A Budget That Can’t Budge

April 6th, 2011 at 11:07 am David Frum | 111 Comments |

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What is the much-discussed Paul Ryan plan?

You probably know the plan’s main elements: A huge cut in Medicaid, a big cut in the value of future Medicare coverage for those under age 55, substantial cuts in discretionary domestic spending, plus a big tax cut aimed primarily at upper-income taxpayers.

Theoretically, this plan constitutes the first step toward the 2012 federal budget. But only very theoretically. The Senate will not pass it, and the president will not sign anything like the Ryan plan. If anything, the Ryan plan pushes us toward a future in which the federal government is funded for the next two years by stopgap continuing resolutions, postponing big decisions until after the 2012 elections.

So is the plan an electioneering document — the first draft of the Republican campaign message for 2012? Again, probably not. The campaign message will be determined by the presidential nominee, not by the chairman of the House Budget Committee. Review the probable nominees, and it’s hard to imagine Mitt Romney or Tim Pawlenty or Haley Barbour or Chris Christie running for president on the basis of a platform much more radical than that offered by Ronald Reagan in 1980.

Third option, then: Is the plan a negotiating ploy, a first offer to get serious bipartisan talks started with Democrats on entitlement reforms? Possibly. But the plan seems as likely to provoke the Democrats into fighting rather than negotiating. From a Democratic point of view, the Ryan plan looks like a Republican demand for all the marbles: Spending cuts for Democratic constituencies to fund tax cuts for Republican constituencies. More relevantly, from a Democratic point of view, the Ryan plan looks like a lethally unpopular demand for all the marbles — exactly the same demand that Democrats turned so decisively against Republicans in 1995. For Democrats, the Ryan plan is not a good faith opening gambit. It’s a temptingly vulnerable political target.

If the plan is not a real-world budget proposal, not an electioneering document, not a negotiating position — then what is it?

Answer: The Ryan plan is a Republican “memo to me” — an attempt by a party emerging from a troubled history to answer the question, “Who are we?” The answer is not aimed at the general public, but at Republicans themselves.

It goes like this: “Perhaps we used to be the people who introduced Medicare Part D. No longer. We have rediscovered our identity as the people who shrink government, not the people who expand it. Here is the proof.”

This “speaking to ourselves” mission explains many things about the plan that are otherwise puzzling.

  • Why are there no revenue enhancements of any kind — not even fees or excise taxes that have no negative impact on incentives or savings?
  • Why is Medicare protected in its existing form for a decade while the changes to Medicaid go into effect immediately?
  • Why is Social Security exempted entirely?
  • Why is agriculture treated so lightly — $30 billion in savings over 10 years, all of them (interestingly) to be decided by the Agriculture Committee, a unique concession by a Budget Committee otherwise determined to centralize decision-making?

Pose these questions and the answers become obvious:

These days, Americans over 55 vote heavily Republican. Under-55s lean Democratic, under-30s overwhelmingly so. (That’s the reverse, by the way, of the situation that prevailed as recently as the 1980s). Farmers vote Republican. Medicaid recipients do not. The deficit grows because the deficit reduction plan includes a big additional tax cut to upper-income taxpayers. And so on.

Well, that’s politics. The president’s health care and stimulus plans were larded with much grosser payoffs to Democratic constituencies.

But notice what Ryan’s plan does not do.

It does not credibly address the number one concern of Americans: jobs. The job numbers attached to the plan have become instant targets of ridicule. Not even the actual authors of the numbers believe them. See Noah Kristula Green’s article at FrumForum.com:

The Ryan budget touts analysis from the Heritage Foundation which argues that the unemployment rate will reach 2.8% by 2021. (For comparison, ‘natural’ unemployment is estimated to be around 5%.) FrumForum contacted the Heritage Foundation’s Center for Data Analysis to ask about this figure. Heritage responded that they came to this conclusion using a CBO baseline as they were requested to do, and that they view the baseline they were asked to use as one which was too optimistic to begin with.

More surprising still, the debt reduction plan actually increases the debt over the medium term — by even more President Obama’s budget would. Ryan’s plan tries to minimize this awkward fact by inserting it within a chart on page 57 that portrays the deficit from 1960 to 2080, a long enough timeframe wherein the worsening of the deficit situation over the period from 2012 to 2021 seems to shrink into historic insignificance.

The real message of the Ryan plan is: Upper-income tax cuts now; spending cuts for the poor now; more deficits now; spending cuts for middle-income people much later; spending cuts for today’s elderly, never.

Jobs first, deficit later is actually the right timing of priorities. But the upper-income tax cuts of 2001 and 2003 markedly failed to translate into higher incomes for ordinary Americans. The Ryan plan offers no reason to hope that another round of the same medicine will deliver better results.

As politics, the message is even worse than the economics. Cut Medicaid and Medicare to fund tax cuts? Isn’t that the issue that returned Bill Clinton to the White House in 1996? Don’t all the polls show that Medicare and even Medicaid are popular, and that more tax cuts for the wealthiest Americans are not? Isn’t this a formula for a GOP bloodbath in 2012? And if the plan did somehow become law, is it not a formula for an economy in the 2010s that will underperform for most people in the same way that the economy of the 2000s underperformed for most people?

Those are the questions that will worry economists and swing voters alike. But the plan is not written for economists and swing voters. It is written for the GOP core. Yet one has to wonder: What happens to a party that invests so much energy talking to itself? I am reminded again of the best anecdote in Karen Hughes’ memoir, “Ten Minutes From Normal.”

Walking on the beach one day, the former Bush communications director noticed a small plane trawling a huge advertising banner. The banner read something like: “Jill come back. I am miserable without you. Jack.” Hughes thought: “Bad message, Jack. Too much about you, not enough about her.”

That’s advice Republicans should ponder as they absorb Paul Ryan’s inward-focused budget ideas.

Originally published in The Week.


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111 Comments so far ↓

  • Watusie

    What is the Ryan plan? Pure fantasy. Witness these assumptions:

    1) unemployment will drop to 2.8%.

    2) resurrection of the idea that “tax cuts pay for themselves”, despite our decades of evidence to the contrary.

    3) repealing ACA will save $1.4 trillion, when in fact the CBO says it will cost $200 billion.

    4) there will be a sudden housing boom, starting next year – despite the massive backlog of foreclosures and unsold houses.

    5) the growth of the cost of Medicare or Medicaid will be reduced to the level of inflation.

    Following your line of thought, David – Ryan appears to be trying to remind the Republican party that they are not part of the reality-based community.

  • politicalfan

    Love this Frum, even if I disagree with a few things.

    “Cut Medicaid and Medicare to fund tax cuts?”
    Superb sentence. Exactly!!! There is no way they can continue to say that tax cuts equals jobs without the proof. This is one thing that the President was masterful on. He compromised but will be able to say, “Where’s the beef?”
    http://www.youtube.com/watch?v=Ug75diEyiA0

    Great read Frum and the reason that I come back to the site!!! Constructive criticism is a very good thing.

  • indy

    I am largely in agreement with this post. And yes, I had a lot of trouble typing that last sentence. I would add I really don’t think it was a good political decision to articulate what is on their minds so publicly.

  • jerseychix

    But the upper-income tax cuts of 2001 and 2003 markedly failed to translate into higher incomes for ordinary Americans.

    A truer statement was never made by a Republican.

  • balconesfault

    Frum tossed in: Well, that’s politics. The president’s health care and stimulus plans were larded with much grosser payoffs to Democratic constituencies.

    Except … the President’s health care and stimulus plans were consistent with the President’s rhetoric.

    For example – the President’s health care plan included lots of dollars to subsidize insurance for lower-wage workers because THAT’S WHAT THE POINT OF THE PLAN WAS. If you view the subsidies as just a “payoff to a Democratic constituency”, then you have to view the whole plan as a “payoff to a Democratic constituency”.

    The GOP, on the other hand, is just being purely cynical in avoiding cuts to those who vote GOP, and concentrating the cuts on those who vote Dem. It has nothing to do with policy, and everything to do with politics.

    Return of the Mayberry Machiavellis, except now they reside in the House instead of the Bush/Rove/Frum White House.

    (PS – anyone want to guess whether Frum ever put “the President” in lower case when Bush was in office? The man is a professional wordsmith – I’m hard pressed to view this slight as unintentional.)

    • politicalfan

      Good point but HCR was not exactly popular. While, I absolutely agree that strong health care reforms are needed (or the dreaded universal type care would have been a better number cruncher with private supplementals to be purchased by those who can participate in this option.) I think there were better arguments to seal the deal. Health care has become the catalyst for not compromising and has been branded socialist care.

      We have seen a lack of compromise in Wisconsin and it is being played out today, ‘can we say potential government shut-down.’ When people campaign on shutting down the government, it is possible that they will follow through. I side on the best deal for the most, not a fan of not addressing our countries poverty issues.

      • balconesfault

        Good point but HCR was not exactly popular.

