The Ryan/GOP budget...what's really going on.

I posted this the other day on a thread, but I think it merits it's own thread, because I rarely see people talking about sound economic principle...rather than ideology. What's really going on with the budget? Well I think it's a plan to force an extreme neo-liberal agenda on this country.

I wondered what "average Americans" thought of this plan, if they were going to buy into the MSM rhetoric that this was a "smart, bold, serious" plan? Or were they going to see it for what it really is? "Government by people that hate you" as one reporter put it. So, I was heartened the other day to see the new WSJ/NBC poll that shows that these Washington "insiders" "elites" "extremists" whatever you want to call them, are hugely out of touch with the average American.

Before I go into some of the known facts about the budget and economy as well as all the misleading information that many of the budget extremists base their positions on. I want to put this all in perspective by showing what actual Americans want from the government:

A) The majority of respondents, 51%, felt that "the government needs to do more". While 46% thought it should do less (the rest "unsure").

B) Only 29% of respondents considers themselves a "supporter" of the Tea Party Movement, while 61% do NOT support them (the rest "unsure"/"it depends").

C) When asked if it is necessary to cut Medicare in order to "significantly reduce the deficit". Only 18% of respondents said "yes", while a majority of 54% said "no". (the rest "unsure/no opinion"). Similarly for Social Security 49% said "no" and only 22% said "yes".

D) When given a list of various programs of which could be cut, respondents were asked to rate each as totally acceptable, mostly acceptable, mostly unacceptable, and totally unacceptable. Options such as Social Security, Education, Medicare, Medicaid, and Heating to Low income families, were all last on the list (in that order) as being "mostly or totally unacceptable" to cut spending from. A whopping 77% felt it was "mostly or totally unacceptable" to cut Social Security. Medicare, again a whopping 76% felt it was unacceptable to cut the program, with Medicaid being at 67% and Education 77%.

E) Among options that would be "most acceptable" of programs that could be "cut or eliminated" at the top of the list was "Surtax on millionaires" of which a whopping 80% felt would be "mostly or totally acceptable"...80%!!! (only 17% were against it). Next on the list was the "elimination of earmarks" which got 78% "mostly or totally acceptable". Eliminating necessary weapons systems from defense was next at 76% acceptable. "Eliminating tax credits for oil & gas companies" at 74% approval and "phasing out Bush tax cuts for those making over 250,000" was at 68% approval.

And for those who want to dismiss this study by saying something like "they probably asked a bunch of hippie liberals"...well according to the participants. 36% identified as "somewhat or very conservative", 38% as "moderate", and only 24% as "somewhat or very liberal" (with the rest being "not sure").

(Source)

Now I want to talk about the deficit and economy.

One major thing that has bothered me, has been all these assertions that "unions" or "welfare queens" or "lazy unemployed americans" have been the ones to cause the big deficit. That is simply not true. The deficits are a result of the recent economic crisis, and partly a reduction in tax revenues. Spending is not as important as most are claiming it to be, because often times, spending money now, has the effect of saving money in the future (it's what we call an investment). Sure it doesn't hurt to cut wasteful programs and being a "smart investor" are all good things, however any economist will tell you that it's just bad policy to cut government spending in times of economic downturns. You are supposed to cut spending in times of economic prosperity as was done in the 90's when the budget was balanced. Government spending should increase, however, during recessions in order to pick up the slack lost by the private sector and keep people working.

Two years ago, faced with soaring unemployment and large budget deficits -- both the consequences of a severe financial crisis -- most advanced-country leaders (Europe) seemingly understood that the problems had to be tackled in sequence, with an immediate focus on creating jobs combined with a long-run strategy of deficit reduction.

Why not slash deficits immediately? Because tax increases and cuts in government spending would depress economies further, worsening unemployment. And cutting spending in a deeply depressed economy is largely self-defeating even in purely fiscal terms: any savings achieved at the front end are partly offset by lower revenue, as the economy shrinks.

So jobs now, deficits later was and is the right strategy. Unfortunately, it's a strategy that has been abandoned in the face of phantom risks and delusional hopes.

