Posts Tagged ‘Social Security’

Paul Ryan’s America

Monday, April 18th, 2011

 

[reddit-me]Paul Ryan launched an attack on Barack Obama’s deficit speech last week — calling it “excessively partisan.”

Which is interesting considering his own approach to the budget deficit which he called “an existential threat to all we hold dear”: Balance the budget without offending a single Republican.

Over a year ago, I described the conundrum Republicans faced as the deficit they were fuming against was largely a result of policies that benefited their own constituencies. Those over 55 who were the only demographic group to vote Republican (even in the Democratic wave years of 2006 and 2008) benefited the most from the trillion dollars spend on Medicare and Social Security. Our military spending nearly matched the rest of the world’s combined — and if you include other national security spending — totaling another trillion. And then there were the various tax incentives and loopholes for big corporations adding up to another few hundred billion dollars. Further, Republicans were committed to not raising taxes on anyone — especially the richest.

Paul Ryan was faced with the unenviable task of squaring this circle. In an effort that nearly everyone described as “serious,” Ryan managed to put forth a plan with no prospect of passing at all — and one that managed to place the entire burden of balancing the budget on the backs of Democratic constituencies. The military was left alone. The base of the Republican party and driver of most of the debt — the elderly — was left alone. Corporations were rewarded with a lower tax rate with some vague talk of eliminating their enormous tax subsidies.

Though Ryan kept saying the pain of balancing the budget would be shared by everyone — his plan was really about cutting off support for those left behind in our society. The rich and elderly were rewarded — even as they accumulate more and more of the nation’s wealth; the middle class were mainly left alone; and the young and the poor were cut off.

That doesn’t sound like the path to a dynamic and prosperous society to me.

Paul Ryan’s future is one where my generation must be prepared to support our parents as they become the test subjects in the biggest social experiment in history: As Medicare becomes a voucher program growing at much lower than the rate of health care inflation, in the hopes that this will slow it down. Meanwhile, my generation must be saving more than any generation in history as we prepare to pay for our own medical costs.

Ryan’s plan is many things:  If taken seriously, it is an attack on all non-Republican constituencies. If implemented, it would be a grand ideological experiment that barely considers the lives of those it would affect which Republicans would normally call “social engineering.”

But most of all, the Ryan plan is (as Slate‘s John Dickerson said in Friday’s Political Gabfest), a “bold negotiating position.”

[Photo courtesy of Gage Skidmore licensed under Creative Commons.]

 

Real Fiscal Responsibility & Deficit Politics: Introduction

Wednesday, December 9th, 2009

[digg-reddit-me]Last week I wrote a semi-irresponsible post about how Republicans are waging a generational war* by opposing fiscally responsible health care legislation. It was a variation on the common refrain from the right that all sorts of government programs are in fact “generational theft.” This memorable phrase was coined by John McCain to describe the stimulus bill, but there is nothing in principle to distinguish it from all deficit spending.  Bill Frezza writing in Real Clear Markets in a more recent example of this right wing meme called Social Security “a Ponzi scheme” which in which the younger generations are being screwed. The general message of the “generational theft” meme is that the young shouldn’t expect to benefit from government spending – but should only see it as a burden.

Few would dispute that it is my generation that is being screwed if our current policies remain in effect. The deficit we face now is big but manageable. But the real reason we are being screwed is that the projected deficits are not manageable, specifically because of the rising costs of Medicare. (Graph source: CBO.)

We know that projected spending is unsustainable: so the question moves to why has this issue not been addressed? To answer that, you need to look at who benefits from the status quo and wants to protect it. The federal budget and tax system consists primarily these components:

  • Entitlement spending on the elderly, mainly Medicare and Social Security, which together represent the largest projected expenditures of the federal government. (For 2010, Medicare about $453 billion and Social Security about $695 billion.)
  • Military spending. (For 2010, $664 billion. Or as commentor John Rose points out, including non-DOD military spending, the total would come to somewhere in the $900 billion range.)
  • Medicaid and other aid to the poor. (For 2010, $290 billion on Medicaid; some portion of the $571 billion in “other mandatory spending.”)
  • Interest on the debt. (For 2010, $164 billion.)
  • Subsidies to corporations in the form of tax loopholes which makes our effective corporate tax rate among the lowest in the world (even while the nominal rate is among the highest.) Also, more traditional subsidies to large corporations in favored industries, specifically agriculture. (More than $75 billion on tax subsidies; some portion of the $571 billion in “other mandatory spending.”)
  • Education and infrastructure. (Combined, for 2010, about $120 billion, plus some portion of the $571 billion in “other mandatory spending.”)