        Let’s define terms here. Thanks to the amazing amount of resources focused on defeating the ACA, the healthcare reform bill was not exactly popular. Those resources included the entire GOP caucus acting in concert, one major TV news network, all the right-wing radio pundits with their hours and hours of airtime, and tens of millions in advertising dollars.

        Despite all this – the COMPONENTS of HCR … Federal subsidies to make insurance coverage for the working class poor affordable, elimination of recissions and denial of coverage … were very popular, consistently polling a solid majority.

        I blame this dislink on the media, who acted as scribes instead of as reporters.

        While, I absolutely agree that strong health care reforms are needed (or the dreaded universal type care would have been a better number cruncher with private supplementals to be purchased by those who can participate in this option.)

        Preach it, brother!

        • politicalfan

          Preach it sister!!! :)

          Mr. Frum is not in the minority in the Republican party. I think we need to stop making Republicans the enemy, I love a lot of Republicans and acknowledge many are very close friends.

          The radical right is nothing but the sum total of making sure that the party is revived. Making a contrast with your opponent is not new, they have just taken the rhetorical approach times ten. What they can learn from Frum is that it is better to win an argument with substance versus rhetoric. The demonizing makes it impossible to debate the issues and only creates an image of intolerance that does not serve either party well.

          Now go compromise and don’t shut down the government!!! Please.

        • ottovbvs

          With all due respect I don’t think you quite understand what DF is up to with this. He’s acknowledging the dishonesty and essential lunacy of the Ryan program (it’s hard not to) but saying it’s not really very important; it’s all internal navel gazing; we don’t actually ever intend to do this. And of course despite the disdain with which he treats Ryan’s nonsense he will continue to claim Republicans are more effective at running the country. Viz.

          “Who are we?” The answer is not aimed at the general public, but at Republicans themselves.

        • medinnus

          I think we need to stop making Republicans the enemy

          Agreed – as far as it goes. As a former Republican-turned-Independent, I want the Republicans to stop pushing unAmerican ideas like:

          * Branding anyone who disagrees with you as “Not a real American” or a “traitor”.
          * Promoting a Christianist (the Western version of Sharia) agenda
          * Hating minorities and homosexuals

          When they do that, and start actually acting like real Conservatives, and not unthinking Tea Party bigot drones, I’ll stop considering them the Enemy. Until then… they are precisely that.

        • balconesfault

          The thing that bothers me about so many Frum articles is that he often clearly articulate clear flaws with the current GOP stance on an issue – but feels the need to take some kind of backhand swipe at Obama or the Democrats at the same time.

          But the swipes are usually weak and dismissive, without real substance – more a tool for Frum to justify his own determination to ally himself with the march in lockstep crowd that’s clearly marching in a direction he disagrees with, where his opinions are quite frankly as much a concern as the fate of any given endangered species.

          I just don’t get it. Within the Democratic Party, Frum would engage in a battle of ideas. In the GOP, he’s a voice that’s being more and more marginalized as time goes on. Even if GOP leadership agreed with any of what he writes, they will ignore him on purely tactical grounds, since their real goal is simply to make the country ungovernable under Obama, rather than to share in governing.

  • COProgressive

    David wrote;
    “These days, Americans over 55 vote heavily Republican. Under-55s lean Democratic, under-30s overwhelmingly so. (That’s the reverse, by the way, of the situation that prevailed as recently as the 1980s). Farmers vote Republican. Medicaid recipients do not. The deficit grows because the deficit reduction plan includes a big additional tax cut to upper-income taxpayers. And so on.”

    Good piece David. What you have shown is what many of us have known for sometime. Republicans favor the wealth and business at the expense of the Middle Class and the poor. While they talk about “Entitlements” for Americans as a bad thing for our country, they make no mention of what it would be like with millions of elderly poor without healthcare and without some form of a social safety net.

    The Ryan plan makes no mention of defense spending, the “Entitlement” for the MIC, and little mention of farm subsidies, the “Entitlement” for the Corporate farmers in their penthouse offices in Chicago, or the subsidies for the oil industry, the “Entitlement” for BIG OIL and the “Entitlements” for PhRMA in Medicare Part D.

    There is no mention of raising revenue. Look at any household income chart and it is plain to see that those who have benefitted most over the last decade are the ones who will be most benefitted once again by the Ryan Budget. Cutting corporate tax rates to 25% when a number of very large corporations pay no income tax at all is an insult to all of us who have had to write checks to the IRS each April 15th when our family income pushes us into a tax bracket above our individual bracket.

    Then there is the military. We have troops stationed all over the world where American tax money pay our troops and that money is spent if those countries. American tax money also pays for maintaining those bases and the cost of getting troops and material into and out of those countries. On top of that is the cost of fuel in the military. We need to bring our troops home.

    There are any number of ways our country can cut back on spending by eliminating some of the “Entitlements” without attacking the Middle Class, the poor and the elderly.

    As a smart man once said,

    “What really pains me about this is the Republicans care about politics and the Democrats care about government.” David Frum

  • Jim in DE

    So the Ryan plan is basically the GOP’s “Daily Affirmation with Stuart Smalley?” Perhaps that’s their method to woo Franken’s vote, at least.

    Very good synopsis, David. What will be deliciously ironic is that, if indeed there is a 2012 bloodbath, the party/right wing media line will be that selfish voters want to keep voting for goodies for themselves and aren’t adult enough to deal with Ryan’s dose of reality. (If memory serves, their postelection analysis in 2008 was something along these lines.) I’m sure nobody will remember that the 2010 Republican rennaisance came on the backs of older whiter voters, who liked their message of “spending cuts for the poor now; spending cuts for middle-income people much later; spending cuts for today’s elderly, never.”

  • think4yourself

    If I understand the portion in the plan about Medicare, people 54 and younger would become part of a “voucher” program. The gov’t gives me a set amount of money to go buy a plan on the marketplace from a private insurer. The CBO estimates this will create rising costs for the beneficiaries for 2 reasons. First, due to higher administration costs of private insurers (i.e. multi-million dollar pay for top executives) and the Federal contribution will grow slower than the growth of inflation.

    If anything, I think the CBO understates the fact. Private insurers love this, they get to talk unsophisticated seniors into health plans (have you ever tried to read an insurance document?) and since these are individual plans, the beneficiaries no longer have any leverage in dealing with the insurance companies or medical providers. Today the gov’t as a single payer has more leverage in determining how much should be charged for services. That goes out the window.

    This will become similar to the health insurance market for individual policies. As a self employed over the last 10 years my health insurance premium increased an average of 25% per year (not really tied to inflation, is it). What happens when that occurs for medicare (and it will)? Either seniors get stuck and no longer purchase these plans (and end up in the emergency rooms, costing us more), OR, gov’t becomes forced to bail out the program after the fact with enormous costs, nullifying any potential financial gains.

    I’m okay with paying more for my health costs when I’m over 65. I disagree that making it an open market will lower costs. It’s an unequal market place dominated by the corporations (oligopolies) that will determine pricing and thus we need a large entity on the individual’s side to help control costs.

    Frum is right, this is not about balancing the budget, it’s about GOP priorities.

    • jerseychix

      I heard a really interesting analysis on the radio today about the Medicare portion of the budget.

      It doesn’t work without “Obamacare”. It will give seniors vouchers AND will mandate that insurance companies sell to them because the original market failure in the 60s was that seniors simply could not buy insurance on the open market period.

      So, without a mandate, Ryan’s plan is 100% unworkable.

  • Primrose

    Good point Balconesfault, though as long as Mr.Frum uses the term president and not Barry or the Kenyan, it’s respectful enough.

    Whether I agree with Mr. Frum or not, I believe he holds his republican politics because he thought they were the best, and not simply because he thinks his kind of people are best. This is what the Ryan plan is saying, that only certain people count.

    Too bad for him too bad for all of us, that fewer and fewer republicans come to it that way. Even talking to yourself, how can you justify taking money away from babies and small children, so wealthy people can have tax cuts?

    Amazing. Absolutely Amazing.

  • ottovbvs

    I’ve been wondering when DF was going to give us his spin on the Ryan Ridiculousness. And I’m impressed by the candor with which he addresses both it’s complete dishonesty and it’s potential as a suicide note for the GOP in 2012. I only differ with two of his conclusions. A memo to themselves? Not really. This is what the vast majority of elected Republican officials; the party apparatus; it’s noise machine in the media; and much of the base; honestly believe represents an effective program of economic management for the country and it’s people. Not the Republican platform for 2012? Well David Brooks in the NYT very specifically claimed it would be and several of the nominees are already making nice noises about it. The fact is, it doesn’t matter what the Republican candidates or the party wants because the President and the Democrats are going MAKE IT the Republican platform for 2012. It’s going to be THE legislative issue for the rest of this year and into next. Republicans in the house at least are going to be compelled to vote for it. It will be the source of endless argument in congress and the media just as the ACA was for much of 2009/10.