(Source).
Now considering that all the greed and corruption on Wall Street was a major cause of this economic downturn, this is why people find it especially vexing, and just plain cruel, that draconian austerity measures are being applied to everyone else, the average Americans, while the class of wealthy elite money-grubbers that caused the tanking of the economy in the first place are getting tax breaks and handouts. As Paul Krugman put it:

"the poor must accept big cuts in Medicaid and food stamps; the middle class must accept big cuts in Medicare (actually a dismantling of the whole program); and corporations and the rich must accept big cuts in the taxes they have to pay. Shared sacrifice! "

Either way, it seems the entire washington beltway, has simply chosen to ignore the fact that these deficits are also a function of the recession, and perhaps better way would be to expand the economy first and create more jobs...and then go after certain wasteful spending after the economy returns to health. From the CBO:

Since last August, the outlook for the ten-year budget deficit has deteriorated by $1.4 trillion (see Table A-1 on pages 106-7). Note that more than 100% of the deterioration is due to revenue losses; projected federal revenues over the (fiscal years) 2011-20 period declined by $1.9 trillion–a net $713 billion due to recent legislation (the lame-duck deficit-financed tax cuts), but a larger $958 billion due to negative revisions to the economic forecast and the interaction of those economic changes with our less-than-adequately-robust-or-resilient income tax base.

Source Source
What baffles my mind, is that republicans are proposing yet even MORE tax cuts for corporations and the wealthy (and austerity for everyone else). The Ryan plan calls for cutting the top marginal rate to 25 percent — lower than it has been at any time in the past 80 years. Let's look at how those Bush tax cuts stack up against the deficit.
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So, if we pulled out of all these wars of aggression and brought tax levels back to what they were in the 90's (the last time we balanced out budget) we could solve much of this problem. The point being that we don't have to balance the budget on the backs of middle class and poor Americans.

Also, contrary to what some might say, tax cuts are not "deficit neutral"...nor do they "pay for themselves"...the Bush tax cuts for example were not paid for, and one commonly cited figure is that they will add roughly 1 trillion over 10 years to the deficit (although it's hard to tell since taxes are effected by economic health) Source

Here's another couple interesting charts. Here's a trend showing decreasing tax rates with increasing debt and an inverse relationship (again tax cuts = less revenue = increased debt)
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the claim that lower taxes mean higher revenue — is still very much there. The Heritage Foundation projection has large tax cuts actually increasing revenue by almost $600 billion over the next 10 years.

A more sober assessment from the nonpartisan Congressional Budget Office tells a different story. It finds that a large part of the supposed savings from spending cuts would go, not to reduce the deficit, but to pay for tax cuts. In fact, the budget office finds that over the next decade the plan would lead to bigger deficits and more debt than current law.

Source

And where do these savings mostly come from in the "Ryan Plan":
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Ah, Of course, the poor and working class. I can't help but think that this has nothing to do with the budget, and all about cutting programs that Republicans are ideologically against (despite the success/effectiveness of programs like SS/Medicare, despite the fact that a majority of Americans support these programs and are against cutting them). Literally what we have is a transfer of wealth to the top...of course it's been happening for the past 30 years, since the implementation of all these "free trade deals", "NATFA", "regressive tax policy" and "neo-liberal economic policies" The vast middle class that made this country so great, is being decimated before our eyes. It's the coming Plutocracy.
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While I can post plenty of charts, and show trends, and how corporations have hijacked our government and manipulated policies towards their own end, by the rich, for the rich...what I understand the least, is how some people, regular Americans, can support this type of policy, against their own economic interest. How they can defend the decimation of the middle class. How they can defend the feckless corporate plutocracy. How can they hate the middle class so much? How can they call American workers "greedy, lazy, whiners" when American's have the longest work week of the industrialized world, along with least amount of vacation and fewest benefits (if they get benefits as all, since most don't). Of course the corporate class is, I'm sure, happy about this demonization of working Americans, as it plays towards their end goal, a race to the bottom for the rest of us. This is a class war, initiated by the wealthy and they are out to destroy the vast middle class that made this country so great in the first place. Do you agree? If not, why?

reply to post by meeneecat


S+F Keeping thread front page......Deny Ignorance

I wish I could say out loud what I think should be done -to- that Ryan demon, that rightwingnut corporatist Nazi, but it would get me in trouble.

reply to post by meeneecat

Thanks for putting up all that information. I'm not sure that it proves what you think it does, but if the thread gets interesting I may come back for another peak.