People of all political stripes acknowledge the approaching fiscal apocalypse, but each party’s responses and proposed solutions have been shaped by their core constituencies and their ideology.

The next two posts will explore each party’s approach in more depth, but in short:  Republicans, believe government is the problem; yet as the currently elderly, along with big corporations and the military are core interest groups and the primary beneficiaries of the status quo, they implicitly propose a deal whereby they maintain the status quo today – and then eliminate or drastically reduce entitlement spending on future elderly, the young Democrat-voting generation now, as well as, presumably, shrinking the government by eliminating other spending programs that do not benefit their interest groups.

The Democrats meanwhile, believing government programs can work, propose a three-step approach culminating in a “grand bargain,” to finesse the issue:

  1. Get the GDP growing again. A growing economy expands the tax base and reduces welfare spending, and – most important – reduces the size of the deficit in relation to the economy making it easier to pay off.
  2. Curb the growth in health care costs – thus alleviating the biggest factor leading to the explosion of the deficit.
  3. With these two factors relieving pressure, strike a Grand Bargain. Either through a technocratic commission or through bipartisan legislation, push through some combination of taxes and adjustments to current programs to make them sustainable.

Both of these plans are risky. But any path we choose now will be risky – due to the incredible and seemingly deliberate starve-the-beast-style (see next post) fiscal irresponsibility of George W. Bush’s administration, coupled with a downturn and the looming fiscal crisis.

Part 2 on the Republican approach found here. Parts 3 and 4 discussing the Democratic approach and then lessons from this moment of “welfare scleroris/imperial overstretch” coming tomorrow and Friday.

*I know that’s a bit unfair, a bit too pithy to be true. But the simple messaging – the oversimplification – can be a useful tool to get people to think if it is not used to reinforce the conventional wisdom. All too quickly, using such an oversimplified scheme, one can come to the wrong conclusions – which is part of the reason George Orwell in his “Politics and the English Language” stressed using original phrases. The first time one encounters such a phrase – it can prompt thought. But all too quickly, it solidifies into dogma and ideology.

[Image by Vermin Inc licensed under Creative Commons.]

They called Medicare and Social Security “tyranny” too.

Tuesday, August 18th, 2009

[digg-reddit-me]Of those who are opposing health care reform, there are a few general groups:

  • There are those who are wary of any change in the status quo, even while they realize it is unsustainable;
  • There are those who are misinformed on one aspect of the legislation or another – whether they think the plan is “radical” or that it has “death panels;”
  • There are those who are opposed for partisan reasons – one of these is Senator Chuck Grassley who – though he is the key Republican whose support the Democrats are trying to win – admitted he would not support a bill he agreed with if enough Republicans didn’t support it with him; others in this camp are – of course, Bill Kristol who advised Republicans to “kill” reform and Senator Jim DeMint who said he wanted to make health care reform Obama’s “Waterloo;” and
  • There are those are ideologically opposed – who are inciting much of the most extreme rhetoric about this issue. The leadership promoting this – as Rachel Maddow aptly demonstrates – oppose and want to dismantle the programs most Americans support. They consider Medicare and Social Security to be “tyranny” and “creeping socialism” and all those other buzzwords that they are now using against health care reform. In this clip where Maddow confronts former congressmen, majority leader, and one of the major organizers of the tea parties and the anti-health reform activists , Dick Armey:

As Maddow said – it is a very important point. Many of the Republicans participating in this national “conversation” are hiding their true beliefs.

Most Americans do not consider Medicare and Social Security to be “tyranny.” Those who are inciting fears about health care reform do.