    Of course I recognize what DF is up to here. He realizes this is one of the longest suicide notes in history (as someone once said of a British Labor party manifesto) so naturally he wants to dismiss it as just a memo to ourselves and pooh pooh the idea that it will actually be the party program. The reality is very different.

  • Watusie

    The CBPP sums up what Ryan bravely, boldly wants to cut:

    While leaving defense spending untouched.

    Madness.

  • jcm433

    I think this budget will work better than it’s author had hoped, but not in the way he expected.
    Now, Americans have been rather brutally confronted with the limitations of their government’s power. You can have Medicare and Medicaid. You can fight wars in foreign lands on the flimsiest pretext. You can have low taxes. But not all at the same time.

    • COProgressive

      It’s all a matter of priorities.

      We are now spending $2.8 Billion a WEEK in Afghanistan. That’s $145.6 Billion a year playing a deadly game of “Whack-A-Mole” with the locals.

      The estimated cost of a Universal Single Payer Healthcare System would be $100 Billion a year.

      Why is it we ALWAYS have enough money to kill people halfway around the world, but NEVER have enough money to care for the basic needs of Americans here at home?

      “Don’t tell me where your priorities are. Show me where you spend your money and I’ll tell you what they are.” – James W. Frick

  • ottovbvs

    Heritage responded that they came to this conclusion using a CBO baseline as they were requested to do, and that they view the baseline they were asked to use as one which was too optimistic to begin with.

    This is friggin priceless….Yeah we know our numbers are bunk but it’s the CBO’s fault.

  • ottovbvs

    Balconesfault:
    The thing that bothers me about so many Frum articles is that he often clearly articulate clear flaws with the current GOP stance on an issue – but feels the need to take some kind of backhand swipe at Obama or the Democrats at the same time.

    Rationalisation of the politically suicidal by a leopard that hasn’t really changed his spots?

  • Non-Contributor

    They decided the unemployment numbers were not right so they changed them?

    http://krugman.blogs.nytimes.com/

    • balconesfault

      They didn’t change them … they simply hid them.

      And no doubt, someone was flogged behind the curtain at Heritage for putting that ridiculously low unemployment figure out for public consumption in the first place.

  • PatrickQuint

    I expected better from Ryan. Far better.

    I’ll mirror many other comments here. Not only is this bad economics, it’s political suicide. I expected the bad economics part. The political suicide has me disappointed.

    Cuts to Medicare and Medicaid had to be suggested, and many voters know it. That’s not the politcal suicide. Adding in tax cuts at the top, combined with a failure to address Social Security and Defense is what really does the damage.

    Okay, politics aside the grand bargain formula shouldn’t be all that hard to see at this point. Getting there is the hard part.

    Keep Obamacare (also known as Nixoncare ++), because the voters like all the parts.

    Raise the retirement age and cut benefits for younger people. It won’t take huge cuts to keep Social Security in good shape.

    Medicare and Medicaid can see reform of drug coverage. Allowing greater competition from foreign drug markets will increase the trade deficit, but I think it’s necessary to get drug costs under control. Almost universally accepted is a need to reform end-of-life care coverage, creating incentives for people to spend their last days in a place other than a hospital. Hospitals are both a terrible place to spend your final days and among the most expensive places for hospice care.

    Substantive cuts to Medicare, Medicaid and Social Security should be long-term and structural, creating confidence in the long-term financial stability of the nation while having a minimal impact on government spending in the short term while a recovery is still happening.

    Cuts to Defense start with the programs the Pentagon says it doesn’t want. Then move on to cutting contractors and a few foreign bases. Remove about 100 of the intelligence agencies in the country, leaving the other 50 or so. Amalgamate and shuffle as necessary.

    Increase funding to the IRS investigations department to make sure that people and corporations pay the taxes they owe. The ratio of money spent to income earned is quite high for the IRS.

    Reform the tax code to cut loopholes for companies, like the ones that allow ExxonMobil and GE to get away without paying any taxes. Start with the loopholes that favor outsourcing. High-income individuals and large corporations have been booming. They’ve had their recovery, and if they were hiring they would have started by now.

    A jobs plan is all about education for the trades, which the nation finds in perennial short supply. The idea is to find the jobs and tailor retraining programs to get the worker we have to match the jobs that are needed.

    Investment in infrastructure is a good idea, both to increase demand long-term and to lock in the loans while interest is low. This kind of thing, when visible, increases confidence in long-term stability. Confidence is a huge factor in the economy.

    • ottovbvs

      Cuts to Medicare and Medicaid had to be suggested, and many voters know it

      Except these aren’t cuts they’re effectively dismantling the programs, even if you accept the highly debatable proposition that access to Medicare and Medicaid need to be cut. Your problem is you don’t understand that Medicare’s problems are all to do with the cost of providing care. Implicitly you’re accepting Ryan’s premise that all we need to do is a) restrict access because of ability to pay and b) shift the burden of paying for it to seniors who can find the money to pay. Which means the cost component is not addressed at all.

  • Frumplestiltskin

    Frum: The real message of the Ryan plan is: Upper-income tax cuts now; spending cuts for the poor now; more deficits now; spending cuts for middle-income people much later; spending cuts for today’s elderly, never.

    Perfect. This is why I stay at Frumforum, even though there are a share of hack writers like Goldfarb, the main guy is often 100% on target as with this sentence.

    I don’t think it is a “memo to me” I find the whole thing to be nothing but showboating by Ryan, quick anyone name any major pieces of legislation attached to his name…like McCain-Feingold.

    I think the guy is a fraud and I truly don’t understand this sudden Republican urge to lionize him as anything but. Maybe Ryan represents the Republican Id; the dark unconscious drives of many Republicans and he is the one who expresses them without restraint.

    I guess this makes Obama the Democratic super-ego.

    • TerryF98

      “I think the guy is a fraud and I truly don’t understand this sudden Republican urge to lionize him as anything but. Maybe Ryan represents the Republican Id; the dark unconscious drives of many Republicans and he is the one who expresses them without restraint.”

      He unfortunately is the best they have and all they have. There is a total lack of serious, talented people within the GOP which is why every new face that pops onto the scene is immediately lauded as the new super republican. Christie is an example.

      They really have got nothing.

      • balconesfault

        He unfortunately is the best they have and all they have.

        Exactly right. Nobody else is even willing to do the math to make bogus assumptions add up. They just want to keep selling supply side fairy dust to the middle class, as long as there are some stupid enough to buy.

  • ottovbvs

    Oh boy, as Krugman points out the liars at Heritage have tried to rub out the 2.8% employment number. VIZ.

    [i]Yep — they took the offending number out.

    I mean, really, guys — this is all over the blogosphere; did you really think you could get away with pretending it was never there?

    But this does bring back memories: during the Social Security debate, Cato tried to expunge all evidence that it had ever used the word “privatization”, when it was easy to show that its project was originally the Project on Social Security Privatization.

    Anyway, you now know what kind of people we’re dealing with.[/i]Update: For reference, here they are (pdf files):

    As of yesterday.

    As of today.

  • Rob_654

    What does he do about Medicare Part D? Does he propose any way to pay for it? Does he propose a minimal free market exercise of negotiation prices for drugs?

    Another thing I don’t get is why decrease the tax rate right now? Why not cut spending and see what we can do to get some deficit spending in a better position before we start also decreasing revenues?

    No one likes paying taxes, but that is the price of living in a society.

    Ryan is in a good place for him – he can release all sorts of stuff – is not the leader so he doesn’t have to answer for it as the leader, he knows that it will never get enacted (even plenty of his own party wouldn’t vote for it) so he will never be held responsible for it, but he gets on TV and radio and gets to play the “fiscal hero” while never having to actually to face the reality of his words.

    As noted he lacks guts by pushing out the old people’s hits so that no current old voter will get mad at him or the GOP and the younger people who it will hit are either voting Democratic already – or think that they won’t be hit by the realities so they will keep voting GOP.

    • COProgressive

      Medicare Part D is low hanging fruit. We need to claw back the “Entitlement” given to PhRMA by the Bush administration. Much of the problem with Medicare is in the underlying cost of our medical delivery system. We need to address lowering medical costs as the basis of reducing the overall reduction of Medicare. Attempting to kill Medicare with a ludicrous voucher system that will push the elderly into the obsolete, profit driven, predatory Sickness & Injury Insurance industry will help no one in the long run.

      “Republicans created an entirely new Medicare program, Part D, that pays for prescription drugs, and didn’t finance a penny of it with spending cuts or tax increases; it all went on the national credit card.” – Bruce Bartlett

      http://www.thefiscaltimes.com/Columns/2010/11/19/Why-Republicans-Arent-Serious-About-the-Deficit.aspx

  • Frumplestiltskin

    PatrickQuint, not a bad set of proposals, you need to flesh out what those substantial cuts to entitlements are. Raising the retirement age is not a cut, raising the cap on SS taxes isn’t either, I also don’t think the adjusting the COLA to one that represents the true inflation rate for seniors should count as a cut since it will accurately reflect their inflation rate even if long term it saves a lot of money.

