Path to Prosperity 2012 Version

Congressman Paul Ryan (R-WI-01) released this year's version of his Path to Prosperity this week. I give him credit for it, but it's really the work of the House Budget Committee, which he chairs. This will be the starting point for the 2013 budget prepared by the House of Representatives. The Senate is required to prepare their own budget, but they won't. The Senate Majority Leader is a spineless, lying, sniveling coward, who knows that a budget prepared by Democrats would destroy their party.

But, I digress.

This year's version shares quite a bit with last year's version. It greatly simplifies the tax code, and cuts the corporate tax rate to 25% (which is still 25% too high, sadly--but at least it's identical to the top marginal rate). And, based upon CBO's conservative growth estimates, it balances the budget around 2040. Which is far too slow, but I'll get back to that later. Obviously, it also assumes pretty much a complete repeal of ObamaCare.

The major differences lie in two areas: Medicare & Medicaid, and dealing with the sequester. The Medicare/Medicaid section is quite a bit different. Not sure if it's better or worse, but different. Ryan clearly understands the heat he & the Republicans took on this issue last year and is trying to address it in a more palatable way. This part is the same as what was released last year and is commonly called the Wyden-Ryan plan for Medicare, co-authored with Senator Ron Wyden (D-OR).

The heart of the Wyden-Ryan plan is to use competitive bidding to allow private insurers to compete with traditional, 1965-vintage fee-for-service Medicare. If you want to learn more about competitive bidding, see this piece I wrote about Mitt Romney’s proposal for Medicare reform. If that doesn’t quench your thirst, you can read the definitive book on competitive bidding:Bring Market Prices to Medicare, by Robert Coulam, Roger Feldman, and Bryan Dowd.

The basic idea behind competitive bidding is that, say, on a county-by-county basis, you let private plans and traditional Medicare offer plans with the same actuarial value compete, to see who can offer the same package of benefits the most efficiently. Each plan in a given county will name a price for which they are willing to offer these services, and seniors are free to pick whichever plan they want. However, the government will only subsidize an amount equal to the bid proposed by the second-cheapest plan. If you want a more expensive plan, you have to pay the difference yourself.

I have some concerns with this, like what happens when private insurers can't compete with an unfunded government plan, but overall, at least Ryan can't be accused of pushing grandma off a cliff. Also, this clearly is an arrow to the heart of IPAB ("death panels"), one of the most offensive parts of ObamaCare.

As for Medicaid, this section appears to be unworkable to me. Funds are fixed based upon an inflation and population index. That assumes that healthcare services remain static. Generally, not only have healthcare services increased in price, but also in quantity. You're offered a lot more healthcare choices today than you were 50 years ago. In other words, there are more opportunities for you to spend your hard earned dollars on healthcare related costs. This is one of the reasons programs like Medicare and Medicaid always expand beyond expectations. It doesn't seem like to me that the Ryan plan would deal with that, leaving further Medicaid burdens on the states. Maybe that's ok. But I know it'll be a criticism from the left.

Finally, the other significant change in the Ryan plan this year is dealing with the sequester. From the actual doc:

Reprioritizing sequester savings to protect the nation’s security:  The defense budget is slated to be cut by $55 billion, or 10 percent, in January of 2013 through the sequester mechanism enacted as part of the Budget Control Act of 2011. This reduction would be on top of the $487 billion in cuts over ten years proposed in President Obama’s budget. This budget eliminates these additional cuts in the defense budget by replacing them with other spending reductions.  Spending restraint is critical, and defense spending needs to be executed with effectiveness and accountability. But government should take care to ensure that spending is prioritized according to the nation’s needs, not treated indiscriminately when it comes to making cuts. The nation has no higher priority than safeguarding the safety and liberty of its citizens from threats at home and abroad.

As an aside, Ryan points out that the entire $400B of "savings" from President Obama's (D-USA) plan comes from shredding the military budget (emphasis mine).

Yet,  the defining characteristic of the President’s new defense posture is a reduction in the administration’s own defense plan from last year, bringing the total reduction to $487 billion over the next ten years. This number stands out as significant for several reasons. In the President’s latest budget proposal, total spending increases by $1.5 trillion and taxes increase by $1.9 trillion, for a total of around $400 billion of deficit reduction over ten years. A clear‐eyed look at the numbers reveals that American taxpayers and the Department of Defense are being asked to bear the entire burden of deficit reduction under the President’s budget.

Overall, as I said last year, the Ryan plan is a good start. But it still has areas that concern me. In no particular order:

1. There's no way to bind future Congresses to his plan. So, really, any budgetary saving after FY2013 must be taken with a grain of salt. However, with our baseline budgeting, it would establish the "baseline". So, future Congresses would have to explain why their future budgets differ from the baseline. For once, baseline budgeting could play in our favor. Maybe.
2. Spending vs. GDP (based on CBO forecasts) is still too high. It's still over 20% GDP through 2030. That is unacceptable. The President's "plan" never drops below 25% GDP and is nearly 40% GDP in 2050. As I have mentioned numerous times in the past, the President is ignoring our impending financial crisis. The best you can say about his plan is that it may kick the can down the road a bit. Let me repeat this for what seems like the thousandth time. Our impending financial crisis is real, huge, and unavoidable. And the longer we wait to deal with it, the worse it's going to be. We can do something now and maybe have a soft landing, that won't be too terrible. Or we can destroy the economy for a generation or more. The President has chosen the latter. That last statement is not hyperbole. It's not even opinion. It's demonstrable fact..
3. It takes too long to balance the budget (based on CBO forecasts). The budget isn't balanced until 2040. That is also unacceptable. And unrealistic. And disappointing. But it shows the depth of the 2008 financial crisis and how much worse the current White House occupant has made things. It may take decades to undo the damage that he has done to America.
4. Finally, a minor quibble, but I don't think Path to Prosperity is a good name for the document. It's truthful, but not a powerful enough statement. It should be called. Path From the Brink or something. Perhaps even Saving America From Bankruptcy.

Ok, that's the bad news. There's some good news. All of the economic projections are based on low growth estimates from the CBO. That includes the spending vs. GDP projection and the deficit projections. Ryan has released a supplemental document called "The Budgetary Impact of The Path to Prosperity Under Alternative Growth Scenarios". The tax reform and budgetary reform outlined in the plan should act as a giant shot in the arm to the economy. Also, moving towards deficit and debt reduction will make investors less skittish and increase economic investment, which will also boost the economy. Finally, corporations with profits sheltered outside of the U.S. will be allowed to invest this money back in the U.S., further stimulating economic growth.

Currently, U.S. companies have an estimated $1.4 trillion parked offshore and are reluctant to repatriate those funds back home due to the significant taxes that could be incurred under the current U.S. tax system.7 A worldwide tax system essentially locks this money out of the U.S. economy, where – if it were repatriated – it could be used to fund investment, business expansion and job creation in the United States. Policymakers on both sides of the aisle have proposed a temporary repatriation tax holiday in order to give businesses an incentive to send these funds home and put them to work in the U.S. economy. A switch to a territorial tax system would give U.S. businesses a permanent incentive to do exactly that.

This three pronged economic stimulus package (and it actually really would be one), makes the CBO's low growth estimates far too limiting.

In its range of estimates, CBO found that the economy under The Path to Prosperity could be 1 percent larger in 2030, 3 percent larger in 2040 and 6 percent larger in 2050 relative to its long-term base case. By contrast, under the path implied by the extension of current tax and spending policies, the econ0my would shrink by as much as 10 percent in 2030 and 28 percent in 2040. In other words, the difference in outcomes between these two trajectories could sum to as much as 11 percent of total economic output in 2030 and over 30 percent of output in 2040.

