By Matt Miller, Published: August 16
In poker a “tell” is the physical giveaway or tic that lets you know someone is lying about his or her hand. In politics it’s the mode of evasion a politician chooses to sidestep a truth he or she doesn’t want to admit or to avoid saying something against self-interest. In his debut interview with Fox News’ Brit Hume Tuesday, Rep. Paul Ryan’s “tells” were audacious and revealing. They suggest an opening Democrats would be wise to pursue.
Ryan (R-Wis.) tried to cloak himself in his supposedly charming “wonky-ness” to sidestep two simple questions from Hume: When does Mitt Romney’s budget reach balance, and when does Ryan’s own budget plan do the same? Ryan pirouetted because Hume’s queries threatened to expose his famed “fiscal conservatism” as a fraud.
It’s worth parsing Ryan’s tactics in this exchange because it shows the brand of disingenuousness we’re dealing with. So let’s go to the videotape. Have a look at the relevant two-minute portion of the clip (excerpted on this CNN video) and then we’ll dissect it.
Okay, you’re back. Hume started with a simple question: “The budget plan that you’re now supporting would get to balance when?”
Now, for context, recall that in the last era of epic budget smackdowns, 1995 and 1996, Newt Gingrich would have had an equally simple answer: in seven years. President Bill Clinton’s failure to embrace the goal of a balanced budget at all was a major political liability that Clinton finally (and shrewdly) erased when he came out with his own 10-year plan in mid-1995. (It’s worth underscoring that a 10-year path to balance was viewed then as the outer limit of credibility — pledging to end the red ink any further than a decade out didn’t pass the laugh test.)
Since Ryan knows that Romney’s bare sketch of a plan never reaches balance, he stumbles momentarily before trying to move the conversation to his comfortable talking points about Romney’s goal of reducing spending to historic norms as a share of gross domestic product.
But Hume grows quietly impatient. He practically cuts Ryan off.
“I get that,” Hume says. “But what about balance?”
You can see Ryan flinch. He doesn’t know, he says. Why not? “I don’t want to get wonky on you,” he says, recovering, “because we haven’t run the numbers on that specific plan.” But that’s not “getting wonky” at all. As common sense (and the Gingrich/Clinton approach) suggests, there’s nothing arcane about this subject. You decide on a sensible path to balance as a goal and come up with policies that achieve it. All this means is that Romney hasn’t done what a fiscally conservative leader would do. Trying to evade this as a matter of not “getting wonky” is Ryan’s tell. He’s betting Hume is too dumb, uninterested or short on time to press the point.
Ryan then adds that “the plan that we’ve offered in the House balances the budget.” But he immediately stops short of saying when — you see his eyes dart to the right at that moment, his next tell — because that would mean admitting it reaches balance in the 2030s. And Ryan wants to get through this interview without saying that, because he knows it doesn’t sound good. After all, what kind of “fiscal conservative” has a 25-year plan to balance the budget? Instead, in a practiced maneuver signaled by his telltale sideways glance, he moves to a contrast with President Obama, who he says has never offered a budget that ever reaches balance.
This is true — but is a plan to balance the budget when Ryan is nearly 70 really different enough to make Ryan the “deficit hawk”? Please.
Meanwhile, Hume’s quiet baritone presses on.
“Your own budget . . . when does that contemplate reaching balance?” Hume asks.
There’s no exit. Not until the 2030s, Ryan finally admits, looking uncomfortable — but then he quickly adds, making a face, that’s only under the Congressional Budget Office’s scoring rules, implying that they’re silly constraints every Fox News viewer would agree are ridiculous (instead of sensible rules meant to credit politicians only for policy proposals that are real). Ryan adds that “we believe” if we get the economy growing, “it would balance in 10 years.” But that’s supply-side faith-based budgeting again — exactly what we ran an empirical test on in the 1980s. (And the truth is, if Ryan’s big tax cuts were properly accounted for, his plan’s real date of balance would push well beyond 2040).