    With the ACA Medicaid should go down since poor people will get subsidies to purchase insurance and not get government provided, not sure this should count as a “cut”

    As to cutting Medicare…maybe co-pays with limited means testing (ie. an old woman living off nothing but social security will be exempt) might make Seniors become more cost conscious.

  • geojen

    Ryan’s plan is nothing but a big F U to my generation (Millenials, GenX). We are supposed to keep paying taxes so old people can have their platinum health plans but when we get old, we get the private market. If the private market is so great, it’s good enough for the oldsters now. No need to wait, right?

    • blueshark

      @ geojen

      I agree, it is certainly breathtaking in its cynicism. We won’t touch the Medicare of you over-55ers, because you’re a big part of our base and we can’t afford to lose your votes. So we won’t touch YOUR benefits. But with respect to the youngsters who won’t vote for us anyway? Let’s privatize their benefits so that another part of our base (rich insurance companies/executives) get even richer.

      • COProgressive

        A little to big for a bumper sticker, but,

        [blockquote][b]If you liked Bush’s Privatization of Social Security,
        You’ll love Ryan’s Privatization of Medicare![/b][/blockquote]

        • jerseychix

          So true. As I pointed out in another thread, Ryan’s plan will primarily mean that Gen-X, Millennials, and younger WOMEN will be taking care of everyone’s parents plus their kids. Plus working outside the home.

          I for one would like to see Ryan taking care of an incontinent in-law.

    • IntelliWriter

      @geojen: I think you make an excellent argument for why this is a bad plan. As you say, if it’s so great, why not put everyone into the pool right now. I’m on the tail end of the Boomers, born in 1960 so this will affect me too. It’s not just GenX, Y, etc. I’m thinking that I’ll be watching people right around my age enjoy the benefits of Medicare while I’m out there searching around for an affordable policy, and my out-of-pocket costs spiral out of control.

      Then again, I work for a Canadian company so maybe I can get a transfer and move up north and enjoy universal healthcare along with our neighbors. It’s looking better by the day.

  • politicalfan

    “It’s certainly possible that the party will shift directions again. Representative Paul Ryan, the ranking Republican on the House Budget Committee, has put out a plan to cut Medicare spending, though very few other members of his party support it. Ultimately, the basic arithmetic of the deficit — which, over the long term, will be caused more by Medicare than anything else — may force the Republicans to change.

    But, for now, the party of small government — the party that opposed the creation of Medicare — is also the party of big Medicare.”

    Good reads. http://economix.blogs.nytimes.com/2010/10/20/republicans-and-medicare-a-history/

    http://economix.blogs.nytimes.com/2011/04/06/getting-from-a-to-b-on-deficit-reduction/

  • PatrickQuint

    Here’s what the Republicans propose:

    The grand bargain starts with a repreal Obamacare. While they’re at it, they add all the popular parts of Obamacare (which is nearly all) into the bill. This way, they get to keep all the parts of the ACA that people like while symbolically saying that they killed Obamacare. This can get that albatross off of Republicans’ necks. Astute observers will see little if anything actually removed from the ACA, but astute observers didn’t see much sense in Republican opposition in the first place. Republicans get to call victory while Democrats stand there saying “wait… but isn’t that… didn’t we… huh?”

    Bring down the barriers to foreign-made drugs (which many incidentally are anyway) in the name of cutting harmful regulations. The base will like that, as long as you don’t go around saying that it applies to foreign drugs as well as domestic ones. Just say that you’re cutting regulations.

    Call for reform to make hospital care less attractive as end-of-life care and push people to spend time with family toward the end. Do this in the name of compassion. You could even call this cutting regulations too if you’re careful and/or shameless. I think Republicans are up to the task.

    Just do the Social Security cuts. Popular opinion is willing to go along with a raising of the retirement age and a modest cut to benefits for those who aren’t getting the benefits yet. This isn’t going to kill the bill.

    Don’t table the Defense cuts immediately. Start by calling it cuts to, oh I don’t know, the EPA and a bunch of other small-time discretionary stuff. Democrats say “oh no, don’t cut the EPA!” Then move the cuts from the EPA to Defense in exchange for something… perhaps support on some of the above.

    Increase spending for the IRS under the banner of cutting down on waste and fraud. Unlike tax cuts in this environment, spending on the IRS pays for itself at this point.

    Quietly pass a note along, and let Democrats propose cutting loopholes in the tax code to pay for the jobs bill and infrastructure spending. Hem and haw a bit, then talk about shared sacrifice to get it through. Let Democrats save face by being the ones to propose a jobs bill in the face of cuts all over the place.

    • ottovbvs

      Here’s what the Republicans propose:

      Actually this bears no resemblance whatsoever to what Republicans propose nor is it likely to. The numbers are these. We have a $1.5 trillion deficit which is roughly 10% of GDP and we need to get it down to around 4% of GDP or $600 billion. Ergo there’s $900 billiion to find. An economy working near to capacity gives you about $400 billion in improved receipts so where does the other $500 billion come from when every poll shows there are massive majorities for basically leaving SS, Medicare, Medicaid untouched. I can see maybe $100 billion from defense, closing some tax loopholes and subsidy programs but the rest is going to have to come from taxes.

      • balconesfault

        Exactly which “Republicans” does Patrick think he’s speaking for? I haven’t met them …

        • ottovbvs

          Do you think Boehner’s going to blink over the 2011 budget? Do you think he understood all the ramifications of this turkey before Ryan rolled it out yesterday? Did he just do it to give the neanderthals the smell of red meat in the future because he is going to blink and then thought he could put it away in a drawer and forget about it? It’s very intriguing to me because obviously Frum flipped when he looked this over and I’m sure a lot of other Republican professionals must have done the same. The problem is they’re locked into it for a year of congressional battles because it’s THEIR budget proposal for 2012. This has to be brought to the floor of the house and voted on by a lot of people who have to run re-election next year.

  • think4yourself

    I’m trying to figure the politics for the GOP. The plan MAY be liked by current seniors who will see no cuts (but maybe not as Dems frame the debate by ads about “killing medicare”), liked by high income earners and corporations who see increased tax benefits.

    Not liked by lower income people and everyone under 54 who will see substantial increase in cost and more risk as they are now forced to negotiate with the insurance companies.

    So Republicans decide to alienate those under 54, those who are not rich and those who are minority (in an increasingly minority-majority country). This doesn’t bode very well for the National GOP in 10-15 years.

    There is a reason that CA’s legislature is almost 2/3rds Dem – the GOP has made itself irrelevant with the changing demographics. By the way, that started in 1994 with Prop 187 (anti-illegal alien legislation) supported by Pete Wilson. That law was passed (later overturned as unconstitutional) and Pete Wilson was re-elected Governor so there were short term GOP gains from it. But ultimately it helped decimate the GOP in CA.

    I think it’s bad policy and bad politics and does not advance the debate about deficit reduction.

  • greatgranny

    I agree with Me Frum. But here and on other web sites I get a bit tired of hearing comments about seniors needing to be more careful how they use Medicare. I am 74, my hubby is 76. I go to see a doctor once a year for labs so I can get refills for my thyroid disease – My hubby has major health problems – so he uses a lot of medical $$$ but not because he wants to. Last fall he fell and broke his arm and pelvis and needed rehab – then in Dec he was diagnosed with skin cancer on his cheek – first surgery was in Dec – 2 months later it was back – second surgery was in Feb – now he will be starting 7 weeks of radiation . Where in this scenario does he have options? If he does not have the expensive radiation, the cancer could come back and the doctors would have to hack off more of his face and ear. Believe me, he’s not a person who runs to the doctor for every little pain. He had a little sore on his face that would not heal, but ignored it because he thought it was silly to run to the doctor for somthing that appeared so minor – ended up causing major pain, surguries, etc. Oldsters like us tend to get very bad illnesses – We’d be lost without Medicare. By the way, I’m a life long liberal Democrat who lives in fear of the radical right. I know there are people in all stations of life who ARE doctor happy and I think they abuse the system. No one in politics has addressed the reasons why medical care is so expensive in this country. That’s where the focus should be.

    • ottovbvs

      Well under the Ryan plan if you can’t afford it you don’t get treatment.

    • KBKY

      @greatgranny
      I understand your point and while I (and most reasonable folks) will completely agree that seniors would prefer never needing to use their Medicare benefits, this intention doesn’t negate the fact that, chances are, you did not pay for all of the care that you and your husband receive. An average earning 56-year old married couple will, when they start receiving benefits, have paid roughly $140,000 into Medicare. They will on average receive roughly $430,000 in medical care(http://www.nytimes.com/2011/04/06/business/06leonhardt.html?src=recg). That’s roughly $300,000 dollars that this couple is taking away from the younger generations or another government program.

