Thursday, March 11, 2010

Republican Economic Plan

Drum: Summing Up Paul Ryan

I'd just like to quickly sum up what we now know about conservative Rep. Paul Ryan's "Roadmap for America’s Future":

And remember, this comes from the guy who's pretty much the best the GOP has to offer. Pretty impressive, no?

Rep. Paul Ryan (R-Wis.), the ranking Republican on the House Budget Committee, recently unveiled what he described as a budget "roadmap," intended to address the budget mess his own party had created during the Bush/Cheney era. Ryan's blueprint immediately became a political hot potato that Republicans liked but were reluctant to hold on to -- the roadmap, after all, would eliminate Social Security and privatize Medicare.

Policy experts have since had a chance to scrutinize Ryan's plan in detail. As the Center on Budget and Policy Priorities explained today, the roadmap "calls for radical policy changes that would result in a massive transfer of resources from the broad majority of Americans to the nation's wealthiest individuals."

The Roadmap would give the most affluent households a new round of very large, costly tax cuts by reducing income tax rates on high-income households; eliminating income taxes on capital gains, dividends, and interest; and abolishing the corporate income tax, the estate tax, and the alternative minimum tax.

At the same time, the Ryan plan would raise taxes for most middle-income families, privatize a substantial portion of Social Security, eliminate the tax exclusion for employer-sponsored health insurance, end traditional Medicare and most of Medicaid, and terminate the Children's Health Insurance Program. The plan would replace these health programs with a system of vouchers whose value would erode over time and thus would purchase health insurance that would cover fewer health care services as the years went by.

An analysis by the Urban Institute-Brookings Institution Tax Policy Center found that the richest 1% of Americans -- those making more than $633,000 a year -- would find their tax burden cut in half in 2014. The more one makes, the bigger the cut -- millionaires who Republicans have already taken good care of would find their taxes cut even more dramatically, by hundreds of thousands of dollars.

To make up the difference, we'd all have to pay a new consumption tax on goods and services. On the whole, the tax burden would shift dramatically from the wealthy to the middle class.

And best of all, even with new taxes on the middle class, and the massive cuts to Medicare and Social Security, Ryan's roadmap still wouldn't balance the budget for a very long time.

It's a rather breathtaking vision of how the government should operate in the 21st century. The roadmap offers directions to a system that makes it even easier for the very wealthy, even harder on the middle class, and all but eliminates bedrock societal programs. It raises taxes on 90% of the public without managing to close the budget gap, a feat that hardly seems possible.

Remember how radical the Gingrich/Dole agenda seemed after the '94 takeover? This is like that agenda on steroids -- with a crack chaser.

Best of all, don't forget the punch-line: if Republicans reclaim the House majority next year, Paul Ryan will be the chairman of the House Budget Committee, directly responsible for helping write the federal budget.

I can't wait to see just how many congressional Republicans endorse Ryan's roadmap in advance of the midterm elections. It looks bleak for Democrats now, but the radical nature of Ryan's scheme offers Dems a chance to go on the offensive.

Sullivan: The Reality Of The Ryan Budget

The Tax Policy Center finds that Rep. Ryan's budget alternative falls short of its revenue goals. Also:

Top-bracket taxpayers would overwhelmingly benefit from Ryan’s tax cuts. By 2014 people making in excess of $1 million-a-year would enjoy an average tax cut of more than $600,000. To put it another way, their after-tax income would rise by nearly 30 percent.

By contrast, the average taxpayer making $75,000 or less would pay higher taxes if they chose Ryan’s two-rate alternative. If they chose the tax plan more favorable to them, they’d do a bit better. For instance, people making between $50,000 and $75,000 would typically get a tax cut of $157 in 2014, while those making between $40,000 and $50,000 would pay $128 more on average.

Ryan responds here. Drum flags a report by Citizens for Tax Justice, a progressive tax group, that mocks the plan by writing that "it’s difficult to design a tax plan that will lose $2 trillion over a decade even while requiring 90 percent of taxpayers to pay more. But Congressman Ryan has met that daunting challenge". Ezra thinks this shows that "even draconian, unthinkable limits on spending won't be enough to balance the budget."

Beutler (TPM): Experts: Ryan Roadmap Balloons Deficits While Taxing Middle Class, Slashing Entitlements

Ever since Rep. Paul Ryan (R-WI), the GOP's top budget guy, unveiled a proposal to slash and privatize entitlements in order to reduce long-term deficits, the media--and even some Democratic politicians--have praised the plan as a serious way to save money. The plan may be conservative, they say, but at least it takes a serious, honest stab at averting fiscal catastrophe. Ryan even had the Congressional Budget Office score the package, and they found that, by mid-century, it would eliminate federal deficits.

But it turns out that's not even close to true.

As we reported a month ago, the CBO's analysis of the Ryan plan was drawn up based upon revenue projections Ryan himself provided. The CBO doesn't analyze the impact of tax policy on revenue, so they were unable to estimate how Ryan's policy prescriptions would actually impact revenues--and just took Ryan's numbers at face value. Turns out, those numbers were pure fantasy.

The Tax Policy Center--a non-partisan think tank--did a thorough analysis on the impact of the tax changes Ryan proposes--a massive tax cut for the wealthy, paired with substantial tax increases on 90 percent of the country--and found that the so-called "Roadmap" would actually leave the federal government desperately starved for funds.

According to the Center for Budget and Policy Priorities, "the Ryan plan would result in very large revenue losses relative to current policies."

[The Tax Policy Center] estimates that even with its middle-class tax increases, the plan would reduce federal revenues to 16 percent of GDP in 2014. Because the tax cuts for the wealthy would dwarf the tax increases for the middle class, the Ryan plan would allow the federal debt to continue growing for a number of decades to come, despite its steep cuts in Medicare, Medicaid, and Social Security.

The result, they conclude, is ballooning, unsustainable deficits--a quirky feature for a plan touted far and wide for its potential to right the country's fiscal course. And yet, Ryan's star is on the rise in the GOP and in Washington.

By contrast to the Ryan Roadmap, President Obama's budget would increase revenues as a share of GDP from 14.5 percent in 2010 to 19.6 percent in 2020. There would still be deficits at that point--but at a much more sustainable level than under the GOP alternative.

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