Congress is planning to spend $3.7 trillion this year. Let's see how we can pay for it:
Tax every household making more than $250,000 100% of what they make - take it all = $1.4 trillion
Tax the corporate profits of every Fortune 500 firm at 100% - take all their profits = $ .4 trillion
Now confiscate all of the property; homes, everything of the 400 richest Americans = $1.3 trillion

Spend $3.7 Trillion, Take in $3.1 Trillion = $600,000,000,000 defecit added to the debt in one year.

Do you still think the problem is too little revenue? And what will you take the next year?

Originally posted by meeneecat
what I understand the least, is how some people, regular Americans, can support this type of policy, against their own economic interest.

Because the don't or refuse to understand the consequences. It's like that lady who demanded Obama leave her medicare alone while calling him a socialist, marxist, or how the GOP argued that Obama's healthcare would cut medicare... even though medicare is socialist in nature, something the GOP stood against.

It's all for show, insist you are against anything remotely socialist in nature, but dont do much in the backround because you know there will a backlash if you actually to action. In a perfect gumdrop candy world we can all live back in the 18th century with the attitude that we can live in near anarchy, but we don't live in a perfect world. This is what many tea partiers and conservatives refuse to get, even some democrats don't understand this. In theory A = B, but in practice the circumstances changes this. The free market is an unworkable system in nature, it's a lovely system to wave around and proclaim you support in public, but nobody wants to actually live in it, and nobody wants to be the one to axe programmes that people depend on. In the end theres two choices, either axes these social progammes and leave millions of americans out in the streets, and then turn a blind eye and pretend nature will just fix everything up, or reassess the real issues causing out debt crises e.g lack of regulation on businesses that hire illegals and shift jobs overseas, insufficient tax revenues been generated to pay off our debt and this country's infrastructure.

Both sides are a crock.
The budget needs to be cut across the board, period.
I don't spend more then what I make. What makes the Govt think they are special?

And taking more away from people to provide for others is BS anyway you look at it.

reply to post by charles1952


Where do you get your numbers from I find it hard to believe the 500 largest companies in America only made 400 billion in profit.

As for the Ryan budget it looks pretty clear that he intends to balance the budget on the backs of the poorest people in America. I think theres some middle ground here if the parties can compromise and have actual shared sacrafice.

reply to post by meeneecat


I am not sure you know what a liberal vs. A libertarian is. A liberal is generally for spending on social programs, fair pay for workers, equitable taxes, and less military spending among other things. A libertarian is generally for less regulation (food safety, state licensing like drivers licenses, fishing licenses etc...), less corporate regulation, and more personal freedom to do anything they want.. Republicans usually want to tax corporations less, despise any federal or public assistance to the most vulnerable members of society, and don't like workers to have any power (unions, minimum wage, OSHA standards etc...). They also heavily support eliminating any government regulations or over sight on "big" business. What you have described in your post is more libertarian/hard right republican than it is liberal.

Want to know what is the most "unfunded" liability that you aren't mentioning?

The Federal Reserve System.

Right now everyone is spinning in circles about the budget but let us break it down...

Bush tax breaks seem to be the main issue. This issue is a farce. There were no income taxes before 1913 which happens to be when the Federal Reserve was put into existence. Income taxes are used as a steady income stream to the bankers. It will never go away, no matter who pays for it.

The real issue with the Bush tax cuts is how it divides us. The poor and middle class think the rich don't pay enough while the rich think they pay too much. The reality is that both the rich and poor shouldn't pay anything at all when it comes to income taxes and that is exactly how it was pre-1913 pre-IRS.