      “No one in politics has addressed the reasons why medical care is so expensive in this country. That’s where the focus should be.”

      There will always be expensive cancer treatments and hip/arm surgeries. Many of our cost problems with Medicare treatments occur because there are no incentives for seniors to be frugal with their benefits. For the average senior, which cancer treatment will he/she choose: one that costs $150,000 and has a 60% chance of success or one that costs $250,000 and has a 65% chance of success? Any logical person would choose the latter, better chances of success and you don’t have to pay the difference; it’s what I would encourage for my own parents. This doesn’t mean that this is a cost-effective decision. Watch television for awhile and you will see the ads on Hoverounds and other nice, but unnecessary, equipment that companies promise they can get paid for by Medicare. Medicare was not designed to be able to handle this type of care or these types of purchases.

      I appreciate that you would be lost without Medicare, but the under-65 folks are getting lost paying for an entire generation of folks getting cancer treatments, hip replacement surgeries, Hoverounds, and more, when the average senior only funded 1/3 of this care. Medicare was not designed to support an unhealthy generation (I don’t mean this as a slight, just that, as you mentioned, the elderly tend to have more health problems) for over two decades. I should clarify that this isn’t meant to be a criticism of the elderly, this is human nature. In my opinion, it’s why, in general, single payer systems (without healthcare rationing) can’t work.

      It seems that, moving forward, we have roughly two choices. We can either cut benefits (either by age, amount, or cost) to ensure the same basic design of Medicare is updated to take into account changing demographics. Or, we can raise revenue (increased taxes or cuts from somewhere else) to change the design of Medicare so that it can cover the reality of treatment costs for seniors. Personally, I favor the former, but I’m sure that there are many posters here that would prefer the latter. We will, however, have to choose.

      As a voting block, however, the elderly seem to want it both ways: all the care that they feel they need with no tax increases or cost controls (to be clear, I’m not necessarily including you or your husband here, just average elderly voters). This is bankrupting the younger generations and causing the intense frustration that you see on forums.

  • PatrickQuint

    ottovbvs: “Except these aren’t cuts they’re effectively dismantling the programs, even if you accept the highly debatable proposition that access to Medicare and Medicaid need to be cut.”

    Ryan may want to dismantle the programs. I agree that the Ryan plan is bad. Let’s talk about alternatives.

    The long-term structural deficit of the US is huge. You fix that with long-term, structural cuts to the programs as well as other cost-cutting measures.

    balconesfault: “Actually this bears no resemblance whatsoever to what Republicans propose nor is it likely to.”

    It was turn of phrase. I meant “Here’s what the Republicans *should* do to get a grand bargain.”

    I blame the intertubes for the missing tone.

    Let’s have a productive discussion about how to handle the deficit and avoid a sovereign debt crisis without tanking the economy.

    • ottovbvs

      You fix that with long-term, structural cuts to the programs

      Er…delightfully vague, but what do you mean by this? I don’t dispute we have a deficit problem and laid the broad numbers out for you. We gotta find $900 billion and in practice Medicare/Medicaid/SS are off limits apart from some minor tweaks like raising the retirement age slightly and raising FICA caps. Without SS/Medicare two thirds of the seniors in the country are going to be moving in with their kids.

    • think4yourself

      Seems to me that the place to start a productive conversation is the President’s debt commission:
      http://www.fiscalcommission.gov/sites/fiscalcommission.gov/files/documents/CoChair_Draft.pdf

      It creates almost 4 trillion in savings by 2020, balances the budget by 2037. It does not raise top tax rates (it doesn’t lower them by 30% as Ryan’s plan does) but does create additional tax revenue by eliminating deductions. It does call for Medicare cost shifting (beneficiaries pay more of first dollar) and does call for tort reform (all GOP priorities), but doesn’t turn Medicare into a voucher program. It does address Social Security which Ryan’s plan does not. It’s not perfect but it’s a good place to have a conversation about debt, not ideology.

      The Commission’s plan has elements that both parties do not like and is even-handed. Ryan’s plan is a GOP manifesto aimed at Supply Side economics that are not proven (Laffer Curve says that at some point lower rates produce less tax revenues. Economists argue with Liberals saying that happens when rates get below 50% and Conservatives say that happen something below where we are currently now – but not proven).

      Finally, Ryan’s plan is dead on arrival. If it where to ever make it to the President’s desk in it’s current form (it won’t, the Senate won’t approve it), the President won’t sign it. Even if in the future we have a change in office where the GOP holds Legislature and the Presidency, the Senate would filibuster.

  • PatrickQuint

    Frumplestiltskin: “PatrickQuint, not a bad set of proposals, you need to flesh out what those substantial cuts to entitlements are.Raising the retirement age is not a cut, raising the cap on SS taxes isn’t either, I also don’t think the adjusting the COLA to one that represents the true inflation rate for seniors should count as a cut since it will accurately reflect their inflation rate even if long term it saves a lot of money.”

    Right you are. A lot of what I said shouldn’t really count as cuts. My mistake. You’re also right that a lot of those proposals need fleshing out. Unfortunately, I’m not well-versed enough in the subject to propose anything more specific with confidence.

    If you have some idea of what specific cuts might both work and be anywhere near doable, then I’d love to hear them. What I tried to do is take a stab at what the final product might look like, if all actors were roughly rational starting today (so the Republicans and Democrats are stuck with what they’ve said and done so far).

    ottovbvs: “We gotta find $900 billion”

    Not today we don’t. Huge, immediate cuts in spending can mess with the economy in a big way. The balance between recession 2.0 and a sovereign debt crisis is to find is to keep spending stable enough to avoid tanking the economy while convincing the world that the US can and will pay off the debt. This means cuts that make the long-term fiscal situation look good while minimizing the pain now.

    Raising the age for Social Security eligibility is a way of keeping the money (demand) flowing today while making the long-term prospects look better. That’s the kind of fix we should be looking for.

    The big money of the medical costs is in drugs and end-of-life care.

    You deal with drug costs by breaking the deterrents on cheaper drugs. Big pharmaceuticals seem to be in coalition to keep sources of cheap drugs out of the country. They’ll be angry if you mess with this, but they’ll be angry at any measure to control Medicare/Medicaid costs. Screw ‘em.

    You deal with end-of-life care by planning for it, and by finding ways to keep the terminally ill comfortable and out of a hospital bed. I’m open to suggestions about how to write that policy. Yes, I remember the “death panels” talk, and I’ll be happy to point out a boatload of Republican contradictions apparently ignored by the base they pander to. Republicans can and will pull a 180 on end-of-life care policy of one of their movers can spin it for them.

    • ottovbvs

      Not today we don’t.

      Well of course we don’t but at some point in the reasonably near future we do. So apart from a few minor tweaks to SS you agree there’s no more there. On Medicare/Medicare you agree the problem is cost not access and Ryan’s plan does nothing to address that. But getting cost out of healthcare is the work of generations so what do we do in the meantime? You have to increase the tax take…it’s unavoidable.

  • Non-Contributor

    Fix unemployment and a lot of the issues go away.

    • ottovbvs

      Not true. Even if we return to full employment it’s only estimated to bring in another $400 billion at current tax rates when the total deficit is $1.5 trillion.

      • Non-Contributor

        The big problem is private sector savings. Once business start spending the deficit will come down.

  • armstp

    My questions are two:

    1) who actually wrote this plan, as I do not think Ryan has the intellectual capacity and he has done no major legislation in the past? who is behind the scenes that is writing this BS? Koch consultants?

    2) where are all the right-wing nuts who usually comment on this site? where are their comments on this very good discussion of the Ryan plan? I guess this shit is hard to defend even for a FF right-wing blogger?

    • TerryF98

      WillyP,WillyP where are you, come out and defend this crap sandwich.

    • ottovbvs

      who actually wrote this plan,

      His staff and that of other right wing Republicans. These guys are all products of the revolving door and up until six months ago were working at right wing think tanks, lobbying firms, and forth.

  • PracticalGirl

    A really good article and some fantastic responses.

    A smart poster (I’ve lost the thread, but you know who you are) pointed to cuts in Medicare plus tax cuts for the wealthy as suicide. Reason number one that Republicans will never sign on to something as base-alienating as the Ryan plan, especially in an election year.

    Specific to the tax cuts…Sigh. There is virtually no proof that tax cuts for the wealthy leads to jobs creation, and plenty of empirical evidence to the contrary.

    Set aside Federal taxes for a moment and concentrate on the top ten states for jobs growth:

    1. Texas
    2. North Carolina
    3. Tennessee
    4. Virginia
    5. Nevada
    6. Florida
    7. Georgia
    8. Colorado
    9. Utah
    10. South Carolina

    Out of those ten states where the highest rates of job growth is occuring, NONE have lower tax rates for the wealthy. Three have no state income tax and the rest either have rates that increase for those making more money or tax everybody at the same rate. And the state creating the most jobs-Texas- actually has instituted a corporate tax franchise tax that slides upward with increasing corporate income.

