So, being the insane liberal pinko commi that I am, I of course believed everything the press fed me about Paul Ryan’s budget. The best article I read was, as usual, Krugman. Here’s the link if you missed it: http://www.nytimes.com/2012/04/02/opinion/krugman-pink-slime-economics.html
However, I thought it might be nice to get another persepective: that of my friend who earned a degree in Economics from UC-Berkely, and who is definitely not a hippie. You might recognize him as the one who slapped down an article I sent out about six months ago. It’s published, so, if you want to read me eating crow, feel free to read that here: http://chuckingrocks.com/?p=65
Anyhow, this is the same guy, and as far as I trust anyone, I trust him to be tremendously objective, especially when it comes to economics. Need more credibility: he used to be a staunch, economically conservative Republican, until that party went insane. And, though he generally agrees with me, he still asks critical questions about my positions that really make me think. In other words, this guy is as good a reality check as there is…have I built him up enough? OK, so here’s HIS analysis of Ryan’s plan, all 230 pages of it (btw, the bold headings are the titles of the different sections, and the analysis appears right after):
1) Prioritize defense spending to keep America safe. Our massive defense spending is what makes us UNsafe, terrorists rise because of international action. I think we should cut defense by 90% over 20 years. I HATE PART ONE.
2) End cronyism and restore free enterprise. In sum, Ryan proposes to end corporate welfare, increase American energy resources, and streamline government agencies. I strongly agree, but what does this actually entail? The plan might be vastly different from what a reasonable person might think should be obvious in achieving this end. I like part 2, but need more details.
(Chuckingrocks take on this is that it seems incredibly hypocritical for a Republican (Ryan) who never votes to end subsidies for oil to say that they want to end cronyism. It also makes me skeptical, because the last Republican President we had was the worst offender of putting people in office that were friends of the industry that office governed.)
3) Strengthen the social safety net. Well, Ryan’s stated plan might not work, because I surmise that his idea of strengthening the social safety net is to slash it to bits. To distill it, he wants more power in the hands of the states when it comes to this sort of thing, which I agree with. In the end, this part of the budget is again, too vague.
4) Fulfill the mission of health and retirement security. Basically, he’s saying we should let people choose from a larger list of health coverages, have them pay for it themselves, and provide subsidies for the poor. In order for this to work, we will have to subsidize only the lowest level of care for the poor, because it will end up costing even more than before if we pay for the highest level of care. This doesn’t seem like a very good idea. Also, this section addresses the demographic changes in the country and the need to change social security to match. This dosen’t seem equitable or cost effective for Medicare. I like the ideas with regards to SS, but need to see the details. We must raise retirement age dramatically
5) Individual and corporate tax reform. Great idea, but two rates of 10 and 25 will probably bring in less revenue, and I assume that the corporate tax reform is code for corporate tax cut with a few minor loopholes being sewn up. Great idea, the corporate tax rate needs to be cut, but the personal tax rate needs to go back to the Clinton era levels to make up for it, for ALL income levels. We should eliminate many, but not all corporate loopholes.
6) Change Washington’s culture of spending by increasing oversight and transparency. I agree, but spending is only 2/3rds of the problem. Oversight and transparency won’t do that much. Dumb.
7) Lift the crushing burden of debt. Really? we borrow at like 1.5%, if we grow at that rate we’re virtually free rolling that debt cost. Strongly disagree.
In conclusion, there are some things that I like very much, like tax reform and lowering corporate taxes, but this has to be MORE than offset by higher personal taxes in the future, increasing net revenue. I don’t see a good way to use the market to control health care costs, and I have no answer for the horrible expansion of the costs of medicare and medicaid. I do agree that the structure of SS has to be redone, this should be much easier though: retirement age must be raised.
The most troubling thing about this budget is not enumerated above. It is the general conception that we should be trying to balance the budget primarily by cutting spending. This is absurd. We need 5 Trillion of infrastructure stimulus and 1 Trillion in corporate tax cuts (contingent on hiring) over the next 10 years to get the economy rolling. The debt is almost insignificant in the context of high unemployment. Once employment returns to normal (under 6% unemployed), we can stop stimulus spending, overall government spending should be cut (mostly military), and personal income taxes should be raised dramatically on all income levels (Clinton era minimum). I do understand that this strategy is only applicable when US borrowing costs are extremely low, but they are, and we ought to take advantage of that. If the cost to borrow becomes more expensive, then our outlook changes.