The U.S. went about just fine pre IRS. There were expensive and destructive wars and there was infrastructure that needed to be paid for. In fact Abraham Lincoln came up with a brilliant system to pay for stuff (Lincoln Greenback) which would have probably put and end to the banker scheme once and for all if he hadn't gotten assassinated.

So lets get off the left/right talking points and pay attention to the real problem.

Just another thought to add. One common argument you often hear from neo-liberal ideologues is that tax cuts are "good" because they "trickle down" the wealth to everyone else.

For those that don't know, trickle down theory, also known as "Reaganomics" essentially says that policies that favor the wealthy, such as large tax breaks for the rich and big corporations, are beneficial to society as a whole because these people are more likely to spend this money, creating more economic activity and thus creating more jobs, essentially meaning an increase of wealth at the top will also flow down to benefit those in the lower income brackets.

Well the data tells a different story.

As of 2007, income inequality in the United States was at an all-time high for the past 95 years, with the top 0.01% -- that's one-hundredth of one percent -- receiving 6% of all U.S. wages, which is double what it was for that tiny slice in 2000; the top 10% received 49.7%, the highest since 1917 (Saez, 2009). And the rate of increase is even higher for the very richest of the rich: the top 400 income earners in the United States. According to another analysis by Johnston (2010a), the average income of the top 400 tripled during the Clinton Administration and doubled during the first seven years of the Bush Administration. So by 2007, the top 400 averaged $344.8 million per person, up 31% from an average of $263.3 million just one year earlier.

How are these huge gains possible for the top 400? It's due to cuts in the tax rates on capital gains and dividends, which were down to a mere 15% in 2007 thanks to the tax cuts proposed by the Bush Administration and passed by Congress in 2003. Since almost 75% of the income for the top 400 comes from capital gains and dividends, it's not hard to see why tax cuts on income sources available to only a tiny percent of Americans mattered greatly for the high-earning few. Overall, the effective tax rate on high incomes fell by 7% during the Clinton presidency and 6% in the Bush era, so the top 400 had a tax rate of 20% or less in 2007, far lower than the marginal tax rate of 35% that the highest income earners (over $372,650) supposedly pay.

Source

You can see how larger gains in this top income bracket were made following major tax cuts.
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Trickle-down theory also predicts a positive correlation between inequality and economic growth, the idea being that income disparities strengthen motivation to get ahead. Yet when researchers track the data within individual countries over time, they find a negative correlation. In the decades immediately after World War II, for example, income inequality was low by historical standards, yet growth rates in most industrial countries were extremely high. In contrast, growth rates have been only about half as large in the years since 1973, a period in which inequality has been steadily rising.

Source
It's actually not all that rare for an economic theory to have greatly different outcomes in the real world. Some models are better than others, and in the case of "trickle down" theory, it just doesn't hold up in the real world. Again, the percent change in wealth for top earners vs everyone else. A variation on the above chart that shows income gains going to the top income bracket whereas wages for everyone else stagnated of decreased.
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Now that isn't to say that the theory is completely without merit. In fact some studies have shown that over the longer term, that is decades, that some wealth may in fact "trickle down". However, I believe it's like most things, too much of anything can be a bad thing. This country has taken an extreme stance on tax policy and neo-liberal economic policies. A return to a more moderate position on taxes with regard to top income earners would go a long way in helping to return to the days of a strong middle class.

Originally posted by charles1952
reply to post by meeneecat

 

Thanks for putting up all that information. I'm not sure that it proves what you think it does, but if the thread gets interesting I may come back for another peak.

Congress is planning to spend $3.7 trillion this year. Let's see how we can pay for it:
Tax every household making more than $250,000 100% of what they make - take it all = $1.4 trillion
Tax the corporate profits of every Fortune 500 firm at 100% - take all their profits = $ .4 trillion
Now confiscate all of the property; homes, everything of the 400 richest Americans = $1.3 trillion

Spend $3.7 Trillion, Take in $3.1 Trillion = $600,000,000,000 defecit added to the debt in one year.

Do you still think the problem is too little revenue? And what will you take the next year?