    Constant tax rates or higher rates for the wealthy is a jobs killer? Bull. Shit.

    • ottovbvs

      Reason number one that Republicans will never sign on to something as base-alienating as the Ryan plan, especially in an election year.

      They’ve signed up for it by default. THIS is their 2012 budget plan, they have to bring it to floor or something fairly similar, it’s going to be THE legislative issue of the next 12 months. They’re only hope for a distraction is if Obama invades Russia or is caught with the proverbial dead girl or live boy.

      • ram6968

        and obama said: republicans, show us your cards….and they did…..and here comes 2012…..well played

  • armstp

    Why are we even talking about the deficit and debt? Is it really a problem?

    We have a big deficit because of the economic downturn and the Bush tax cuts. The CBO predicts that even if we do absolutely nothing on spending and the Bush tax cuts are left to expire in 2012 the deficit as a percentage of GDP will drop from its current high 9% to a normalized 3% by 2015. The 60 year historic average for the deficit is 2.5% of GDP. We have had deficits every year for the last 60 years except only 5 years, so we run deficits +90% of the time.

    Total debt as a percentage of GDP is high, but similar or lower to other OECD countries and we have been here before. We will eventually grow out of the debt.

    There is no need for dramatic changes to any programs. However, to improve the fiscal position over time we clearly want to do something about healthcare costs. We should also lower defense spending, as most of it is just a waste. Beyond that no big deal. Total government spending is about 23% of GDP and factoring out emergency economic spending and it is currently closer to 21-22%, which is very close to the 60 year 20-21% average.There is no big up tick in government spending and therefore no problem with spending. As most of you know the real difference is on the revenue side. We are collecting the lowest amount of tax revenue since 1950. So if we are really serious about the deficit and really consider it a problem, then the obvious answer is just a slight increase in taxes. Problem solved.

    • ottovbvs

      Total debt as a percentage of GDP is high, but similar or lower to other OECD countries and we have been here before. We will eventually grow out of the debt.

      Actually it’s one of the highest and we won’t just “grow out” of it. Ultimately as you point out we have to bring the tax take back to its historical average as a percentage of GDP. But then that’s what the whole argument is about. Republicans are just committed to an ideology that will not allow them to accept this.

      • armstp

        Otto,

        A couple of points:

        * we have to grow out of it because there is no way in hell we will get to big enough surpluses to actually start to pay it down. We cannot even just get to a simple balanced deficit, never mind big surpluses. GDP is the denominator. If GDP goes up with the recovery, total debt as a percentage of GDP will just fall. Mathematics.

        * what is the right level of debt per gdp? Why does it matter?

        2010 Est. Debt per GDP:
        Japan 225% of GDP
        Italy 118%
        Singapore 102%
        Belgium 98%
        Ireland 94%
        France 83%
        Germany 79%
        Israel 77%
        UK 76%
        Austria 70%
        Netherlands 65%
        Spain 63%
        U.S. 59%

        http://en.wikipedia.org/wiki/List_of_sovereign_states_by_public_debt

        Sure the U.S. is going higher in 2011, but so are these other countries.

        Certainly households and corporations run considerably higher debt levels relative to income. The credit rating agencies are not particularly worried as we maintain our AAA credit ratings. I think the real question is what is the appropriate level of debt? No one is even talking about that. Why? Isn’t that the first question that should be answering before we are even talking about major changes to social and government policy? What problem are we actually trying to solve here?

        The Ryan plan is just Kabuki politics. I do not even know what the problem is he is trying to solve.

        • ottovbvs

          Er…this is per capita debt not deficit as a percentage of GDP which is what you first mentioned. And all these circumstances are different. Japan has the highest but the vast majority of their debt is owned by their own citizens and no one says Japan doesn’t have a huge problem. The US has a deficit problem period. Current deficit predictions are based on a return to historical US growth rates and we’ve still got a deficit that is around 8% of GDP when it needs to half that. You seem to have the strange idea that GDP grows but the deficit doesn’t. Mathematics?

        • armstp

          otto,

          you need to read what you quoted from my quote more closely.

          but, if you want to talk about deficit per GDP, it will fall to 3% of GDP according to the CBO. That is normalized. It will not be a problem at 3%. It is temporarily high because of the economic downturn.

          “You seem to have the strange idea that GDP grows but the deficit doesn’t. Mathematics?”

          Actually, the deficit is expected to significantly decline over the next 5 years with no spending cuts. It should be down to about $500 million in four years, according to the CBO. So the numerator will go down and the GDP denominator will go up, so the ratio of deficit to GDP will go down significantly. Mathematics.

  • Non-Contributor

    They should just reduce federal taxes for everyone. Or take the federal returns and redistribute the money to the states.

    Worrying about entitlement programs is a waste of time.

  • PatrickQuint

    ottovbvs: “You have to increase the tax take…it’s unavoidable.”

    I think I said it before in this thread, but the rich and the large corporations have had their recovery. If they were going to create jobs then they would have done so by now. I say go for the tax hikes.

    Then there’s tax reform. It’s the Gordian Knot of special interests and the holy grail of good policy. The problem is that all them money in Washington is arrayed against it.

    It’s the hidden spending in the federal budget. Targeted tax cuts are just spending on the other side of the equation. It’s cooking the books to give money to interest groups without making it look like spending. This is where the real budget cuts *should* come from. However, reality seems to get in the way. It’s just too attractive a tool to the politicians and lobbyists. Talk about waste and fraud.

    armstp: “Why are we even talking about the deficit and debt? Is it really a problem?”

    It’s a problem because the government needs to find people willing to buy the debt on the cheap. If it doesn’t, you’re stuck with some ugly options to deal with the debt in a hurry. You can print money to pay the debt and collapse the currency. You can make sharp cuts to government spending and crush the social safety net and/or defense. You can increase taxes drastically and crush economic growth. You’ll probably take some combination of the bad news above.

    All it takes is for some foreign government, like China or the Saudis to say “you know what, I want a better return on your debt this time” and it all goes to hell. This depends entirely on perception and so it’s quite unpredictable. Once that happens you don’t have an election cycle to fix the problem. You don’t have a year. You might have a month, depending on how public the negotiations over the debt are. As soon as people get wind of someone demanding higher interest on the national debt things get real ugly real damn quick.

    Now, you seem to actually have a handle on all that armstp. The debt is a problem only so long as it looks like it’s going to keep spiral out of control.

    • armstp

      Patrick,

      The majority of the debt is owed to the U.S. public. There is no evidence that foreign investors are not continuing to line-up to buy our debt. In fact, quite the opposite. Our Treasuries as a source of stability are more popular than ever. Nobody is particularly concerned with the financial situation of the U.S. Certainly financial markets are not showing there is a problem.

      The Chinese and the Saudi are not going anywhere. You are just fear-mongering. Where are they going to go and who cares? Today, the Chinese and the Saudi’s don’t buy our debt because they like us, they buy it because it makes financial sense. You have not proven that his is a real issue, beyond fear-mongering. Another conservative narrative. The Chinese own all our debt (which they do not) and we will be held hostage. In fact, I could make the counter argument that the U.S. actually holds these countries hostage. By the way where are the Chinese and Saudis actually getting these dollars from to buy these Treasuries?

      • ottovbvs

        There is no evidence that foreign investors are not continuing to line-up to buy our debt.

        That’s certainly true at the moment but at some point when the economy returns to full capacity the bond vigilantes ARE going to show up if we don’t get the deficit under control. Government expenditures are set to climb steeply with the retirement of baby boomers, population growth, etc etc.

        • armstp

          Otto,

          That bond vigilanties comment is just a blanket statement with absolutely no proof that it is true. There is no historic precedent. Investing is all a relative game. You pull your money out of Treasuries and then where do you put it? Where will you get better risk adjusted returns? That is all that matters? There is a reason government and investors invest in government Treasuries.

        • ottovbvs

          “There is no historic precedent.”

          You’re starting to sound as silly as Ryan or Willy p. Firstly you don’t seem to know the federal budget is increasing in real terms and then according you long bond rates have always been at their current 3.3% yield when in fact during the past thirty years it’s been as high as 14%. When the US economy is operating at full capacity there lots of other things to invest in like commercial real estate, equities, commodities, or you don’t invest at all but spend it on fancy cars. Investing is indeed a relative game and when bonds look like a lousy investment you don’t buy them.

        • armstp

          Otto,

          Your comment does not make a whole lot of sense. I am not sure what investing in real estate or other things has to do with investing in Treasuries? I think you need to understand risk adjusted returns. People invest in Treasuries because it is essentially risk free.

          As for your comment on the real debt or deficit growing I am not sure what you mean.

  • Non-Contributor

    Selling treasuries is a self imposed constraint that is actually is a carry over from when the US was on the gold standard. The government was so concerned about a run on gold (converting dollars to gold) that they instituted the selling of long term securities as a hedge.

