-side fantasies. Ryan only achieves higher tax revenues by dictating that his plan will bring in 19 percent of GDP in tax revenue; nowhere does he say how we would actually achieve this while slashing tax rates. We also know the spending cuts were completely different, because Obama-Boehner did not convert Medicare to a voucher system (they did include spending cuts, but they kept the same benefit structure), while Ryan does.
Finally, here's one more way to think about the Ryan budget:
This picture shows all government spending except for Medicare, Medicaid, CHIP, Social Security, and net interest. (The data are from Tables 1.1, 1.2, 3.1, and 8.5 of the OMB's 2012 budget, historical tables.) It's a close approximation for discretionary spending, and it's what the CBO uses in its long-term projections. The Ryan Budget would reduce spending on everything except Social Security and health care to the lowest levels since before the Great Depression.
Furthermore, those numbers include defense spending. Since Ryan's budget proposes to protect military spending from the automatic cuts in the Budget Control Act, I think it's fair to assume that he won't want to cut defense spending to historical lows. Since World War II, defense spending has never fallen below 3.0 percent of GDP. Assuming that defense spending never falls below that level, you get this picture:
This is a blatant assault on the entire federal government except for health care, Social Security, and defense. This is not a courageous, centrist starting point for a real deficit solution.
* See XKCD.
James Kwak is the co-author of White House Burning: The Founding Fathers, Our National Debt, and Why It Matters To You, available from April 3rd. This post is cross-posted from The Baseline Scenario. Read more from the Fiscal Affairs series here.
Follow James Kwak on Twitter: www.twitter.com/baselinescene
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The 1% was there when the Huns rules over Asia, when the Romans ruled everything else. When all that came crashing down, there were still the 1%. When our economy was strong and thriving, yup we had the 1%. When I was paying $.79 for a gallon of gas, and I am not that old, yup we had the 1%. I don't care about the 1%, I care about my family. It is also been said if we were to tax the "1%" 100% of everything they earn, we still would be in debt.
The "1%" are this last decade's boogeymen and a nice way to dodge the issues that our government as a whole is broken and self serving. The real issue it seems is one small collective body is so far out of touch with the people it governs that unless basic fundamental changes are made to it we will continue to decline. We are to big and to numerous of a nation for this one size fits all policy making in regards to the states. In some cases it works, but not in most of the entitlement and economical policies.
I am conservative, not a tea party and once Republician which I belive left those roots long ago. But I also think most of us in this country are conservatives in our daily lives and our personal fianances. I can't figure out why we put blinders on to common sense when it comes to government spending other than it is easier to spend other people's money verses out own. No somewhat intellegent person would run their home budgets like the way we allow our government run our national budget, it would be beyond foolish. Yet we continue to champion it and even push beyond.
This is only centrist if you mean somewhere between Louis XIV & Marquis de Sade!
I would; however, add that the Presidents Jobs bill, if implemented, would have kick started the economy more than any other plan. When the government pays to repair/replace our infrastructure a significant amount of 'support' businesses are also 'energized' and new hiring takes place to support the higher demand. Sure, that program would be finite but the impetus of working individuals usually breeds new opportunities and they keep building on one another.
Death to Economic Growth !
DEMS do not believe it...................even though $ 5.00 Gas has proved it.
NY Times sells the Karl Marx vision of Society................they have to, that's NY.
Hugo is not exactly a rightwinger.
You ought to get your head out of your a**.
I just refuse to cut spending on our failing education system, crumbling infrastructure, and social safety-net while our defense spending remains so bloated. I also refuse to cut spending on these vital programs instead of continuing outdated farm, oil, and gas subsidy payments. I refuse to cut back social security benefits or raise premiums on medicare while EVEN IF THE BUSH TAX CUTS EXPIRE, MILLIONAIRES AND BILLIONAIRES WILL STILL ONLY PAY A 20% TAX RATE.
Why on earth would someone want to raise capital gains taxes (i.e., a tax on top of a tax) in this rotten economy? Liberals prove, once again, that they don't know the first thing about inspiring business to expand and HIRE.
The 0.1%, the super-rich, whose entry point is $1.6 million. On average, 94.5% of this group got some portion of its money from investments. And these investments paid well: The average take in 2011 was $2,275,145.
During Clinton's first term, the long-term capital gains tax rate was 28%. The rate on dividends was the same as income, which for the those in the top-income tax bracket was 39.6%. Today, the rate is 15% for both. Oddly enough, during Clinton's first term 11.5 million new jobs were created. During his second term, another 11 million jobs were created with capital gains at 20% and dividends being taxed as income (still 39.6% for top earners). During Reagan second term, over 10 million jobs were added to the economy. The rate on both capital gains and dividends was at 28%.
So, in conclusion, higher tax rates on capital gains do not stunt job growth. In fact, it would seem it does the exact opposite.
But, don't look so sad! When have pesky facts or numbers ever gotten in the way of Republican belief?
You prove that you know nothing about the economy. Businesses don't want to expand and hire because nobody can afford what they're selling - because they're broke from having no raises, no jobs, no income! The problem isn't 'we have too much taxes' for the 70% of the economy that's consumers, it's 'we're broke'.
Meanwhile, at the top - at Wall Street, at big corporations, the execs who pay capital gains on their huge stock options - their problem is that 'we have too much money and not enough to spend it on, so we're stockpiling it'. Go do a few quick google searches on 'record corporate cash'. Pick your sources. It'll be easy to back up.
Hmm. Looks like you're just over-simplifying facts based on an assumption that's bad in the first place.
That's it? No other companies? No job creators?
And who's talking about ONLY companies that "run on capital gains"?
Look at what the Bankers and Mortgage lenders did to this country from the private sector? They barely got a slap on the wrist. How many times do we need the private sector to almost ruin the country before the pubic wakes up. How many times must we run huge deficits to bail them out. Taxpayers where is your voice?
Don't blame Obama. Blame the private sector. They brought this one on. and now they are buying the elections with super pacs. They already bought the Supreme Court when the supreme court ruled corporations are people. I agree corporations are people. very rich people at that, Kochs, Waltons come to mind. What this did is lift the limits. If a corporation is a person. fine, but limit them to the 5000 or 10000 tops. For a one time one voting cycle donation.
More to come.
VOTE!
entitlement programs. If Republicans really don't believe in the programs then they should propose to end them not cripple them to the point where they are not effective.
Get a clue, pal.