I am not advocating raising tax rates to 100%, so I'm not really sure why you suggest that here. Please reread my comment if you had that misunderstanding. What I am saying is that it is generally wrong for the government to be making huge spending cuts during a major recession. Again cutting waste and reallocating resources to programs that work is fine, and if you read my comment you notice that I also say that cutting spending is appropriate during time of economic prosperity. However during a recession, as a general rule most economists agree, that is not the time to make massive spending cuts. What the government should be focused on is expanding the economy and creating jobs. If you look at the data, you see that much of the current deficit IS in fact due to both the recession and the bush tax cuts (see the first chart). These both lead to a decrease in revenue...hence much of the deficit is a revenue problem...I never, in my comment denied that there was a spending problem either. Deficits run up as a combination of the two, it is never purely one or the other, thus focusing on only spending, which the budget hawks are doing, ignores the entire other half of the equation. You balance budgets in either one of two ways, cutting spending, or increasing revenue (and/or a combination of the two). Also, not all spending is "bad"...like I said, it's about getting a return on an investment, and much of the programs cut are actually going to lead to worse financial problems in the future.

Here's an example of how cuts can be counteractive which is why I emphasized "smart" investing.
IRS Funding Cut Days Before Report Shows $330 billion In Uncollected Taxes

Then on Monday, the Government Accountability Office publicly released a study showing that, as of the end of fiscal year 2010, roughly $330 billion in federal taxes had never been paid -- an amount that, if collected, would represent nearly nine times the amount of savings as the budget itself.

However, without hiring additional IRS agents to investigate and collect this money, it's essentially just sitting there wasted. And in fact the budget agreement does not allocate any new funds to go after tax cheats.

There are many other options for balancing the budget other than the massive spending cuts that have been proposed. And again, there is this question of whether or not this is even the right time to do this, as opposed to focusing on jobs and trying to expand the economy to a point of health before we focus on spending. This is just common economic sense. In my personal opinion, I believe that tax rates on the top earners should be returned to what they were during the 90's under Clinton (roll back the Bush tax cuts). And I think we need to end all the overseas wars. Again, as I said before, those 3 things alone will do much to reduce the deficit without doing it on the backs of the middle class and poor. This budget plan is neither "smart", "bold" nor "serious".

reply to post by meeneecat


The strong middle class post WW2 was due largely to the fact that the United States was pretty much the only major economic power that was not in shambles and the fact that the Cold War economy put a ton of money into the system. Taxes had nothing to do with the existence of the middle class post WW2.

The world has however changed, foreign countries have rebuilt and are competitive. Yet U.S. economic policy and theory is still stuck in the arguments of the 1950's and 1980's.

If wealth is to flow back into the U.S. and support a strong economic base, the U.S. has to adopt policies that worked when there were foreign economic competitors. The U.S. needs to adopt economic policies from pre-1910 when there was strong foreign competition. This means an economic policy that was in existence pre-1910, which happens to be when the Fed and IRS wasn't around. This also means an end to unregulated and unfettered free trade as well.

reply to post by meeneecat


The big problem with the government "creating" jobs is the complexes that are created with them.

The military-industrial complex created lots of jobs and is "good" for the economy right? Well it is actually a political resource wasting monster that serves as the preeminent example of big government run wild.

Deficit spending, due to the nature of the military industrial complex example above, becomes a permanent fixture in the economy and it is very very hard to get rid of once unnecessary.

And it will have to be paid for because the overlord bankers and the Fed want interest payments.

Originally posted by macman
Both sides are a crock.
The budget needs to be cut across the board, period.
I don't spend more then what I make. What makes the Govt think they are special?

And taking more away from people to provide for others is BS anyway you look at it.

You may not spend more than you make, but do you have a mortgage? a car loan? college loan? Or did you pay cash for these things. Because that is going into debt and most Americans have some form of it or another. In business terms it's called "leverage", every single bank on the planet, issues "debt" in order to make investments. To say "no one should spend beyond their means" is to completely misunderstand how the concepts of "net capital", "leverage", "investment" etc. actually help create wealth. Additionally, comparing an individual to the federal government is like comparing apples and oranges.