    The argument about auctions failing is fantasy. So what if the securities don’t get sold.

    • ottovbvs

      So what if the securities don’t get sold.

      The govt has raise the coupon (ie. interest) on its bonds to attract buyers. That means interest rates on mortgages, car loans, credit cards, et al go up!!! The Greeks are currently paying around 12%

      • Non-Contributor

        Its an auction. The Fed sets the rate if there are no buyers so be it, auctions sometimes fail. As for Greece, their are doing what states do when they sell municipal bonds, totally different.

        • indy

          The Fed sets the rate if there are no buyers so be it, auctions sometimes fail.

          I’m not sure what you are asserting here. You know we run a deficit, correct? And that if we don’t raise money through the debt market, we can’t meet our obligations since we don’t have enough revenue to cover them?

        • Non-Contributor

          Selling securities is a policy constraint. It’s not needed for funding and now with Bernanke allows interest on reserves it is really not needed at all.

          Regardless, the Fed sets the rates and lets the quantity adjust where as under the gold standard quality was set and prices adjusted.

        • ottovbvs

          He’s advancing the MMT philosophy that the bond market is not required because as a sovereign state we can just print money to fund the debt and therefore don’t need to finance it with bonds. It’s as crazy as Austrianism but it’s being peddled by the far left. Paul Krugman of all people completely demolished this nonsense a couple of weeks back.

  • JeffreyME

    If Ryan had any balls, he would not have given all of us 55 and over a free pass.
    Thanks, David, for an honest look at this train wreck of a proposal. The Ryan plan promises to force a huge number of Americans to choose between financial ruin or impaired health/death. If you don’t believe me, take a look at some of the medical treatments for your Medicare eligible parents. When your mother, father, spouse or child need tens of thousands of dollars in life-saving medical care, what will you do?

  • NRA Liberal

    The cadres running the T.O.P. think this country is ready for the Ayn Rand Revolution.

    They’re wrong.

    Never get high on your own supply.

    • LauraNo

      NRA, they’ve been getting high on their own supply ever since they stole an American presidential election, then proceeded to run up deficits and start illegal/ unnecessary wars they didn’t pay for, they even stooped to torture and told themselves that was patriotic, etc., etc. I fear there is brain damage there now from all that pot.

  • indy

    Nobody is particularly concerned with the financial situation of the U.S.

    That’s an interesting statement. Just look around. EVERYBODY is concerned. The concern is somewhat overwrought, but it is real enough.

    If you mean that investors are not particularly concerned, they will be. We are in a pretty unsettled period right now. If the ship starts stabilizing, there will be an adjustment if we don’t seriously start making headway with the debt. And it won’t be pretty.

    • ottovbvs

      All the dopes aren’t in the Republican party apparently. Amazing isn’t it?

      • indy

        At this point I’m just happy that debt/spending is at the top of the stack and not, you know, the impending collapse of the country.

  • indy

    Certainly households and corporations run considerably higher debt levels relative to income.

    You realize, of course, that people can pay 20-30% to service their consumer debt, right? Corporations pay less, depending. There is generally a relationship between level of debt and how much you pay to service it. Every dollar you pay to service debt means a dollar less to invest in the future of the country. Debt does matter, I’m afraid.

  • ottovbvs

    armstp // Apr 6, 2011 at 5:22 pm

    Actually, the deficit is expected to significantly decline over the next 5 years with no spending cuts. It should be down to about $500 million in four years, according to the CBO.

    Er no.

    Annual deficits under Obama’s budget plan would be about $976 billion from 2011 through 2020, according to a CBO analysis of Obama’s plan released Friday

    I think the Obama budget has them going to around 4% of GDP by 2020 assuming ALL the Bush tax cuts expire. The CBO is more pessimistic.

    • armstp

      Otto,

      I do not think it is fair to use the initial Obama 2012 budget numbers, as this is not even law yet and is at best the beginning negotiating position. The final budget will look very different. Obvious, once it is negotiated with the GOP it will have less of a deficit outlook.

      So if you look at the CBO baseline projection, which is what they are currently going with, the deficit shrinks to $500 bn by 2015 and about 3% of GDP.

      My facts are 100% correct.

      And even if you take the 2012 Obama budget initial proposal as a fait de complete, a 4.1% deficit per GDP by 2015 would cut the deficit per GDP in half from today and is not a significantly big number to worry about and is very manageable.

      Again I will emphasis my initial point: are we sure there really is a deficit and debt problem? The big numbers of today will largely correct themselves as the economy returns. There is no need for big panic driven changes to social and government policy. The deficit and debt is largely a strawman created by the fear-mongering of the right in order to push a small government agenda. Of course we have deficits during economic downturns, but they generally go away when the economy returns.

      • ottovbvs

        armstp // Apr 6, 2011 at 10:07 pm
        My facts are 100% correct.

        A)You claimed:

        Actually, the deficit is expected to significantly decline over the next 5 years with no spending cuts. It should be down to about $500 million in four years, according to the CBO.

        B)The CBO in their latest projection of March 2011 say:

        In all, deficits would total $9.5 trillion between 2012 and 2021 under the President’s budget (or 4.8 percent of total GDP projected for that period)—$2.7 trillion more than the cumulative deficit in CBO’s baseline. Federal debt held by the public would double under the President’s budget, growing from $10.4 trillion (69 percent of GDP) at the end of 2011 to $20.8 trillion (87 percent of GDP) at the end of 2021.

        C)And whether unfair or not to use the president’s budget your facts are demonstrably incorrect (the CBO doesn’t write the budget it scores it). I don’t dispute that much of the rhetoric about the deficit is overblown but it’s still a serious problem in the longer term. Denying this is as ridiculous as claiming that there is no historic basis for the bond vigilantes showing up in bond markets.

        • armstp

          Otto,

          1) I suggest you read the CBO report a little closer. You are again using the CBO projection based on the Obama 2012 budget, which as I say above is at this point not fair to use and relatively useless. You need to look at the CBO baseline projections, which is all that counts at this point. I am not sure why you are repeating yourself. Do you not get this point? The Obama 2012 budget at this point in meaningless. The CBO is not changing their baseline projects based on this initial, very initial, sketch of a 2012 budget.

          Here I will do the work for you.

          Look at the first chart on this link.

          http://www.cbo.gov/doc.cfm?index=12103

          The baseline projection takes the deficit down to about 3% of GDP, which is a more normalized level.

          Now if you open up the PDF and look at the entire March report you will see on page 15 the CBO baseline project of a $513 bn in 2014. That is a considerable drop from where it is too day.

          What about these numbers do you not get?

          “your facts are demonstrably incorrect ” No my facts are completely correct. See the links above. The CBO uses its baseline as its forecast. You can use an irrelevant first cut of a preliminary budget if you want, but that is not what the CBO uses and not its baseline and not what economists use. Everyone, but you, including the CBO, does not put too much emphasis on a very preliminary budget that will likely be completely different 6 months from now. That is why the CBO does not change its baseline forecast until a budget become actual legislation.

          2) “but it’s still a serious problem in the longer term. Denying this is as ridiculous as claiming that there is no historic basis for the bond vigilantes showing up in bond markets.”

          You have not proven this. I dare anyone to prove to me that the current deficits and debt are a serious problem? Why? Explain.

          There is plenty of evidence that investors, credit rating agencies and economists are not particularly worried about the deficit and debt, even in the long-term.

          Here is a question for you: at what level of both debt and deficit does it stop being a problem or if you are running any deficit and debt do you always consider it a problem?

          If you think the latter you have no idea about economics and finance, as it is perfectly economically efficient to run deficits and debts.

          At what point is the debt and deficit manageable?

          Again, why does it matter?

          There is no financial crisis in the U.S. We are coming out of the largest recession since the Great Depression. That has caused a temporary deficit and a spike in the debt. With growth over the next five years the CBO baseline projects are showing that we will grow out of it, like we always do. Because of the demographics long-term there are issues with healthcare costs in this country. That is about it.

  • ottovbvs

    armstp // Apr 6, 2011 at 5:22 pm

    Actually, the deficit is expected to significantly decline over the next 5 years with no spending cuts. It should be down to about $500 million in four years, according to the CBO.

    From the CBO’s own latest summary of March 2011. $9.5 trillion of deficits between 2012 and 2021. And remember this is assuming the Bush cuts go as they probably will. Nice if your facts were correct but they are not.

    In 2012, the deficit under the President’s budget would decline to $1.2 trillion, or 7.4 percent of GDP, CBO estimates. That shortfall is $83 billion greater than the deficit that CBO projects for 2012 in its current baseline. Deficits in succeeding years under the President’s proposals would be smaller than the deficit in 2012, although they would still add significantly to federal debt. The deficit would shrink to 4.1 percent of GDP by 2015 but widen in later years, reaching 4.9 percent of GDP in 2021. In all, deficits would total $9.5 trillion between 2012 and 2021 under the President’s budget (or 4.8 percent of total GDP projected for that period)—$2.7 trillion more than the cumulative deficit in CBO’s baseline. Federal debt held by the public would double under the President’s budget, growing from $10.4 trillion (69 percent of GDP) at the end of 2011 to $20.8 trillion (87 percent of GDP) at the end of 2021.