Why am I harping on this? Because it’s impossible to overstate how central the unjustified label of “fiscal conservative” is to the Ryan brand and the GOP’s strategy. As Clinton understood in the 1990s, “fiscal responsibility” is a values issue important to the voters who decide modern presidential elections.
The point: Democrats can’t afford to let Ryan/Romney’s phony image as superior fiscal stewards survive. And Hume’s interview shows how swiftly this charade can be exposed if Democrats and the press zero in on simple questions like Hume’s. If the press is primed to cover this more intelligently, such queries will also expose the big Republican lie — the idea that you can balance the budget as the baby boomers age without taxes rising.
Let me be clear. The most important issue facing the country isn’t when we’re going to balance the budget. It’s how to get growth and jobs reignited in the near term and how to renew the country’s promise and competitiveness after that (an agenda in which long-term budget sanity is just the ante). But if Democrats spend all their energy on Medicare — and don’t knock out the GOP ticket’s undeserved reputation for fiscal responsibility — they’ll find themselves in unexpected peril as the race heads to the fall.
Showing posts with label Entitlements. Show all posts
Showing posts with label Entitlements. Show all posts
Thursday, August 16, 2012
Wednesday, July 20, 2011
The GOP’s fuzzy math By Matt Miller
The GOP’s fuzzy math By Matt Miller, Wednesday, July 20, 8:40 AM
It’s one thing for a political party to lose its moral bearings – after all, community values evolve, and large swaths of people and their elected representatives can end up on the wrong side of history on such questions as slavery, suffrage, and civil rights. But when a party loses its mathematical bearings – well, that’s a little shocking.
Yet that’s what’s happened to the Republican Party. The debt ceiling endgame has exposed the denial gripping the GOP in the face of the inevitable loss of “lower taxes” as the core of the party’s identity. You can feel the Republicans’ pain; tax cuts have been the party’s defining issue since Ronald Reagan rode them to power in 1980. But in an aging America, the numbers no longer work, and Republicans have failed to develop a new conservative vision to replace their fading mantra.
The “cap, cut and balance” plan passed by the House Tuesday night captures Republican denial perfectly. The plan would cap federal spending at 19.9 percent of GDP by 2018, with the goal of lowering it to18 percent over time. Similar caps have been endorsed by most of the GOP’s presidential candidates.
You’d never know from listening to Republicans that these goals are mathematically and politically unattainable.
But they are. Why? If there’s one fact you need to emblazon in your mind to make sense of the current debate, it is that Ronald Reagan ran the federal government at 22 percent of GDP back when our population was much younger. (Under President Obama, the extraordinary measures enacted to fight the recession – plus a collapse in the denominator, GDP -- have boosted spending to around 24 percent, while revenue has dropped to 15 percent from its 18-19 percent longtime average).
It is simply not plausible to argue that as we double the number of seniors on Social Security and Medicare, Uncle Sam will be able to operate at spending levels 10 to 20 percent below those over which America’s modern conservative icon presided. (Though, as my colleague Dana Milbank notes, Reagan agreed to raise taxes 11 times.) Today there’s no question: Taxes must rise.
Republican “thinking” about these facts is telling. According to the Wall Street Journal, House leaders picked 19.9 percent as their cap “because it is in line with the average spending level over the last thirty years.”
Well, sorry, GOP: The average spending levels of the last 30 years are irrelevant because we weren’t retiring 76 million baby boomers over the last 30 years. And decades ago per capita health costs for seniors were far smaller than they are today.
Let me pause so there’s no caricaturing of these views as belonging to some “tax and spend liberal.” I’ve advocated more “conservative” changes to Social Security than Paul Ryan did in his budget or his prior “roadmap.” I’ve urged progressives to realize that if we don’t slow Medicare’s outsized growth, there will be no money left for poor children, infrastructure, or R&D. And I’ve said we need to learn from countries like Singapore that get outstanding results in health care while spending a fraction of what we spend. So count me as a longtime entitlement reformer who has the arrows from my friends on the left to prove it.