[...]

A larger and faster-growing economy leads to significantly higher revenue than the base case. This higher amount of revenue, when compared to the spending levels outlined in The Path to Prosperity, leads to a much-improved fiscal path. Assuming higher growth within the range cited above – percentage-point increases of 0.5 (lower-bound AGS), 0.75 (mid-point AGS), and 1.0 (upper-bound AGS) – the budget could achieve balance in the mid-to-early 2020s, with the upper-bound growth assumption producing budget balance within the ten-year budget window – much sooner than CBO’s estimated balance date of 2039.

In the spirit of a picture painting a trillion words, see below. The red line is the President's "plan". Based on his plan, you can expect total economic collapse sometime between 2030 and 2050. By "total economic collapse", I mean that you should consider an event like the Great Depression as a best case scenario.

I have a couple more posts on this plan coming up. I think they'll be a bit shorter. I want to hit a couple sections of the document and point them out specifically, as I think Ryan makes some incredibly important points that aren't being made elsewhere, or at least aren't being made loud enough.

Serious Question: Why Would You Vote For Obama?

 

I assume if you’re planning on voting for President Barack Obama (D-USA) in 2012, that you voted for him in 2008. Furthermore, I would hope that your vote in 2008 actually had something to do with what he campaigned on. So, let’s roll the tape, shall we?

Major campaign issues from 2008:

• The Economy. Well, with now a record 37 months at 8% or higher unemployment, you’d be hard pressed to argue that he’s turned around the economy, despite a $787 billion stimulus package (hey, where’d that money go, btw?)
• Close Gitmo. Last I checked, Gitmo is still open.
• Get us out of Iraq and Afghanistan. No. And…no.
• Maybe you’re a supporter of gay marriage. Well, how much progress has been made here by the Obama administration? Err…none. In point in fact, I do expect Obama to make a serious push on this front later this year, closer to November. But remember, from January 2009 to January 2011, Obama had both chambers of Congress in his pocket. He could’ve passed anything he wanted to pass related to gay marriage. In a snap. But he didn’t. Remember this post when something doesn’t pass this year and he blames it on the Republicans. If you don’t, I will. And I’ll remind you. Again.
• High gas prices. Ooops.
• The federal deficit and exploding debt. He was going to cut the deficit in half. Last Thursday, Obama passed President George W. Bush’s deficit total. It took him 38 months to pass Bush’s 96 months of out of control spending. Yes, the economy exacerbated that. But I’ve discussed this before. And, surely, if that matters to you, then you’re upset about the fact that our credit rating has been downgraded? And you’re upset about the Democrats failure to pass a budget? But wait, that’s not Obama’s fault, you say! Well, is he, or is he not the leader of the Democrat party? If he pressured Senate Majority Leader Reid (D-NV) to pass a budget, would one get passed? Bet the farm on it.
• Improve race relations. Well, I think we can all agree that hasn’t happened. And isn’t going to as long as that racist thug runs the Department of Justice.
• Tax cuts for 95 percent of working families. Never happened.
• No new taxes for middle class. Well, sure, as long as you don’t count cigarettes, healthcare, or don’t own a small business.
• Improve foreign relations, particularly with the Middle East. Based on this search, that doesn’t appear to have happened.
• He did get ObamaCare passed, but let’s be honest with ourselves. This is not the law that even liberals wanted or were promised. It costs more, does less, and pretty much ensures that every single conservative criticism is going to come true.

Did I miss something? Did something really, you know, awesomely awesome occur in the last 3 years? Or are you just too stupid to realize that the man is a liar who hates America, wants to destroy it, and will say anything to get your vote?

A Taxing Discussion

If you don’t subscribe to Megan McArdle’s posts at the Atlantic, you’re really missing something. She recently made a couple posts on what we’d actually need to do to tax our way out of our debt problems. The articles are well worth a read in their entirety. Go here and here.

Basically, she points out that we’d have to get our tax receipts in the range of 25% GDP, and what that means.

Without arguing about whether our tax system is fair or not, the fact is that the federal income tax is the most variable part of the code, and the federal income tax is now very progressive; it collects most of its revenue from people at the top.  (Whether it should collect even more is an argument for another day.)  Because it collects most of its income from people at the top, and because the incomes of the wealthy are more variable than the incomes of the poor and middle class (Warren Buffett's income can drop by $300,000; mine can't), we're going to get deep troughs in recessions, and high peaks in boom times.  We will get particularly high peaks when the booms are delivering huge chunks of income to a handful of people in a very short timeframe.

In other words, the only times we’ve approached, or even briefly exceeded 20% GDP have been in high economic booms where the rich got really rich. And that’s just to 20%. We need to get t0 25%. So, she assumes a baseline of 18.5%, rather than 20%. Which is still probably high, but we’ll let that go.

A tax hike of 5-6% of GDP doesn't sound like much.  But that's a big tax hike if your baseline is 19%--it means that everyone's taxes go up by about a third.  If the equilibrium tax revenue at Clinton rates is more like 18-18.5% of GDP, then obviously, they have to go up even higher, from a lower baseline. If you try to concentrate the pain on the wealthy or corporations, it's an even bigger whack.  Meanwhile, state and local taxes will be going up too; they have many of the same pension and entitlement problems that the federal government does.

These aren't little adjustments.  They're huge changes in the overall tax burden, and they will have big effects on peoples lives, and the economy.

So, the libs expecting tax receipts as a % of GDP to be higher than they ever have. They’re expecting them to stay at that level forever, and they’re increasing the tax burden of every person by huge amounts. She delves into some real numbers in her next post.

So our baseline would be returning effective tax rates on the top quintile to around 28%; effective tax rates on the middle quintile to 17%; and effective tax rates on the bottom quintile to 6%.  Then we raise each tax rate by a third to 37%, 23%, and 8%, respectively.  The current tax rates?  We don't know exactly (the data only go up to 2007), but a rough estimate is 25%, 14%, and 4%.

Wow, that sounds pretty big. But what does it mean to me in terms of take home pay? Well, Ms. McArdle comes to the rescue again.

Can this be done?  Maybe.  Probably, at least on the lower tiers, who don't respond to tax rates the way the wealthy can.  But it won't be easy or moderate.  I'm sure there are a number of people in my readership where two spouses take home $125,000 between them.  How easily can you guys chop $20,000 out of your budget?  And though the percentages are lower, in practical effect it's even worse for the bottom: if you're making minimum wage, $460 is several weeks worth of paychecks.

Ok, I’ll admit it. We’re in that range. $20,000 out of our budget? We could do it. Barely. But I can tell you what it’d mean. It’d mean we’d never go to Best Buy again. We wouldn’t go see movies. We’d hold on to our current cars even longer. My younger daughter would wear even more hand-me-downs. We wouldn’t replace our flooring throughout the house, which desperately needs to be done. We wouldn’t be buying that outdoor furniture we want. We wouldn’t replace our couch downstairs or the mattress upstairs. We wouldn’t take that trip to Disney next year. We wouldn’t visit the in-laws nearly as much.

Ok, that’s just one family. Now expand that nationwide. The economy would not just slow, but come to a crashing halt. And since our goal was to get the budget balanced, there’s not much we could do about the economy. We couldn’t spend more. We’d have to tax more then. We couldn’t cut taxes. We’d fail to meet our goal.

On the other hand, maybe we could cut taxes, because GDP would be so low at that point, 25% of it wouldn’t be that much.  Yeah, except the problem we’re looking at is based on rosy GDP projections. So, if GDP falters, our needs related to GDP actually go up. We might need 30%. Or even more.

And that’s why conservatives keep saying “we can’t tax our way out of this”.

