Thursday, March 14, 2013

Balancing The Budget Is Like Three-Card Monte


Has your congressmember signed on yet? Or is he playing for the other team?

There are a lot of premises in Ryan's new/old budget-- like keeping revenues from Obamacare while eliminating every single benefit of Obamacare. But one premise Ryan didn't deal with is the newest polling that shows-- and pretty clearly-- that the public doesn't accept any of the GOP premises about the economy any longer.
72 percent of Americans, including 74 percent of independents and 81 percent of moderates, disapprove of the Congressional GOP.

Americans disapprove of the sequester cuts by 53-39; 64 percent say they’ll hurt the economy; 60 percent say they’ll hurt the government’s ability to provide basic services; and 69 percent say they’ll hurt the military.

Americans hold Congressional Republicans responsible for the sequester cuts by 47-33.

68 percent want Obama and the GOP to work together to avert the cuts, while only 28 percent want them to continue (the conservative position).

71 percent oppose cutting spending on Medicaid to replace the cuts; and 60 percent oppose raising the Medicare eligibility age to replace them. By contrast, 58 percent supports replacing the cuts with more targeted cuts to military spending.

56 percent support replacing the cuts with an agreement that includes limiting deductions enjoyed by higher income individuals.
The folks who have bankrolled Ryan's political career and who are determined to see him-- and their Austerity agenda-- in the White House one day, have taught him to repeat, endlessly, a misconception about balancing the budget. Ryan and his colleagues constantly compare the federal government's budget situation to that of a hardworking, struggling family's situations. They're not only not they same thing, they're barely related. This week even Obama managed to explain-- albeit superficially, how silly chasing "balance" for the perverse sake of balance is.

As Steve Benen pointed out, "[t]he president went on to say, "We're not going to balance the budget in 10 years. If you look at what Paul Ryan does to balance the budget, it means that you have to voucherize Medicare, you have to slash deeply into programs like Medicaid, you've essentially got to either tax middle class families a lot higher than you currently are, or you can't lower rates the way he's promised."
Good for him. I can think of plenty of instances from his first term in which the president has bought into Republican rhetoric on fiscal matters, ceding key elements of the larger debate. As of now, it appears that's over-- Obama isn't going to jump through deficit-reduction hoops simply because congressional Republicans expect him to.

Indeed, even Ryan has struggled to explain why it's necessary to balance the budget within 10 years. His blueprint, released yesterday, said lower interest rates will boost the economy, but interest rates are already ridiculously low. We're left with shallow talking points in which GOP lawmakers tout a specific-but-arbitrary fiscal goal for no other reason than they think it sounds nice.

The president, to his credit, is presenting a smarter path. It's not as progressive a path as I'd like-- my preference would be to hear Obama say he wants to borrow more in the short term, using the money to boost the economy-- but if deficit reduction is to remain a priority, at least it's a sensible approach built on gradually striving for fiscal sustainability.

The latest Republican plan picks a target date of the air, calls for brutal and unpopular spending cuts, punishes the poor while giving the wealthy another massive tax break, and challenges the president to follow their lead. Obama doesn't see the need to play along.

He's right.
I'm less certain than Benen that this is Obama's actual line in the sand. I hope Benen's right and I'm wrong, but yesterday's NY Times framed the philosophical argument a bit more rigorously than Obama did. "While economists generally agree that narrowing the government’s deficit and limiting the size of the debt are necessary in the long run," writes Annie Lowrey, "most argue that balancing the budget would not restore the nation’s still-weak economy to health in the near term. Indeed, rushing to do so with unemployment still elevated and the economy growing at only a sluggish pace could even set back the effort to reduce the deficit."
“There’s nothing magic about exact balance,” said Alice M. Rivlin, a Democratic economist at the Brookings Institution who has worked with Republicans like former Senator Pete V. Domenici on bipartisan deficit-reduction proposals. “The really important thing is to keep the debt from growing faster than the economy.”

...Other goals-- including stabilizing debt as a proportion of economic output, rationalizing the tax code and tackling the long-term fiscal challenge posed by entitlement programs-- might prove more important in the coming years, several experts said.

“We need to do fundamental reforms to the system, and if we did fundamental reforms to the system, that would help so much that we wouldn’t need to worry about the deficit as much,” said Kenneth Rogoff of Harvard.

As sensible as a balanced budget might sound-- much like a balanced checkbook for a family-- countries are generally able to run modest deficits for years on end while still keeping debt stable as a share of economic output. One year’s deficit is effectively paid off by later economic growth, especially if a government is investing in public goods like roads and schools.
Dana Milbank had the perfect response to Ryan's phony-baloney Beltway budget-- to laugh at him and help strip away the ridiculous and unmerited aura of "seriousness" his backers have bought for him and that witless Villagers have been delighted to buy into. As he points out, it's all about the magic and "flimflammery" (good word)-- and the sleight of hand.
Not only does it balance the budget in 10 years while reducing tax rates, it also does so without any pain or suffering-- or even breaking a sweat. It achieves not just the longtime goals of policymakers-- “a safety net strengthened... retirement secured... a nation protected”-- but also brings about changes in human nature that have bedeviled civilization from the beginning of time. “This budget ends cronyism; eliminates waste, fraud and abuse,” Ryan’s plan promises.

“Now, how do we do this?” Ryan (R-Wis.), the House Budget Committee chairman, asked with a magician’s flourish as he unveiled his budget Tuesday morning.

Here’s how: The former Republican vice presidential candidate’s budget eliminates ___ loopholes in the tax code, cutting the ___ and the ____ deductions. It reduces spending on the ____ program by _____ and the _____ program by _____. Retirees would see ____, students would experience ____ and the poor would be _____.

There are so many blanks in Ryan’s budget that it could be a Mad Libs exercise. But this is not a game. It’s black-box budgeting-- an expression of lofty aims, with binders full of magic asterisks in lieu of specific cuts to government benefits. If this were a fitness plan, Ryan, a former personal trainer, would be telling Americans that under his revolutionary program, they could lose 50 pounds in 10 weeks without dieting or working out.

How, Ryan was asked, would he reduce tax rates without going after such popular items as the mortgage-interest deduction and the charitable-giving deduction?

“Yeah, so this is what the Ways and Means Committee is going to do,” he replied.

Mostly, Ryan would achieve his aims through sleight of hand. The recent tax increase on wealthy Americans that Ryan and fellow Republicans opposed? He keeps it in his budget. The $716 billion cut to Medicare he blasted President Obama for? Ryan keeps that, too.

How about the “sequester,” those automatic spending cuts that Republicans condemn? Ryan preserves those in perpetuity, at least for domestic programs. He proposes abolishing Obamacare-- a futile gesture-- but would pocket for other purposes $1 trillion in tax increases that came with the program.

In subtle ways, Ryan’s budget acknowledges the results of November’s election. He isn’t seeking to do away with tax increases that have already been approved, and he accepts that tax revenue will be 19.1 percent of the economy in a decade, up from the 18.7 percent he assumed last year.

But otherwise, he continues to peddle the same ideas: the partial privatization of Medicare; a 10 percent reduction in the federal workforce; and cuts to Medicaid, food stamps, education, job training and farm programs.

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