Here’s the point: Even if we enacted the platonic ideal of sane entitlement reform, and trimmed defense (as we need to), Republican budget math still doesn’t come close to adding up. Instead, as my colleagues at the Center for American Progress have shown, shrinking spending to sub-Reagan levels while retiring the boomers would involve dramatic cuts in everything else Americans think of as government – from national parks to NASA to the FBI to cancer research to student loans.
So why does the GOP pretend otherwise? Because acknowledging mathematical reality is too politically painful. Because uttering this simple phrase – “to accommodate the retirement of the baby boomers, taxes will need to rise” – is forbidden by official Republican doctrine.
Because official Republican doctrine has banned honest math.
Aversion to honest math explains why the Ryan budget embraced by the GOP doesn’t balance the budget — even after Medicare changes that may prove fatal to the party -- until the 2030s and racks up at least $14 trillion in debt between now and then.
That’s because the Ryan budget cuts taxes. Balanced budget math in an aging America doesn’t work without higher taxes.
This doesn’t mean we shouldn’t cut taxes in the near-term to goose the economy. But when it comes to a long-term fiscal fix, the GOP’s math anxiety has produced months of debt ceiling charades instead of framing the debate we really need, which is this: Once the economy has more fully recovered, how do we lift taxes to fund the boomers’ retirement in ways least harmful to economic growth?
My own view is that this means slashing payroll taxes and corporate income taxes, while more than offsetting those tax cuts with higher taxes on consumption and dirty energy. But we can’t even get to this conversation until Republicans relinquish the fantasy that we can keep cutting overall taxes as America ages.
At bottom, this fantasy masks fear. Republicans’ refusal to let go of the old time religion shows how little work the party has done to craft an agenda equal to America’s current challenges. The party has abandoned problem-solving for brand preservation. If tax cuts aren’t our defining issue, Republican pols ask themselves, what distinguishes us from Democrats? Why should voters choose us?
Maybe the Gang of Six can end the GOP’s war on math, but I’m skeptical. For now, if it’s a choice between defying math and staring into this policy and political abyss, Republicans choose defiance.
It’s one thing for a political party to lose its moral bearings – after all, community values evolve, and large swaths of people and their elected representatives can end up on the wrong side of history on such questions as slavery, suffrage, and civil rights. But when a party loses its mathematical bearings – well, that’s a little shocking.
Yet that’s what’s happened to the Republican Party. The debt ceiling endgame has exposed the denial gripping the GOP in the face of the inevitable loss of “lower taxes” as the core of the party’s identity. You can feel the Republicans’ pain; tax cuts have been the party’s defining issue since Ronald Reagan rode them to power in 1980. But in an aging America, the numbers no longer work, and Republicans have failed to develop a new conservative vision to replace their fading mantra.
The “cap, cut and balance” plan passed by the House Tuesday night captures Republican denial perfectly. The plan would cap federal spending at 19.9 percent of GDP by 2018, with the goal of lowering it to18 percent over time. Similar caps have been endorsed by most of the GOP’s presidential candidates.
You’d never know from listening to Republicans that these goals are mathematically and politically unattainable.
But they are. Why? If there’s one fact you need to emblazon in your mind to make sense of the current debate, it is that Ronald Reagan ran the federal government at 22 percent of GDP back when our population was much younger. (Under President Obama, the extraordinary measures enacted to fight the recession – plus a collapse in the denominator, GDP -- have boosted spending to around 24 percent, while revenue has dropped to 15 percent from its 18-19 percent longtime average).
It is simply not plausible to argue that as we double the number of seniors on Social Security and Medicare, Uncle Sam will be able to operate at spending levels 10 to 20 percent below those over which America’s modern conservative icon presided. (Though, as my colleague Dana Milbank notes, Reagan agreed to raise taxes 11 times.) Today there’s no question: Taxes must rise.