Courage

No, I’m not channeling Dan Rather.

Yesterday, President Barack Obama (D-USA) said of the GOP “Path to Prosperity”, “No, I don't think it's particularly courageous”.

Hmmm. Interesting choice of words.

Here I go with math again. Sorry.

The issue is fiscal responsibility.

Obama plan: $4 trillion debt reduction (over original plan) over 12 years.

Ryan plan:  $6 trillion deficit spending reduction over 10 years.

By any objective measure, and just about any subjective one, the Ryan plan is far more fiscally responsible.

So, if the Ryan plan is not “particularly courageous”, then a plan that does less would be, what? How about “abject cowardice”? I think I can go with that.

Thanks for clearing that up, Mr. President.

The Day Of Reckoning Is Coming

This post is primarily directed at more liberal readers, but whatever your stripe, hopefully there’s something here for you.

We are fast approaching the day of reckoning for our country. Everyone, Democrats and Republicans alike says that the growth of our debt is unsustainable. Every economist says so.

At some point then, our debt will become overwhelming. When that happens, our economy and our lifestyles will suffer catastrophic consequences. And the government won’t be able to help. There’ll be no food stamps, no unemployment checks, no Medicare, no Medicaid, no Social Security, no welfare of any kind.

A popular phrase in Washington, D.C. these days is “we can’t continue to kick the can down the road.” I’ve heard President Barack Obama (D-USA) say it. I’ve heard Congressman Paul Ryan (R-WI-01) say it. That may not be completely true. We might be able to kick the can down the road another ten years or so. We might even be able to put off the crisis for a few years (not ten, though, less than that) while doing so.

So, what we do as a people, and what our government does, over the next ten years may well decide the future of this country as an independent nation. We are facing the largest obstacle to our future since the Civil War. Yes, it’s that big.

Look at this chart. It’s about a year old, but still accurate enough for our purposes.

This chart is pretty optimistic, actually. I’ve seen scarier ones, but it’s good enough.

The good news is that it probably won’t actually be that bad. We probably won’t ever hit 600% of GDP, because the country will self-destruct long before then. Somewhere between 2030 and 2050, our economy will completely melt down.

Here’s a look at projected tax revenue vs. entitlement spending. This is from the CBO.

There’s no doubt about it. President Lyndon B. Johnson’s “Great Society” is bankrupting this country.

But what about defense? We spend way too much there. Surely that’s a bigger problem, right?

Wrong.

Notice that dark blue area at the bottom. That’s defense. The green area and everything above it is entitlements and interest. Interest growth is even worse than entitlement growth. Of course, the interest growth is due to entitlement growth.

So, that’s where we’re going. And it’s ugly. As I’ve been saying a lot lately, this isn’t politics. It’s math. You can argue with politics all you want, but you’ll find it much harder to argue with math.

You don’t like the Ryan plan. I get it. Fine. Then what’s your alternative?

Not the President’s vague outline from the other day, I hope.

The President’s plan does exactly what I mentioned earlier. It kicks the can down the road for another ten years. And buys us maybe 5-8 years, if we’re lucky, on the impending crisis. It does nothing about the major cost factor in our spending growth, and assumes tax revenues at much higher levels than we’ve ever had.

Let’s chalk his plan down as “unserious” then, and move on.

I ask again, what’s your alternative?

Well, we could totally eliminate the military. Libs hate the military.  Well, there’s that graph again.

Looks like we could maybe save a decade or so by eliminating the military. That might be enough time, actually. After that, you won’t care about your entitlement programs because you’ll be too busy learning to speak Chinese.

Let’s mark that idea down as “unserious” and move on.

Let’s tax the heck out of the rich. That’s what Michael Moore says we should do.

But as Mary Katherine Ham points out:

The grand total of the combined net worth of every single one of America’s billionaires is roughly $1.3 trillion. It does indeed sound like a “ton of cash” until one considers that the 2011 deficit alone is $1.6 trillion. So, if the government were to simply confiscate the entire net worth of all of America’s billionaires, we’d still be $300 billion short of making up this year’s deficit.

But, that’s just billionaires, and it’s net worth. We’re talking about taxing income. Let’s look at everyone.

1. Tax the profits of the entire Fortune 500 at 100%. $391B
2. Tax 100% of all income over $250,000 for everyone in America. $1.412T

Not even $2T. You’ve covered the deficit for less than a year and a half, and in the process you’ve destroyed the economy.

Of course, you wouldn’t actually go to those extremes, would you? You’d just do part of that. Congratulations, you’ve just returned to the President’s plan which we already decided was “unserious”.

And even if it could work, there’s still a problem. When you increase taxes on big corporations, they tend to move elsewhere. Ask San Francisco about Twitter. Or ask Illinois about Caterpillar. Or New York about Rush Limbaugh. And it’s not just businesses that do that. Those billionaires you want to tax? They have enough money to move elsewhere. And they will.

And, as was mentioned in the link above, what happens then is the well runs dry. Higher taxation is a short term solution. We have a long term problem. All you’ve done is kicked the can down the road a bit.

Let’s mark that idea down as “unserious” too.

I realized that I forgot to compare “The People’s Budget”. So, let’s take a look at that, shall we?

The progressives create impossibly high tax rates, and while they claim to balance the budget in 2021 (it is very hard to confirm their numbers), they almost certainly won’t after that.

[…]

Mimicking President Obama, their plan would retain the Bush-era tax rates and some tax credits for those making less than $200,000 ($250,000 for joint filers). In addition, it would protect middle-income families from the Alternative Minimum Tax for another decade.

Beyond that, the tax increases in this plan are breathtaking. It would restore pre-2001 income tax rates for those making between $200,000 and $1 million and create five new brackets for higher earners, topping out at 49 percent for those making $1 billion or more. Capital gains and dividends would be taxed at ordinary income rates for those making $1 million or more (up to 49 percent). It would also cap the value of itemized deductions for high-income taxpayers at 28 percent (another Obama idea), raise Social Security payroll taxes for both workers and employers, and raise the gas tax by 25 percent. There’s more, but you get the drift.

Ah, so a pretend budget. I’d like to see some CBO scoring, but they create burdensome taxes and appear to make it look like they are doing something for the first ten years. They don’t address the growth of entitlements, so like the previous taxation based plans, all they do is kick the can down the road. They should call it “The Taxing the Heck Out of the People Budget”. It would be more accurate, because this budget is about as un-people friendly as you can get.

Unserious.

To review, we’ve discarded:

• Paul Ryan’s Plan
• The President’s Plan
• The People’s Budget
• Defunding the Military
• Taxing the heck out of the rich

Hmm. I ask again, what’s your alternative?

There is none. There is no way out of this situation without entitlement reform.

Period. Anyone who says otherwise is lying. Yes, I’m talking to you, Mr. President, and you, Senate Majority Leader Harry Reid (D-NV).

At the risk of repeating myself again, math trumps politics.

You may hate the Ryan plan. But at least it faces reality. If you don’t like it, come up with your own, but if it doesn’t include entitlement reform, all you’re doing is wasting your time and everyone else’s.

And we don’t have any more time to waste.

UPDATED: Included some information on “The People’s Budget”

Mr. President, You Lie

I’m writing this in response to the President’s speech yesterday about his “new” budget plans, and why they are laughable from the start.

Then Senator Barack Obama (D-IL), debating Senator John McCain (R-AZ), October 2008:

But there is no doubt that we’ve been living beyond our means and we’re going to have to make some adjustments.

Now, what I’ve done throughout this campaign is to propose a net spending cut.

Reality:

President Barack Obama (D-USA) in 2011, State of the Union Address:

The health insurance law we passed last year will slow these rising costs.