Obama’s Grand Bargain

Tuesday, February 3rd, 2009

[digg-reddit-me]From Obama’s Inaugural Address:

There are some who question the scale of our ambitions — who suggest that our system cannot tolerate too many big plans. Their memories are short. For they have forgotten what this country has already done; what free men and women can achieve when imagination is joined to common purpose, and necessity to courage.

What the cynics fail to understand is that the ground has shifted beneath them — that the stale political arguments that have consumed us for so long no longer apply. The question we ask today is not whether our government is too big or too small, but whether it works — whether it helps families find jobs at a decent wage, care they can afford, a retirement that is dignified. Where the answer is yes, we intend to move forward. Where the answer is no, programs will end. And those of us who manage the public’s dollars will be held to account — to spend wisely, reform bad habits, and do our business in the light of day — because only then can we restore the vital trust between a people and their government.

This brings to mind what George Stephanopoulos was so excited about last Sunday on This Week:

(Yes, I need to work on improving my DVR to computer quality.)

It seems that Obama is preparing to bet his presidency on a Grand Bargain – that will allow him (and us) to rewrite the social contract in a more extensive way than any president since Franklin Delano Roosevelt. Even during Obama’s campaign, he spoke of tackling the challenges that were necessary – and not putting off hard discussions about our country’s long-term stability. But the financial crisis – which at first prompted the endlessly parroted conventional wisdom that whoever won would need to cut all of their projects and focus narrowly on the crisis itself – has instead proved to be an opportunity.

The amount of spending needed to stimulate the economy is enormous – with the numbers being thrown around today dwarfing that of any previous government intervention (save perhaps for our major wars). What Obama understands is that this type of spending, while necessary in the short-term, poses a serious long-term threat. Which is why he is now speaking of the second step – after the financial crisis has passed – of tackling entitlement reform and tax reform, and finally putting America on sound financial footing after years of prolifigacy.

None of these insights are exceptional. What is exceptional is how Obama is already shaping the arch of his first term, using this crisis to set up his next objective, and shaping the conventional wisdom.

The problem I see though is that the Obama administration has not done a good job of conveying to the public the place this stimulus bill has within Obama’s agenda. The word is that in the next week or so, Tim Geithner will present “a ‘comprehensive’ plan that [he] hope[s] will command market confidence.” My hope is that this comprehensive plan will lay out a broad legislative agenda based on Obama’s campaign. Based on the campaign plans and signals sent during the transition, here’s what I see:

Step 1 (The First 100 Days)

  • Release the rest of the funds from TARP.
  • A large stimulus package to demonstrate the government’s commitment to addressing the crisis, especially in alleviating it’s effects on the majority of Americans.
  • A banking and mortgage bill that takes whatever steps are necessary to shore up these sectors of the economy, including new regulations, new oversight, and possibly additional funds.
  • An infrastructure bill that would create a National Infrastructure Bank.
  • Health care reforms that would extend health care benefits and attempt to control the escalating health care costs.
  • A combination of a cap-and-trade program and funding for green energy.

The goal of this first period would be to begin to make both short-term and long-term investments into those sectors that will lead to long-term growth – which will stimulate the economy in the short-term. This is the spending stage. After this burst of legislating, Obama would be able to focus on tinkering with education programs and seeing what works, as well as addressing the simmering foreign policy issues which are constantly threatening to take over the agenda.

Step 2 (Post-Crisis)

  • Entitlement reform (Social Security, Medicare, Medicaid.) Everything is on the table.
  • Tax reform. Not much has been said about this. This will certainly be a wild card – but Obama has criticized our corporate tax rate for its irrationality. It’s very high – but due to the enormous number of exemptions and credits, the effective rate for those businesses able to lobby for benefits, it is very low. This should be rationalized.
  • Universal health care.
  • Education reform.

This is the “cutting back” stage and consolidation stage. The goal of this second stage would be to put America on a solid financial footing again – to eliminate the unsustainable domestic policies that undermine our stability and power.

This is obviously an enormous agenda. And it’s far from clear that Obama can accomplish this. But if he does not lay out the vision – which I have pieced together from numerous statements – then it’s hard to see how he can accomplish it. Of course, Geithner was just confirmed last week – and Obama’s only been in office for two weeks – so he does have a bit more time to lay this out. But he doesn’t have long.

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