Republican “thinking” about these facts is telling. According to the Wall Street Journal, House leaders picked 19.9 percent as their cap “because it is in line with the average spending level over the last thirty years.”
Well, sorry, GOP: The average spending levels of the last 30 years are irrelevant because we weren’t retiring 76 million baby boomers over the last 30 years. And decades ago per capita health costs for seniors were far smaller than they are today.
Let me pause so there’s no caricaturing of these views as belonging to some “tax and spend liberal.” I’ve advocated more “conservative” changes to Social Security than Paul Ryan did in his budget or his prior “roadmap.” I’ve urged progressives to realize that if we don’t slow Medicare’s outsized growth, there will be no money left for poor children, infrastructure, or R&D. And I’ve said we need to learn from countries like Singapore that get outstanding results in health care while spending a fraction of what we spend. So count me as a longtime entitlement reformer who has the arrows from my friends on the left to prove it.
Here’s the point: Even if we enacted the platonic ideal of sane entitlement reform, and trimmed defense (as we need to), Republican budget math still doesn’t come close to adding up. Instead, as my colleagues at the Center for American Progress have shown, shrinking spending to sub-Reagan levels while retiring the boomers would involve dramatic cuts in everything else Americans think of as government – from national parks to NASA to the FBI to cancer research to student loans.
So why does the GOP pretend otherwise? Because acknowledging mathematical reality is too politically painful. Because uttering this simple phrase – “to accommodate the retirement of the baby boomers, taxes will need to rise” – is forbidden by official Republican doctrine.
Because official Republican doctrine has banned honest math.
Aversion to honest math explains why the Ryan budget embraced by the GOP doesn’t balance the budget — even after Medicare changes that may prove fatal to the party -- until the 2030s and racks up at least $14 trillion in debt between now and then.
That’s because the Ryan budget cuts taxes. Balanced budget math in an aging America doesn’t work without higher taxes.
This doesn’t mean we shouldn’t cut taxes in the near-term to goose the economy. But when it comes to a long-term fiscal fix, the GOP’s math anxiety has produced months of debt ceiling charades instead of framing the debate we really need, which is this: Once the economy has more fully recovered, how do we lift taxes to fund the boomers’ retirement in ways least harmful to economic growth?
My own view is that this means slashing payroll taxes and corporate income taxes, while more than offsetting those tax cuts with higher taxes on consumption and dirty energy. But we can’t even get to this conversation until Republicans relinquish the fantasy that we can keep cutting overall taxes as America ages.
At bottom, this fantasy masks fear. Republicans’ refusal to let go of the old time religion shows how little work the party has done to craft an agenda equal to America’s current challenges. The party has abandoned problem-solving for brand preservation. If tax cuts aren’t our defining issue, Republican pols ask themselves, what distinguishes us from Democrats? Why should voters choose us?
Maybe the Gang of Six can end the GOP’s war on math, but I’m skeptical. For now, if it’s a choice between defying math and staring into this policy and political abyss, Republicans choose defiance.
Wednesday, November 17, 2010
Bean Counters to the Rescue! By DAVID BROOKS AND GAIL COLLINS In The Conversation, David Brooks and Gail Collins talk between columns every Wednesday
NOVEMBER 17, 2010, 12:31 PM
Bean Counters to the Rescue! By DAVID BROOKS AND GAIL COLLINS In The Conversation, David Brooks and Gail Collins talk between columns every Wednesday.
Tags:
budget, federal deficit, Politics
The New York Times
Gail Collins: David, did you do the budget puzzle in The Times on Sunday? I really enjoyed seeing if I could eliminate all the shortfalls for the next 20 years. (Thank you, David Leonhardt and Co.) The first time I did it, about two-thirds of my savings came from increased tax revenue rather than spending cuts. But in the end, I got it down to 50-50. How about you?