Reality:

Employees' share of premiums for a family plan is up an average 14%, to $3,997, vs. just a 3% rise in the total bill, according to the Kaiser Family Foundation.

And it's not just premiums that are spiraling higher. You're also likely to be hit with higher deductibles and out-of-pocket maximums as well as bigger bills for doctor's visits and drugs.

"Increasingly, employees have to be thoughtful about not just the cost of the plan, but the cost of the services they use," says Michael Thompson, a principal with Pricewaterhouse-Coopers' human resources practice.

Obama, 2009:

That is why I have pledged that I will not sign health insurance reform that adds even one dime to our deficit over the next decade. And I mean it. We have estimated that two-thirds of the cost of reform to bring health care security to every American can be paid for by reallocating money that is simply being wasted in federal health care programs.

Reality:

CBO: Obamacare = at least $109 Billion in Deficit Spending Over 10 Years; UPDATE: Former CBO Director: Obamacare Deficit will be $562 Billion over 10 years

And that includes the double-counting of Medicare “savings”.

“There is an issue here on the budget because your own actuary has said you can’t double-count,” said Shimkus. “You can’t count — they’re attacking Medicare on the CR when their bill, your law, cut $500 billion from Medicare.”

He continued: “Then you’re also using the same $500 billion to what? Say your funding health care. Your own actuary says you can’t do both. […] What’s the $500 billion in cuts for? Preserving Medicare or funding the health-care law?

Sebelius’ reply? “Both.”

And it includes such wonderful budget gimmickry as collecting taxes for 10 years, but only running the program for 5. Sure, that’ll help the deficit numbers for the first ten years, but unless you’re only planning on running the program half the time from now on, you have a problem after the first ten years are up.

Another source of double-counted savings is the CLASS Act, which creates a new, federally run long-term care insurance program. Beneficiaries will begin paying premiums in 2011 but will not receive benefits for five years. This frontloads revenue and creates the illusion of $70 billion to pay for new spending under PPACA. In reality, premium payments from CLASS will be used to pay out benefits in later years.[8] Senator Kent Conrad (D–ND) called this “a Ponzi scheme of the first order, the kind of thing that Bernie Madoff would have been proud of.”[9]

Then Senator Obama, 2008:

"I can make a firm pledge," he said in Dover, N.H., on Sept. 12. "Under my plan, no family making less than $250,000 a year will see any form of tax increase. Not your income tax, not your payroll tax, not your capital gains taxes, not any of your taxes."

He repeatedly vowed "you will not see any of your taxes increase one single dime."

Reality:

Now in office, Obama, who stopped smoking but has admitted he slips now and then, signed a law raising the tobacco tax nearly 62 cents on a pack of cigarettes, to $1.01. Other tobacco products saw similarly steep increases.

And:

The health care law that Obama signed on March 23, 2010, raises taxes on some things regardless of income. Two taxes in particular stand out. A tax on indoor tanning services begins this year. And in 2014, people will have to pay a fine, levied through their income taxes, if they don't have health insurance. Neither of these taxes are pegged to income.

President Obama, 2011 SOTU:

We have to confront the fact that our government spends more than it takes in. That is not sustainable.

Reality of budget plan from one month later:

At no point in the president’s 10-year projection would the U.S. government spend less than it's taking in.

Obama, yesterday:

This is my approach to reduce the deficit by $4 trillion over the next twelve years. It’s an approach that achieves about $2 trillion in spending cuts across the budget. It will lower our interest payments on the debt by $1 trillion. It calls for tax reform to cut about $1 trillion in spending from the tax code. And it achieves these goals while protecting the middle class, our commitment to seniors, and our investments in the future.

Reality:

Called a “debt failsafe trigger,” Obama’s scheme would automatically raise taxes if politicians spend too much. According to the talking points distributed by the White House, the automatic tax increase would take effect “if, by 2014, the projected ratio of debt-to-GDP is not stabilized and declining toward the end of the decade.”

In other words, more tax increases coming your way.

Finally, it’s worth pointing out that even his new plan expects a tax revenue-to-GDP ratio of much higher than 20%. So, this graph should not be missed.

As you can see, the peak was just over 20% (20.9% to be precise). Some say that we can’t consistently beat 19% (this is known as “Hauser’s Law”). I don’t know whether that’s true or not, but I do know that it would be foolish to assume that we can, since we never have.

Over this period there have been more than 30 major changes in the tax code including personal income tax rates, corporate tax rates, capital gains taxes, dividend taxes, investment tax credits, depreciation schedules, Social Security taxes, and the number of tax brackets among others. Yet during this period, federal government tax collections as a share of GDP have moved within a narrow band of just under 19% of GDP.

Why? Higher taxes discourage the "animal spirits" of entrepreneurship. When tax rates are raised, taxpayers are encouraged to shift, hide and underreport income. Taxpayers divert their effort from pro-growth productive investments to seeking tax shelters, tax havens and tax exempt investments. This behavior tends to dampen economic growth and job creation. Lower taxes increase the incentives to work, produce, save and invest, thereby encouraging capital formation and jobs. Taxpayers have less incentive to shelter and shift income.

Really, based on his track record, anyone that believes Obama when it comes to any kind of dollar figures should be forced to wear a tattoo on his forehead that says “moron”.

The President Isn’t A Hypocrite About The Debt Ceiling

Well, he is. But he’s no more of a hypocrite here than a typical politician.

Many people are pointing out one of his past statements about raising the debt ceiling, and his “no” vote on the issue.

The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies.

And now:

And today White House press secretary Jay Carney said that “the president, as David Plouffe said yesterday, regrets that vote and thinks it was a mistake.  He realizes now that raising the debt ceiling is so important to the health of this economy and the global economy that it is not a vote that, even when you are protesting an administration's policies, you can play around with, and you need to take very seriously the need to raise the debt limit so that the full faith and credit of the United States government is maintained around the globe.

Look, fiscal responsibility is always a good talking point. You rarely come out on the losing side of that issue, as long as you don’t provide any specifics. Therefore, the minority party nearly always opposes raising the debt ceiling. Why not? It doesn’t cost them anything. They know it’s going to pass without their help, so they can score a few political points coming out against it.

The truth is that generally very few in Washington are opposed to debt, no matter how big it is. But they don’t want that to be public. So, the minority party and vulnerable members from the majority vote no. Then everyone pats themselves on the back, and winks to each other that they’ve fooled the American public again, and business proceeds as usual in Washington. It’s been going on like that for over 100 years.

Had President George W. Bush (R-USA) been a Senator in the minority before becoming President, he likely would have voted against raising the debt ceiling too. That’s the way the game is played.

Do I like that? No, of course not. But I’m not foolish enough to be in denial of it.

So, President Barack Obama (D-USA) is no more a hypocrite on this issue than just about every other Congressman and Senator who has ever lived. I’m not happy about his reversal, but it’s hardly surprising, and it would be hardly surprising even if he had an R after his name. Bloggers and pundits that think he should be excoriated for this need to examine history.

Now, having sad all that, I’m not going to let him or the rest of the Democrats off the hook entirely. The Democrats took the screaming about debt and deficits to unheard of levels during the Bush years. Ok, you want to argue that Bush and the GOP were spendthrifts? I wouldn’t argue too strongly against you.

But…

When the Democrats gained power, did they cut spending? No. But no one in Washington ever has, so that’s hardly surprising. Did they follow the normal pattern and go to modest spending increases? No. They threw everything they could get into the budget, and into their plans for the foreseeable future. FY09 had nearly a $1.5T deficit. Ok, but half of that was TARP. So, FY10 and FY11 should have been much smaller. They weren’t.