    This is a problem. Not immediate, getting the economy on track a higher priority at the moment but if you don’t think this is a problem then you are silly as Ryan in reverse.

  • politicalfan

    ottovbvs-

    Responding to your earlier reply.

    Yes, I get your point clearly, he voted for Sarah Palin. However, my point is that it comes off as constructive criticism (or an obvious fine tune this area Republican pal). He is always giving Palin free advice that she never takes. I don’t think his left leaning commentors make him want to vote Democrat all of sudden, with all due respect.

    “It does not credibly address the number one concern of Americans: jobs. The job numbers attached to the plan have become instant targets of ridicule. Not even the actual authors of the numbers believe them.”

    Medinnus-

    “Agreed – as far as it goes. As a former Republican-turned-Independent, I want the Republicans to stop pushing unAmerican ideas like:

    * Branding anyone who disagrees with you as “Not a real American” or a “traitor”.
    * Promoting a Christianist (the Western version of Sharia) agenda
    * Hating minorities and homosexuals

    When they do that, and start actually acting like real Conservatives, and not unthinking Tea Party bigot drones, I’ll stop considering them the Enemy. Until then… they are precisely that.”

    This is part of the problem instead of a solution. (author unknown) I am not into painting everyone with a broad brush.

  • geojen

    Here’s another thing: In my parent’s situation, my dad is 55, my mom 51. So he would get medicare, and she would have to get private insurance? This is just so crazy.

  • nhthinker

    Ryan’s plan levels out at 19% tax revenue as a percentage of GDP.
    The Corker-McCaskellCAP Act reduces total federal spending – discretionary and mandatory spending combined – to a target of approximately 20.6 percent of gross domestic product (GDP), the historical average of federal spending. Beginning in 2013, the CAP Act will establish federal spending limits that will be gradually reduced over 10 years to 20.6 percent.

    Let’s first agree on the tax revenue as a percentage of GDP.
    Republicans and Independents can live with 19-20.6%.

    Most non-NeoCon Republicans can live with major military reductions.

    So… adding a Military cut- and using that to pay down the debt is a possibility.
    Keeping tax revenue less than 20% of GDP AND paying down the debt is critical to getting jobs back to America.

    • ottovbvs

      Republicans and Independents can live with 19-20.6%.

      Republicans, and even that is doubtful, might be able to but I see you’re claiming independants as well. Why not also claim Democrats also, and 7th Day Adventists, Jehovah’s Witnesses’, Christian Scientists, one could go on forever. Since the war tax has averaged 22-23% of GDP and that’s where we need to get back to in order to fund govt properly.

    • LauraNo

      “Keeping tax revenue less than 20% of GDP AND paying down the debt is critical to getting jobs back to America”.
      Why? I don’t understand why it keeps being asserted that lower taxes will bring jobs back. Or reducing the debt. Or both. Lower debt didn’t keep the jobs here in the first place. Tax revenue has been higher than 20% and jobs didn’t leave, it’s lower now and jobs are not coming back or being created. Taxes are lowest in I forget how long. This is all just wishful thinking I fear. The rich, the middle class and the poor were all doing much better in the 90s with the much higher taxes. Common sense says the tax rates don’t determine much at all, tho GOP sure likes to think so.

  • Steve D

    Here’s what I’d do if I were President and we had a Government shutdown.
    1. National Parks stay open. Lock up buildings but you don’t need people on duty to have people drive through. If you fall off Half Dome, we’ll clean it up once the shutdown ends.
    2. Issue an emergency proclamation: all applications not processed within 30 days of submission due to offices being closed are deemed approved. Regulatory agencies would suddenly find themselves completely marginalized.
    3. In general, the shutdown is not allowed to halt any other activities. If you can’t do something because someone isn’t there to issue paperwork, you get to do it.
    4. All State actions are allowed to proceed in the absence of Federal activity.

    • sweatyb

      so… anarchy? I’m glad you’re not president.

    • ottovbvs

      Regulatory agencies would suddenly find themselves completely marginalized.

      Yeah lets marginalize those pesky FAA and FDA pen pushers. We don’t need them.

  • baw1064

    “Under-55s lean Democratic, under-30s overwhelmingly so.”

    So Ryan’s plan is designed to make sure things stay that way? Um, how exactly do these people plan to win any elections at all after about 2020?

    • TerryF98

      You are asking these tools to think beyond the next news cycle, not gonna happen.

  • WillyP

    No I’m fine here on the sidelines. God Bless Paul Ryan.

  • PatrickQuint

    The 59% debt/GDP number doesn’t include intragovernmental debt. Total debt outstanding is closer to 97%, soon to exceed 100%.

    http://www.nytimes.com/2010/03/16/business/global/16rating.html The Aaa debt rating was “tested,” according to Moody’s. This story, and other like it, is why I’m concerned about the debt and deficit. From the article:

    “Growth alone will not resolve an increasingly complicated debt equation,” Moody’s said. “Preserving debt affordability” — the ratio of interest payments to government revenue — “at levels consistent with Aaa ratings will invariably require fiscal adjustments of a magnitude that, in some cases, will test social cohesion.”

    There you go. That’s the rationale for long-term structural measures to protect the Aaa credit-worthiness of the country. For at least a brief time recently the markets thought that money was safer with Warren Buffett’s Berkshire Hathaway than with the US government.

    The article is about a year old, which tells you that this has been a concern for a while now. Bill Gross seems to think that the US will keep it’s Aaa for a while, but a continuation of big deficits will threaten the credit rating. He says that treasury bonds are already less stable (command a higher rate of interest) than other forms of sovereign debt as well as some private bonds.

    • ottovbvs

      This was kite flying by the media and various other people with an agenda. I’d also take what Bill Gross says with a large pinch of salt but philosophically he’s right. We can’t live indefinitely with deficits of a $trillion a year or ultimately the bond vigilantes will show up. We need a serious effort to get them down once we’re out of the recesssion and at bottom this is only going to be achieved by finding another $500 billion from taxation.

    • indy

      What was the credit rating of all those ‘toxic’ assets again? Right up until the day they were ‘toxic’, they were triple-A. The US will maintain a triple-A up to that day too.

    • armstp

      PatrickQuint,

      Moody’s makes some good points, but so what. So in the worst case scenario they lower the U.S. rating from Aaa, pretty much their highest rating, a notch or two. Big deal. That is not a crisis. Not even close.

      If the numbers go in the direction the CBO is predicting in its baseline forecasts, the rating agencies will have zero concerns, as they really have today.

      Otto,

      You are showing your simple minded thinking.

      “We can’t live indefinitely with deficits of a $trillion a year or ultimately the bond vigilantes will show up.”

      Yes, you can live with trillion dollar deficit forever, if the economy is say a +$20 trillion economy. That would be 5% of GDP, which is completely manageable. However, no one is saying we will have trillion deficits. In fact, the CBO is saying it will shrink to $510 billion in only 3 years in 2014.

      Patrick,

      It is not economically efficient to operate a business or a government or a household with zero debt. There is nothing wrong with taking cheap money (which treasuries are, particularly now) and investing that in the future, by using it to pay for good government. The U.S., as almost all countries, has operated with debt and deficits through its entire history. It is only a concern now because it has temporarly spiked, as it has in all countries, because of the economic downturn and because the GOP is using it as their strawman to push their small government agenda.

  • indy

    ottovbvs // Apr 7, 2011 at 10:51 am

    He’s advancing the MMT philosophy that the bond market is not required because as a sovereign state we can just print money to fund the debt and therefore don’t need to finance it with bonds. It’s as crazy as Austrianism but it’s being peddled by the far left. Paul Krugman of all people completely demolished this nonsense a couple of weeks back.

    It sounds a lot crazier than Austrianism to me.

  • PatrickQuint

    ottovbvs: “This was kite flying by the media and various other people with an agenda.”

    Moody’s and S&P are partisan? Really?

    The agencies are issuing very soft warnings here, agreeing that the country will be fine as long as the deficits start to go away. You don’t need to go all Sarah Palin on us and blame the lame-stream media for conservative bias.

    armstp: “I think the real question is what is the appropriate level of debt?”

    I don’t see a reason why there should be any federal debt. Could someone educate me as to the virtues of owing money?

    • baw1064

      “I don’t see a reason why there should be any federal debt. Could someone educate me as to the virtues of owing money?”

      I take it that you paid for your education and your house completely with cash? BTW, do you own any bonds, CD’s, or have any bank accounts? How do those manage to pay any interest except by somebody going into debt?

  • nuser

    Well Ollie, this is a fine mess you have gotten us into!