David Brooks: Boy was I excited when I saw that chart. There I was with my cognac and slippers spending another leisurely morning brunching with Bill and Melinda, Sergey and Larry, Bruce and Bono, Kanye and Taylor when my eyes alighted on that chart. Well, of course, we threw back a few shots and played pin the tail on the deficit.
As I told Denzel when he arrived, you don’t want to be anywhere near a 50-50 spending-cuts-to-taxes split. That’s because international studies have shown repeatedly that higher tax revenues inevitably get spent whereas spending cuts really do go to reduce the deficit.
I was aiming for 70-30. Raising taxes on employer health benefits does double duty because it gets you revenue and it gives the health care system some cost control. Other than that, I was all over the mortgage interest deduction, agriculture subsidies, reducing our nuclear arsenal, raising the retirement age and the Social Security cost-of-living adjustment.
I was going to shelve the mortgage deduction but the housing market is in such a mess now that it seemed like a bad moment.
Gail Collins: Look, I had a glamorous weekend, too. After the dog threw up there were several hours of unmitigated excitement involving a mouse in the garbage can. But about that budget. Obviously, some of the options were of the meat-cleaver variety. For instance, I happily eliminated farm subsidies with my mind on big agribusiness, but if the ones to help small farmers practice better land conservation are in there, I want some of that money back.
David Brooks: My big personal hit was the mortgage interest deduction. I bought a house counting on it, but now I figure I have to give it up for the good of the country. I’m willing.
Gail Collins: This is why you are known among your friends as David the Celebrity Patriot. I was going to shelve the mortgage deduction but the housing market is in such a mess now that it seemed like, um, a bad moment. And I’m such a pessimist I suspect that particular bad moment could still be with us in 2030.
But we part company on this business of raising the Social Security retirement age. It sounds seductive. (Push it to 70 and get $247 billion by 2030.) The much-made argument is that people are living longer so they should retire later. But the longevity is skewed to the high-income earners, and if there’s one thing we already have enough of in this country it’s government programs to make the rich richer.
Sorry, we’ve got to raise the retirement age. There’s no way young people can subsidize the oldsters for nearly a quarter of their lives.
David Brooks: Sorry, we’ve got to raise the retirement age. If you are 60 right now, you can expect to live another 22.4 years. There’s no way young people can subsidize the oldsters for nearly a quarter of their lives. Especially when children today will be getting a negative net return on the money they put into the system. The whole thing will go kablooie if we ask people to surrender to a program that makes them worse off.
Gail Collins: We will agree to disagree on that one. On the positive side, there were some things I really did enjoy hitting the computer to delete. Cancel or delay some weapons programs: Yes! No more contracts for two different engines for the very same F-35. Return the estate tax to Clinton era levels! Get rid of the Bush tax cuts for the wealthy! And if Mitch McConnell’s ready to get rid of earmarks now, you aren’t going to see me standing in his way.
David Brooks: I’m actually with you on those weapons systems. I’m for keeping some earmarks though. They’re useful for getting legislation passed and they make congressmen so happy! I would repeal all the Bush tax cuts too, including the middle-class ones.
Gail Collins: There are some proposed cuts that I don’t really agree with but I’m tired of fighting about them. I don’t think medical malpractice reform is going to save any money — and even in this puzzle it’s only $13 billion over the next 25 years. But every time we start talking about health care costs there’s this shrieking about malpractice suits, and it just cuts off the conversation and gives people who don’t want to do anything an easy out. So I’ll concede malpractice reform, but I want an asterisk there saying we have to do it very, very carefully. Also, if foregoing the next 1.4 percent raise for federal civil service workers will get the Republicans to stop talking about laying them off, I concede.
David Brooks: In the spirit of compromise, I’m willing to give you the consumption tax if you’re willing to lower corporate taxes, to improve competitiveness.
Gail Collins: I’ll totally sign on to lowered corporate taxes if we get rid of all the loopholes, too.