If Bush and the GOP were fiscally irresponsible in the early 2000s, then the spending that Obama and the Democrats have done amounts to treason. You want to accuse them of hypocrisy, there’s your target. And you’d be absolutely right.

Now, the Tea Party has gone even further. Did I say that the amount of screaming about the debt and deficit during the Bush years was unprecedented? If so, then we need a whole new word for what the Tea Party has done. And that’s a good thing. As long as we hold the Republicans feet to the fire on this issue.

Sooner or later (hopefully sooner), the Democrats will no longer be the dominant power in Washington. There are more than a few indications that the GOP leadership expects once again to go back to business as usual when that happens. Sure, they’ll offer up a few token cuts to appease the base, but then they’ll go back to patting themselves on the back and winking to each other that once again, we’ve been fooled. We can not let that happen this time. We cannot be fooled again. This time is has to be different. We have to make it be so.

Or it’s over. Forget about security for your children. There’s not even going to be security for you.

Everything Old Is Well, Still Old

We heard yesterday that the White House will unveil a new plan for fiscal responsibility this week. Well, I’m glad that the White House is jumping on the bandwagon, but the ink isn’t dry on their last pathetic budget plan. Nothing says “leadership” like jumping all over the place on issues.

And we already know what’s going to be in it. They’re going to time warp back to last summer, which means killing the Bush tax cuts, major cuts to defense, and they’ll punt on entitlements and tell Congress to do something about them.

I’m pretty sure we already had this election, but apparently President Barack Obama (D-USA) thinks he gets a mulligan. Maybe the only thing that says “leadership” like jumping all over the place is jumping back a year to arguments that were miserable failures then. The fashion world has a statement that “everything old is new again”, but that doesn’t apply here. In this case, old is well, still old.

Expect to hear, once again, all summer long about how awful the Bush tax cuts are. We’ll also hear that if not for the evil Republicans who are being held hostage to the even more evil Tea Party not allowing him to expire them, we wouldn’t be in this mess.
Remember this graph?

Removing that tax cut on the $250,000 and up crowd will only get the feds back an additional $700B. And that’s over ten years. When you’re running trillion dollar deficits annually, that’s a drop in the bucket. It’s not that much bigger a drop than the one we got this weekend which works out to be over $400B over ten years.

If we get rid of all of the Bush tax cuts, we get to $3T over ten years. A much more impressive number, but that assumes that we don’t kill the economy in the process, so you can write down “unrealistic” next to that number.

Expect no one on the Democrat side to mention ObamaCare at all, and to attempt very hard to deflect the subject when asked about it.

And certainly don’t expect any Democrat to even discuss the fact that we had all these discussions already, and that the American public made their opinion on them quite clear.

How The Tea Party Can Win

We can change the debate. In fact, we already have. as has been said previously, the debate is no longer about whether to cut, but where to cut, and how much to cut. The importance of that point can not be overstated.
But…
We have to realize we’re not going to win this war in one shot. We’re not going to get President Barack Obama (D-USA) to suddenly cut trillions of dollars. Probably not even hundreds of billions. It’s just not going to happen. Even if we get someone in the White House with an R after their name, it’s still not going to be as easy as we’d like.
We have to fight this war one battle at a time. One penny at a time. Every single appropriations bill that comes along needs to be attacked and whittled down. If someone wants the debt ceiling raised, that’s going to come at a price. As heavy a price as we can manage. Every single tax bill needs to be attacked. If a new department or grant is being considered for creation, we need to jump in and shut that off or trim it down.
Obama and Reid need to know that we’re not going away. That we’re going to penny pinch them to death, and that we’re in it for the long haul.
And we don’t let up when we do get a better Senate and White House. That’s a big reason we got into this mess. Despite all my compliments about President George W. Bush (R-USA), there’s no doubt he was a big spender.
But…
We have to understand that we’re not going to get everything. When we ask for $100 billion in cuts, we might only be able to achieve $30 billion, and then only by some serious brinkmanship. And if that means using the troops as a bargaining chip, then we have to do that. We have to use every bargaining chip, every tool we have at our disposal. Because the other side is going to do that, and it’s the only way we’re going to win.
Yes, we’re trying to kill socialism in the United States. But it’s going to have to be a death by a thousand paper cuts. We don’t have the tools and there isn’t the political will in Washington to kill it out right. There may never be.
Those that say that compromise is wrong, and that Boehner screwed up, are flat wrong. Yes, compromises got us in to this mess. But it’s a whole different ball game now, and the compromises we’re seeking are totally different. As I said at the beginning, we’ve changed the argument. We’re not compromising on how much to grow, but how much to cut.
And if we can do that every time, there’s still hope.
Now yes, we have to get that clown out of the White House. And we have to replace him with someone who is serious about cutting. Because we do need some big cuts, and we do need them fast. But, sorry to say, Tea Partiers, but those big cuts ain’t happenin’ before January 2013. It’s impossible.
Shutting down the government is a losing proposition. Independents expect our government leaders to lead and to compromise. Not to pick up their ball and go home. Allowing the government to shut down is no different than what the Democrats did in Indiana and Wisconsin. And in fact, in many ways it’s worse. The GOP might get a boost short term. But then people are going to be needing to go to the Social Security Administration office because they’re dealing with identity theft, and they’re not going to be able to. People are going to get ticked off because all construction has stopped on the interstate they take to work. And the tide will turn against the GOP. And not slowly. Quickly.
Also, there’s a fine line between standing firm and being obstinate. Speaker Boehner (R-OH-08) et al have to walk that line very carefully. Tea Partiers may want him to step over the line to obstinate, but that’s a losing proposition for us long term. Frankly, so far, Beohner has been brilliant. We’re getting an up and down vote in the Senate on ObamaCare. Ed Morrissey describes perfectly how big that is:

So this isn’t important because it holds some new hope for a quicker repeal.  Rather, it forces Democrats to defend the massive government expansion of control yet again, this time closer to the 2012 election.  Democrats didn’t run on ObamaCare in 2010, except in reliably liberal districts for House races, and the last thing they need in an already-difficult cycle is another reminder to voters of the unpopular program.  By forcing a floor vote in this agreement, Reid will have to get his caucus — now reduced to 53 rather than 59 — to entirely back ObamaCare in a new vote.
That means Senators like Bill Nelson in Florida will have to back it, even with the latest Quinnipiac poll showing voters there opposing it 41/49 more than a year after its rollout.  Jon Tester in Montana will have to explain yet again to his constituents why he wants the IRS to be health-insurance cops.  Claire McCaskill already has enough problems in Missouri, as does Ben Nelson in Nebraska.  Even Democrats running for re-election in 2014 — like Mary Landrieu of Louisiana and Mark Pryor in Arkansas — will have to go back on the record to support it in order to keep the repeal from passing Congress, and that comes after the clear expression of voter disapproval in last year’s midterms.
Of course, even if that happened, Obama would veto it, but that creates problems for him as well.  If Democrats peel away from ObamaCare and he has to veto it to keep it in place, he suddenly looks very extreme and out of touch.  He’d have to explain why his only real legislative accomplishment has become so toxic that his own party doesn’t back it any more, which would put him even further on the defensive and eliminate the “GOP used scare tactics” defense of ObamaCare that he’ll undoubtedly use on the campaign trail.
Frankly, I’m surprised Reid and Obama agreed to this.  This has zero upside for Democrats heading into 2012, and looks like a political trap.