It seems one of the points that I was trying to make here, that budgets should be balanced during times of economic prosperity and NOT during a recession has been missed. Do you also think that the government should purposefully implement policies that will put more people out of work and further contract the economy?

And please, you want to talk about "taking money away from people to provide for others" I don't mean this as a knock on GOP leaning states, but this is factually correct, the GOP are the ones who generally rail against "taking money away from people to provide for others" as you put it...however it's also the "Red" states who receive more federal funds than they pay out, while the "Blue" states are the ones providing these funds (and meanwhile receiving less, than they put in)

"Red States Feed at Federal Trough, Blue States Supply the Feed"

The Tax Foundation has released a fascinating report showing which states benefit from federal tax and spending policies, and which states foot the bill.

US 50 States MapThe report shows that of the 32 states (and the District of Columbia) that are "winners" receiving more in federal spending than they pay in federal taxes -- 76% are Red States that voted for George Bush in 2000. Indeed, 17 of the 20 (85%) states receiving the most federal spending per dollar of federal taxes paid are Red States.

reply to post by Vikus


Can you please provide some evidence to back up what you are claiming.

Originally posted by Achaetes
I am not sure you know what a liberal vs. A libertarian is. A liberal is generally for spending on social programs, fair pay for workers, equitable taxes, and less military spending among other things. A libertarian is generally for less regulation (food safety, state licensing like drivers licenses, fishing licenses etc...), less corporate regulation, and more personal freedom to do anything they want.. Republicans usually want to tax corporations less, despise any federal or public assistance to the most vulnerable members of society, and don't like workers to have any power (unions, minimum wage, OSHA standards etc...). They also heavily support eliminating any government regulations or over sight on "big" business. What you have described in your post is more libertarian/hard right republican than it is liberal.

You must be referring to my reference to "neo-liberal" policy. I don't mean to be rude, but you should really have looked this up yourself before you assume I do not "understand the difference". Neo-liberal is also referred to in the U.S. as neo-conservative. In the rest of the world it is referred to as "neo-liberal". I use "neo-liberal" to refer to the economic philosophy of the "lazzez faire" / "chicago school" / Milton Friedman variety. Here's the first paragraph on the wiki entry:

Neoliberalism describes a market-driven[1] approach to economic and social policy based on neoclassical theories of economics that stresses the efficiency of private enterprise, liberalized trade and relatively open markets, and therefore seeks to maximize the role of the private sector in determining the political and economic priorities of the state.

The term "neoliberalism" has also come into wide use in cultural studies to describe an internationally prevailing ideological paradigm that leads to social, cultural, and political practices and policies that use the language of markets, efficiency, consumer choice, transactional thinking and individual autonomy to shift risk from governments and corporations onto individuals and to extend this kind of market logic into the realm of social and affective relationships.[2] Philosopher Mark Lila refers to the "The forces of globalized nation that have given us a 'neoliberalism' that people everywhere associated with unregulated markets, labor exploitation, environmental degradation, and official corruption."

Source

The sad part is people dont care.. Politics is a team sport now, they dont care what happens, who pays, what it does to America. It is only about if my team wins *sighs*


Good post though OP, i just doubt it will open eyes.

Well first of all our debt was started by FDR and his reckless spending at will. Up until that point every President had maintained a balanced budget but FDR spent more in his first 6 months of office than all the presidents before him combined. The following period of democratic control maintained this policy even including the republicans.

The recent hard times you can argue were the fault of the Bush tax cuts but you don't know that. For all you know the recession would have been far worse had those not been in place. It is not reasonable of you to blame the recession on that without considering other factors such as Barney Frank and friends and their horrible policies that lead to the housing bust. Or giving proper credit to the wars as a possible factor.

Bush actually tried to change the housing policy but was stopped. Go figure

reply to post by kro32


See by the post above....political game. So sad.

reply to post by meeneecat


One other thing. The spending during a recession is pure Kenysian economics. It's what FDR followed and while it may sometimes help it has not been proven to work in all cases. Greece in particular followed that strategy and failed horribly. It also insanely increases national debt and without a plan to pay it off it will lead to even further bigger troubles down the road.

Learned that in my freshman year.