Did you notice that at the beginning of the exercise, when the options were all discretionary domestic spending, the savings were $12 billion here, $14 billion there. Then you get to health care, and capping Medicare growth saves you $562 billion by 2030! It’s far and away the biggest single option.
Many of the same people who spent the last campaign wringing their hands over earmarks ($14 billion) were also warning the voters that Obamacare is going to cut Medicare or, in their parlance “get between you and your doctor.” They poisoned the well on the one issue that would actually solve the budget crisis they claim to be so worried about. Not that I’m bitter or anything.
David Brooks: I guess I also keep coming back to the biggest square on that page, Medicare. If we don’t cut that, nothing else matters.
I bet between us we could come up with a package in about five minutes. The problem is never with the policy substance. The problem is finding a political strategy to get it passed. Maybe next Sunday, David Leonhardt and his team could put together a chutes and ladders type game. Roll the dice and try to move your piece through the legislative process. Pass a bill and get re-elected!
That game would be really hard.
Bean Counters to the Rescue! By DAVID BROOKS AND GAIL COLLINS In The Conversation, David Brooks and Gail Collins talk between columns every Wednesday.
Tags:
budget, federal deficit, Politics
The New York Times
Gail Collins: David, did you do the budget puzzle in The Times on Sunday? I really enjoyed seeing if I could eliminate all the shortfalls for the next 20 years. (Thank you, David Leonhardt and Co.) The first time I did it, about two-thirds of my savings came from increased tax revenue rather than spending cuts. But in the end, I got it down to 50-50. How about you?
David Brooks: Boy was I excited when I saw that chart. There I was with my cognac and slippers spending another leisurely morning brunching with Bill and Melinda, Sergey and Larry, Bruce and Bono, Kanye and Taylor when my eyes alighted on that chart. Well, of course, we threw back a few shots and played pin the tail on the deficit.
As I told Denzel when he arrived, you don’t want to be anywhere near a 50-50 spending-cuts-to-taxes split. That’s because international studies have shown repeatedly that higher tax revenues inevitably get spent whereas spending cuts really do go to reduce the deficit.
I was aiming for 70-30. Raising taxes on employer health benefits does double duty because it gets you revenue and it gives the health care system some cost control. Other than that, I was all over the mortgage interest deduction, agriculture subsidies, reducing our nuclear arsenal, raising the retirement age and the Social Security cost-of-living adjustment.
I was going to shelve the mortgage deduction but the housing market is in such a mess now that it seemed like a bad moment.
Gail Collins: Look, I had a glamorous weekend, too. After the dog threw up there were several hours of unmitigated excitement involving a mouse in the garbage can. But about that budget. Obviously, some of the options were of the meat-cleaver variety. For instance, I happily eliminated farm subsidies with my mind on big agribusiness, but if the ones to help small farmers practice better land conservation are in there, I want some of that money back.
David Brooks: My big personal hit was the mortgage interest deduction. I bought a house counting on it, but now I figure I have to give it up for the good of the country. I’m willing.
Gail Collins: This is why you are known among your friends as David the Celebrity Patriot. I was going to shelve the mortgage deduction but the housing market is in such a mess now that it seemed like, um, a bad moment. And I’m such a pessimist I suspect that particular bad moment could still be with us in 2030.
But we part company on this business of raising the Social Security retirement age. It sounds seductive. (Push it to 70 and get $247 billion by 2030.) The much-made argument is that people are living longer so they should retire later. But the longevity is skewed to the high-income earners, and if there’s one thing we already have enough of in this country it’s government programs to make the rich richer.
Sorry, we’ve got to raise the retirement age. There’s no way young people can subsidize the oldsters for nearly a quarter of their lives.
David Brooks: Sorry, we’ve got to raise the retirement age. If you are 60 right now, you can expect to live another 22.4 years. There’s no way young people can subsidize the oldsters for nearly a quarter of their lives. Especially when children today will be getting a negative net return on the money they put into the system. The whole thing will go kablooie if we ask people to surrender to a program that makes them worse off.