Brilliant.
The next big battle is over raising the debt ceiling. We’re going to have to get some concessions for that. And frankly, they should be big. Bigger than the $39B we just got. But we’ll see how it goes. Then we have next year’s budget, which will be in a dozen different budget bills. That gives us a dozen different votes. And then we’ll have the 2013 budget, which will be voted upon right before the elections in November 2012. Huge opportunities there.
Attack each one. Get every penny. But understand when you’ve gotten all the pennies you’re going to get.
And move on to the next battle.
Perseverance is the key. This isn’t the lottery. We’re not going to wake up one day and discover that we hit the jackpot and now we’re flush with money.
So, in that spirit, I can accept yesterday’s compromise. Am I happy about it? No. Am I even satisfied? Not hardly. But I can accept it. Win what you can. Move on to the next battle. That has to be our motto, or we’re going to lose.
Remember, the very future of this country is at stake. We can’t afford to lose the war because we’re pouting that we didn’t get enough from one tiny battle.
And we can win this way. Remember, a billion here, a billion there, pretty soon you’re talking about real money.

Ryan’s Path To Prosperity–Second Look

Speaking of crap sandwiches…
No, Paul Ryan’s (R-WI-01) plan isn’t a crap sandwich. But it’s no Philly Cheesesteak either. And it’s certainly not filet mignon.
I stand by what I said in my first look, that overall it’s a great start.
But there are some problems.

• Spending is still too high. It’s still over 20% of GDP. As I said in my last, that’s a problem. It’s barely over, at 20.5%, but it is over. We need to get it to around 19%. Or lower.
• Defense spending is still too high. Which is probably why it’s still over 20% of GDP. Look, I understand that defense is always where the Dems go first for “cuts”, and that many on the conservative side feel like defense has given up enough. But, we need to put everything on the table if we’re going to be serious about remaining an economic power. We have no chance of being a military power if we’re not an economic one. Defense cuts need to be part of the plan. Just not the biggest part.
• Ryan claims we’ll get to 4% unemployment by 2015, which is extremely unlikely. That makes all of his numbers following 2015 circumspect.
• The long term entitlement reforms are extremely vague. He makes broad strokes and gives us numbers, but it’s hard to believe these numbers without more detail.
• It doesn’t balance the budget until nearly 2040. And that’s under a best case scenario. Of course, this destroys the argument that it’s extreme. Supposedly we had a balanced budget back in 1998, a mere 13 years ago. Taking 29 years to rebalance it is “extreme”? Not hardly.
• The final bad thing is that this document is going to be the starting point for budget negotiations in 2012. This is a bad starting point. We should be looking at something like this as the end point. Because whatever we get in place of this, will be a crap sandwich.

No, before you think I’m being super critical, you have to understand that Ryan clearly sees the problems we’re facing. And he’s bold enough to point them out. And he has presented a serious plan to address them. No one else has done that. Certainly not President Barack Obama (D-USA), who seems to have decided that it’s best to pretend that the problems don’t exist. I may have problems with the details (or lack thereof in some places), but that’s going to be true no matter what plan we eventually adopt. At least this is a serious proposal to get us pointed in the right direction.
For more on his seriousness, and the seriousness of our situation, look at this week’s weekly Republican address, given by him.


Veronique de Rugy has more criticisms at Reason. Many mirror my own, but she’s even more critical.

More On Budget Deal

Yes, $39B in cuts amounts to a crap sandwich.
But, we knew when we came in to this diner that all they serve are crap sandwiches.
We got the best crap sandwich we were going to get.
You want something other than a crap sandwich? In November 2012, you will have a chance to change the management.
Look, you can grouse all you want. You can point out that this isn’t 1995, and that President Barack Obama (D-USA) is no President Bill Clinton (D-USA). But, the media is still in the Dem pocketbook. And, long term, a shutdown favors the Democrats. Probably not short term. It isn’t 1995, and he isn’t Bill Clinton. But long term, no doubt.
So, right now Speaker Boehner (R-OH-08) was negotiating from a position of strength. Give it 2-3 weeks, or a month, and he’s negotiating from a position of weakness. We would not have gotten a $39B deal in May. No chance whatsoever.
One more point, it can not be denied that John Boehner’s political power increased greatly over this deal. The 536 people in Washington, D.C. that matter know exactly who won this round and who lost. When the next battles come, that may turn out to be the most significant part of this deal.

Shutdown Averted

Ok, first the bad. Speaker John Boehner (R-OH-08) agreed to a mere $39 billion in cuts. That’s about 1%. Or about 2.8% of the deficit. Symbolic, at best.
Ok, now that’s out of the way. Let’s talk about the good.
Despite controlling only 1/2 of one branch of the government, the GOP was able to achieve the first actual spending cuts in modern history. And did it despite the biggest spending President and Senate this country has ever seen.
The Corner has a couple nice quotes for us.

Harry Reid, Feb. 3, 2011, on Paul Ryan’s initial offer of $32 billion in spending cuts:

The chairman of the Budget Committee today, today sent us something even more draconian than we originally anticipated…So this isn’t some game that people have been playing. The House of Representatives [is] actually sending us some of these unworkable plans.

Harry Reid, April 9, 2011, on a deal to cut $38.5 billion:

This is historic, what we’ve done.

Yes, this is a drop in the bucket. But it’s the first drop in our bucket we’ve ever gotten. I believe that Boehner got the best deal he was going to get. Shutdown or no. We have a Keynesian socialist President, who is either incapable of seeing the crisis in front of us, or does see it and honestly doesn’t care. Every financial battle against him is going to go like this. We’re going to have to push him to the brink and settle for the tiniest of cuts.
But we’re setting the table for 2013, when hopefully someone more reasonable will be in office. And the GOP is keeping its promise to push as hard as they can. Victories are going to be small and far between. For now, we’re going to have to be happy with the ones we get, as long as there is reason to believe we took it as far as we could.
But we also got some more things.
Our military will receive their paychecks. That’s good. Not sure how you feel, but I find slavery somewhat abhorrent. Apparently the President feels differently.
The D.C. school voucher program has been restored. This is a huge win for Boehner.
Funding for Planned Parenthood and ObamaCare will receive an up or down vote on the Senate floor. ObamaCare defunding has no chance of passage, but it’s not out of the question that PP defunding could get to 51 votes. It’s a stretch, but not an unbelievable one. There are several vulnerable Democrats who are not going to want to go on the record on this issue.
Remember, the one cut proposal we got from the Dems prior today was for $4 billion in cuts. And passage of that looked unlikely. The Democrats are totally unserious about the financial state of this country.
Next big battle: raising the debt ceiling. We’ll hit it in about 5 weeks, so round 2 is coming up fast.
One question though. How did the Senate vote first on the CR? I thought funding bills started in the House? Was our shutdown avoidance unconstitutional?
UPDATE: Some good points at HotAir:

We’ll see who won in September, but Republicans have achieved one major accomplishment.  Not only did they force the first actual reductions in government spending in ages, but they have changed the political paradigm from whether to cut to how much and where to cut.  That’s a pretty impressive victory for a party that only controls one chamber of Congress.
Update: One last point along these lines.  Democrats have spent the last four months arguing that Republicans were too radical to govern and wanted to destroy government.  Instead, Republicans fashioned a deal on their own terms and passed a budget deal — something Democrats couldn’t or wouldn’t do when they had all the power in DC.  This gives the GOP a lot of credibility on leadership and governance, and all of it at the expense of Harry Reid and Barack Obama.

Do Liberals Only Have One Speechwriter?

Every single time the GOP offers reforms for entitlement programs or offers up a budget, it’s the same litany.
“You’re starving senior citizens”
“The plan will end Medicare as we know it”
”Tax cuts for the rich”
etc.
Note that there are no counter proposals. Just whines. Dems never lead on something that takes courage. They have none.
It doesn’t starve senior citizens. Nancy Pelosi (D-CA-08), you’re either a liar or an idiot. Or both. The link above tears her assertion to shreds.
Next. Well, yes, it’s going to end Medicare as we know it. And Social Security, and Medicaid as we know them too.
That’s a good thing.
Guess what? If you haven’t been paying attention libs (and based upon your screaming, you haven’t), these programs as we know them are going to end, regardless of the Ryan plan. And they’re going to end soon. If we do nothing, they won’t just get revamped. They’ll die.
Read that again. They’ll die. These entitlement programs are going to change drastically, at the very least, no matter what happens. There is no way to avoid it. Scream all you want about the changes, but face reality. Otherwise you’re just like my four year old throwing a tantrum when I tell her I’m not going to buy her another Barbie doll.
Ryan’s plan is an attempt to save these programs. And the only way that’s going to happen is to cut costs and to increase revenue. You may not like the way he tries to save them. Fine. But whining that it’s going to change isn’t accomplishing anything other than making you look childish and stupid.
Tax cuts for the rich. Yawn. You realize, of course, that the poor don’t pay taxes? You can hardly cut their taxes. You also realize that just about any tax cut is going to help the rich the most, right? I mean, let’s say we did a 1% tax cut across the board. To every single taxpayer in America. Who’s that going to help more? The person who pays no taxes, the person who pays $350 in taxes, the person who pays $35,000 in taxes, or the person who pays $3,500,000 in taxes? Well, the first person gets nothing. The second person saves $3.50. The third person will get to pay about $350 less. The last person, the rich one, will pay $35,000 less. Still the same 1%, but the last person gets to keep a lot more money.
Yeah, I’d like it if I could cut my taxes by $35,000 too. But I don’t think many flat tax credits like that are coming my way or your way any time soon.
Even if it was a sliding scale like 10% for the first, 5% for the second, 2.5% for the third, and a measly 1% for the rich person, the rich still saves the most money.
Why? Because they pay the most taxes! Like I said earlier, libs, this isn’t policy. It’s math. And math trumps politics every single time.
This is exactly why Dems punted on the budget last year. They had near super-majorities in both chambers, and the White House. And they didn’t even try to pass a budget. They knew that they’d either have to cut spending, or raise taxes, or put out a budget with an astronomical debt figure. They didn’t want to do that in an election year. They punted so that Republicans would be forced to handle it this year, and now the Democrats can demonize the Republicans for doing all the awful evil things they were afraid to do.
Ryan’s plan has flaws. A lot of them, actually, now that I’ve looked at it in more detail (coming soon), but it’s a start, and it’s a recognition of the problem. It takes courage to lead, and I applaud Ryan for attempting to do so. The Democrats in Congress prefer to shirk their responsibilities and demonize those with real courage. They should all be tarred and feathered and never allowed to work for the public again.
At the very least, they should get a new speechwriter.

Ryan’s Path To Prosperity–First Look

Ok, I took my lunch hour and read Congressman Paul Ryan’s (R-WI-01) The Path To Prosperity. Is it perfect? No. In fact, my biggest criticism is that it doesn’t go far enough.
But overall, it’s a great start. Highlights:

Brings government spending to below 20 percent of the economy, a sharp contrast to the President’s budget, in which spending never falls below 23 percent of GDP over the next decade.

This is a necessity. Play all the games with taxes you want. We know from history that we can’t consistently get tax revenue over 20% of GDP for any extended period of time. President Barack Obama (D-USA) and the rest of the Dems ignore the problem. If you never get anywhere near 20%, you’re being criminally irresponsible.

Corporate Tax Reform: Improves incentives for job creators to work, invest, and innovate in the United States by lowering the corporate tax rate from 35 percent, which is the highest in the industrialized world, to a more competitive 25 percent.

Well, if you’ve ever read this blog before, you know how I feel about that. It doesn’t go nearly far enough. Still, if you want to get the economy going and consistently moving forward, this is a necessity. It’s the minimum we can do, and we should do much more, but it’s a good first step.
And the first big chart:

Debt over 100% of GDP is not sustainable. Japan’s debt is right at 200% of GDP and they are on the verge of economic meltdown. Greece was even higher, and they have already collapsed. You’ll notice that under Obama’s current plan, we hit 100% around 2020, and 200% around 2035, and then it really starts climbing. These are conservative and very optimistic projections. We’re likely much closer to these numbers than that. But even accepting them at face value, we have a date. 2035. Game over.
Got that? At that point, we will have no choice but to cut, and cut deep. And it’s going to be painful for every single man, woman and child in America. Dems will tell you that the Ryan plan is “extreme” and complain about all the people that are going to be hurt by it. Well, to respond to the first criticism, it’s not extreme. The President’s own Debt Commission’s plan was far more extreme than Ryan’s.

As for the second criticism, they’re right. A number of people are going to be impacted negatively by his plan. The government will not be giving them the money that they’ve been expecting. Frankly, this probably applies in some way to just about all of us.
But, you know what? Doing nothing is far worse. Sure, we get 20 years (maybe) where we can blissfully ignore the coming collapse and continue giving out free lunches to everyone. And then, we have to stop giving out free lunches to anyone. Ryan’s plan is the choice between getting a bloody nose now, and getting both legs amputated later.
I’ll take the bloody nose, thanks.

At a time when the free-market foundations of the American economy were in desperate need of restoration and repair, the last Congress took actions that further undermined them. The President and his party’s leaders embarked on a stimulus spending spree that added hundreds of billions of dollars to the debt, yet failed to deliver on its promises to create jobs. Acute economic hardship was exploited to enact unprecedented expansions of government power.
This did not sit well with the American people. Citizens stood up and demanded that their leaders reacquaint themselves with America’s founding ideals of liberty, limited government, and equality under the rule of law.
In recent years, both political parties have squandered the public’s trust. The American people ended a unified Republican majority in 2006, just as they ended a unified Democratic majority last fall. Americans reject leaders who focus on the pursuit of power at the expense of principle. They reject empty promises from a government that cannot live within its means. They deserve the truth about the
nation’s fiscal and economic challenges. They deserve – and demand – honest leaders willing to stand for solutions.

Ryan remembers last November. I hope the rest of Congress does also. Yes, I’m talking to you too, GOP.

In the words of Abraham Lincoln, “We cannot escape history. We of this Congress and this Administration will be remembered in spite of ourselves.” Will this be remembered as the Congress that did nothing as the nation slouched toward a preventable debt crisis and irreversible decline? Or will it instead be remembered as the Congress that did the hard work of preventing that crisis – the one that chose the path to prosperity?

Call me skeptical. I still believe that this Congress will be remembered as the Congress that did nothing.

Defense spending as a share of the budget has fallen from around 25 percent thirty years ago to around 20 percent today. Like all categories of government spending, defense spending should be executed with greater efficiency and accountability.

Ryan plays a game with the numbers here. Sorry, but I’m not going to let him get away with it. Defense spending has fallen as a share of the budget, but that doesn’t mean that there have been defense spending cuts. There haven’t. Defense just hasn’t grown as fast as other parts of the budget. He should be comparing defense spending to GDP here, as he does with other things. In terms of GDP, defense spending has grown, so it’s still part of the problem. It’s just not as much a part of the problem as other areas of the budget.

[It is] very clear that, absent action, Social Security, Medicare and Medicaid will soon grow to consume every dollar of revenue that the government raises in taxes. At that point, policymakers would be left with no good options. Making do without any federal government departments, including the military, is not really an option at all, and neither is raising taxes to a level that no free and prospering
economy could sustain.
Of course, if Congress continues to delay, it will lose even the ability to make such choices on its own terms.

Bingo.