Gail Collins: We will agree to disagree on that one. On the positive side, there were some things I really did enjoy hitting the computer to delete. Cancel or delay some weapons programs: Yes! No more contracts for two different engines for the very same F-35. Return the estate tax to Clinton era levels! Get rid of the Bush tax cuts for the wealthy! And if Mitch McConnell’s ready to get rid of earmarks now, you aren’t going to see me standing in his way.
David Brooks: I’m actually with you on those weapons systems. I’m for keeping some earmarks though. They’re useful for getting legislation passed and they make congressmen so happy! I would repeal all the Bush tax cuts too, including the middle-class ones.
Gail Collins: There are some proposed cuts that I don’t really agree with but I’m tired of fighting about them. I don’t think medical malpractice reform is going to save any money — and even in this puzzle it’s only $13 billion over the next 25 years. But every time we start talking about health care costs there’s this shrieking about malpractice suits, and it just cuts off the conversation and gives people who don’t want to do anything an easy out. So I’ll concede malpractice reform, but I want an asterisk there saying we have to do it very, very carefully. Also, if foregoing the next 1.4 percent raise for federal civil service workers will get the Republicans to stop talking about laying them off, I concede.
David Brooks: In the spirit of compromise, I’m willing to give you the consumption tax if you’re willing to lower corporate taxes, to improve competitiveness.
Gail Collins: I’ll totally sign on to lowered corporate taxes if we get rid of all the loopholes, too.
Did you notice that at the beginning of the exercise, when the options were all discretionary domestic spending, the savings were $12 billion here, $14 billion there. Then you get to health care, and capping Medicare growth saves you $562 billion by 2030! It’s far and away the biggest single option.
Many of the same people who spent the last campaign wringing their hands over earmarks ($14 billion) were also warning the voters that Obamacare is going to cut Medicare or, in their parlance “get between you and your doctor.” They poisoned the well on the one issue that would actually solve the budget crisis they claim to be so worried about. Not that I’m bitter or anything.
David Brooks: I guess I also keep coming back to the biggest square on that page, Medicare. If we don’t cut that, nothing else matters.
I bet between us we could come up with a package in about five minutes. The problem is never with the policy substance. The problem is finding a political strategy to get it passed. Maybe next Sunday, David Leonhardt and his team could put together a chutes and ladders type game. Roll the dice and try to move your piece through the legislative process. Pass a bill and get re-elected!
That game would be really hard.
Tuesday, November 16, 2010
One Way to Trim Deficit: Cultivate Growth
By DAVID LEONHARDT
We look back on the late 1990s as a rare time when the federal government ran budget surpluses. We tend to forget that those surpluses came as a surprise to almost everybody.
As late as 1998, the Congressional Budget Office was predicting a deficit for 1999. In fact, Washington ran its biggest surplus in five decades.
What happened? Above all, economic growth. And that may be a big part of the answer to our current problems.
Yes, the government became more fiscally conservative in the 1990s. Both President George H. W. Bush (who doesn’t get enough credit) and President Bill Clinton, working with Congress, raised taxes to attack the 1980s deficits.
But those tax increases were the second most important reason for the surpluses that followed. The most important was the fact that the economy grew more rapidly than expected. The faster growth pushed up incomes and caused more tax revenue to flow into the Treasury.
Today’s looming deficits are almost surely too large to be closed exclusively with growth. The baby boom generation is too big, and the rise in Medicare costs continues to be too steep. Yet growth could still make an enormous difference.
If the economy grew one half of a percentage point faster than forecast each year over the next two decades — no easy feat, to be fair — the country would have to do roughly 40 to 50 percent less deficit-cutting than it now appears, based on my reading of budget data from the economists Alan Auerbach and William Gale.