Each year that Congress fails to act, the U.S. government gets closer to breaking promises to current retirees while adding to a growing pile of empty promises made to future generations. The government’s unfunded liabilities – promises the
government makes to current workers about their health and retirement security for which it has no means to pay – are growing by trillions of dollars a year.

This isn’t spin. It’s a fact. To deny facts is to stick your head in the sand like an ostrich. Dems today want you to be an ostrich.

The non-partisan Congressional Budget Office has concluded that the tax rates needed to sustain the nation’s current fiscal trajectory into the future would end up sinking the economy. That is one reason that the Commission on Fiscal Responsibility and Reform proposed, as part of an overall effort to fix the nation’s
unsustainable deficits, a fundamental tax reform plan that actually lowered income tax rates to promote growth, while eliminating tax loopholes to broaden the tax base.

Actually, I disagree with part of that too. I don’t want to eliminate loopholes. I want the “loopholes” to apply to everyone. There’s been a lot in the papers recently about GE not paying enough in taxes. The problem isn’t that GE doesn’t pay enough. It’s that everyone else pays too much. But I digress.

The recent sovereign debt crises in Greece and other highly-indebted European countries provide a cautionary tale of the rough justice of the marketplace – lenders cannot and will not finance unsustainable deficits forever, and when they cut up the credit cards of profligate countries, severe economic turmoil ensues.
Over the past few years, Americans have seen just how quickly a  severe financial crisis can create widespread pain and chaos. But the last crisis was foreseen only by a small number of perceptive individuals who recognized the implications of unwise decisions being made in Washington and on Wall Street.
By contrast, nearly every fiscal expert and advisor in Washington has warned that a major debt crisis is inevitable if the U.S. government remains on its current unsustainable path. The government’s failure to prevent this completely preventable crisis would rank among history’s most infamous episodes of political malpractice.

We are on the exact same path as Greece, Italy, and others. And we’re not as many steps behind as you might think.
And here’s what Ryan says about how the debt crisis would unfold.

The first sign that a debt crisis has arrived is that bond investors lose confidence in a government’s ability to pay its debts – and by that point, it is usually too late to avoid severe disruption and economic pain. Right now, the U.S. government is able to borrow at historically low rates, partly because of the Fed’s interventions in the market, but also because the bonds of most foreign countries are looking even riskier. Neither of these conditions is going to last. Interest rates – and the burden of paying interest on the debt – have nowhere to go but up.

We may be mere months from this. If it’s years, it’s not very many (think less than 5).

If foreign investors, especially foreign governments such as China, begin to lose confidence in the U.S. government’s ability to solve its most difficult fiscal challenges, they will demand higher compensation to offset the perceived risk of holding U.S. debt – meaning sharply higher interest rates.

They may also demand payment in tender other than U.S. dollars. If China required that all future debt payments be made in gold, that would be catastrophic. At some point, that becomes not just a terrifying thought, but an destructive inevitability.

The economic effects of a debt crisis on the United States would be far worse than what the nation experienced during the financial crisis of 2008. For starters, no entity on the planet is large enough to bail out the U.S. government. Absent a bailout, the only solutions to a debt crisis would be truly painful: massive tax increases, sudden and disruptive cuts to vital programs, runaway inflation, or all three. This would create a huge hole in the economy that would be exacerbated by panic.

Well, that’s a pleasant thought.
Want more pleasant thoughts? Ryan doesn’t have them.

In the end, the debate about rising U.S. debt is not just about dollars and cents, but also about America’s status as a world power and its freedom to act in its own best interests. If the nation stays on its current path, interest payments on the national debt will begin to exceed yearly defense spending just 11 years from now. In just 16 years, yearly interest expenses will be double national defense spending.
If it stays on its current fiscal path, the United States will be unable to afford its role as an economic and military superpower. Other nations with very different interests will rush in to fill that role.
Last year in Foreign Affairs magazine, financial historian Niall Ferguson surveyed some of the great empire declines throughout history and observed that “most imperial falls are associated with fiscal crises. All the… cases were marked by sharp imbalances between revenues and expenditures, as well as difficulties with financing public debt. Alarm bells should be ringing loudly… [for] the United States.”

That’s where we are. The rest of the document lays out how to fix it. And it ain’t pretty. But overall, it could look much worse. The cuts aren’t extreme. They’re manageable. In fact, it’s easy to argue that in some places, they’re too small. Far too small.
Some more details of the plan:

Ending corporate welfare: There is a growing and pernicious trend of government overreach into sectors of the private economy – a trend that stacks the deck in favor of entrenched interests and stifles growth. This budget ends the taxpayer bailouts of failed financial institutions and stops Washington from picking the winners and losers across sectors of the economy.
Boosting American energy resources: Too great a percentage of America’s vast natural resources remain locked behind bureaucratic barriers and red tape. This budget removes moratoriums on safe, responsible energy exploration in the United States, ends Washington policies that drive up gas prices, and unlocks American energy production to help lower costs, create jobs, and reduce dependence on foreign oil.

And:

This budget puts an end to empty promises from a broke government, offering instead real security through real reforms. The framework established in this budget secures health and retirement benefit programs both for current beneficiaries, who will receive the benefits they’ve organized their retirements around, and for future generations, who will inherit stronger programs they can count on when they retire.

As Governor Chris Christie (R-NJ) said recently:

I went before the firefighters convention on Friday down here in Wildwood, New Jersey, and I said to them, you know, I understand why you're angry. For 20 years, governors have been coming here to your convention and lying to you about the kind of benefits they can provide to you. And you want to "boo' me, that's fine, but I'm the first guy who's telling you the truth, which is if we don't make these reforms, we are going to wind up with you not having a pension in 10 or 15 years, because the situation is so dire.

I’ve seen a lot of booing and anger directed at the GOP lately. Especially the Tea Party wing. These aren’t the people you should be booing. You should be booing the people who have been promising you unicorns and rainbows for the last 50 years and telling you not to worry about how to pay for it because that’s a problem for the future. Guess what? The future is now.
Look, this is very simple. You may disagree with the items on Ryan’s plan. You may think that parts of it are too extreme. You may think that parts of it don’t go far enough. You might think that it goes too fast or too slow. You may think that it cuts taxes too much. You may think it doesn’t cut them enough. You might even think that we should raise taxes. If you think any of those things, that’s fine. Those are reasonable criticisms, and would promote a reasonable debate. Ryan’s plan is not the only solution. It’s not even the best solution, in my opinion. But it is a solution.
What you can’t do is to deny the need for a plan like Ryan’s. That is a path to economic suicide, and it’s not even a slow one. From what I’ve seen, and maybe they’ll surprise me and change, is that the Democrat leadership wants to continue down the path towards economic suicide. They will destroy this country if you let them.
Again, that’s not hyperbole. It’s not even exaggeration. It’s not even a criticism of progressive policies versus conservative ones. It’s math. And no matter how much the Dems try to make it not be so, math trumps politics every time.

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The Most Predictable Economic Crisis In History

More on where we are. This from Erskine Bowles, co-chair of President Barack Obama’s (D-USA) National Commission on Fiscal Responsibility. He also served as chief of staff to President Bill Clinton (D-USA). In other words, he is not a tinfoil hatter, nor is he a “GOP hack”.
Watch this. You have to understand where we are in order to move forward.

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Paul Ryan Lays It Out

Very powerful video here. Presented without commentary for now. Commentary will be coming later.
Watch this. Until you do, you can not speak about the debt or the size of government. This is very simple, and easy to understand. I’ll have some more complex stuff with more details later.

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Bill Whittle–Eat The Rich!

Bill Whittle is great. Worth watching all of his stuff.