To get a concrete sense for what this would mean, you can play around with the The Times’s online deficit puzzle. It asks you to find almost $1.4 trillion in annual spending cuts and tax increases by the year 2030. If growth were a half point faster than expected, the needed savings would instead drop to less than $700 billion. That would mean many fewer painful choices, be they tax increases or Medicare cuts.
So arguably the single best way to cut the deficit is to make sure that any deficit-cutting plan does not also cut economic growth. Ideally, it will lift growth.
There are two main ways to do so. First, we shouldn’t plunge ourselves back into another economic slump by raising taxes and cutting spending too quickly. President Franklin Roosevelt made that mistake in 1937, and this time (one hopes) the country won’t be able to rely on war mobilization spending to undo the error.
In the short term, we should actually spend more. “Some politicians and economists present a false choice: reduce unemployment or stabilize the debt,” argues a new bipartisan deficit plan that will be released Wednesday, the second such plan to come out in the last week. As Alice Rivlin, a Democrat who oversaw the writing of the plan with Pete Domenici, a Republican, put it: “We can do both. We can put money in people’s pockets in the short run and trim government spending in the long run.” .
The plan calls for a one-year payroll tax holiday for employers and workers, costing $650 billion. But remember that’s a one-time sum, while the needed deficit cuts will be hundreds of billions of dollars a year. Relative to those cuts, a payroll tax holiday — or more spending on roads and bridges, as President Obama favors — is a rounding error. And, of course, putting people back to work has its own benefits.
Even more important than the next couple of years is the second part of a pro-growth strategy: the long term. A good deficit plan doesn’t simply make across-the-board cuts for years on end. It cuts funding for programs that do not spur economic growth and increases funding for those relatively few that do. Likewise, it raises tax rates that do not have a clear record of promoting growth and cuts those that do.
This task is not an easy one, because advocates and lobbyists inevitably claim that their idea, whatever it is, will help the larger economy. Just look at farm subsidies, a form of welfare for agribusiness that is supposedly crucial to the American economy. Or look at President George W. Bush’s tax cuts, which, after being sold as an economic elixir, were followed by the slowest decade of growth since before World War II.
The two bipartisan deficit proposals that have come out over the last week each do a pretty good job, but not quite good enough, of focusing on economic growth. The most pro-growth part of both proposals — the Domenici-Rivlin plan and the one from Erskine Bowles and Alan Simpson — is their emphasis on tax reform.
Today’s tax code is a thicket of deductions, credits and loopholes that force people to change their behavior and waste time trying to avoid too large of a tax bill. A tax code with fewer deductions and lower rates — which, to be clear, is not the same thing as a tax cut — would instead let businesses and households focus on being as productive as possible. The potential to make good money would drive more decisions, and the ability to qualify for a tax break would drive fewer.
Beyond tax reform, both deficit plans mention the importance of making investments that will lead to future growth. In particular, the Bowles-Simpson plan calls for a gradual 15-cents-a-gallon increase in the federal gasoline tax to pay for highways, mass transit and other projects. The plans also urge the government to prioritize education and science.
These are clearly among the best ways to promote growth. The United States created the world’s most prosperous economy last century in large measure because it was the world’s most educated country. It no longer is. Federal science dollars, meanwhile, led to the creation of the intercontinental railroad, the airline industry, the microchip, the personal computer, the Internet and numerous medical breakthroughs. Yet science funding is scheduled to decline as stimulus money runs out.
Unfortunately, the plans don’t get more specific than saying that education and science are important. The only dedicated money for specific investments in either plan is the infrastructure fund financed by the gas tax. And, realistically, exhorting a future Congress to avoid wasteful spending and prioritize growth has about as much chance of success as exhorting it to find the political will to revamp Medicare.
The two bipartisan deficit groups deserve a lot of credit for starting to move the debate beyond vagaries. There is one more step they can take, though: making sure we remember that cutting the deficit is not only about making cuts.
By DAVID LEONHARDT
We look back on the late 1990s as a rare time when the federal government ran budget surpluses. We tend to forget that those surpluses came as a surprise to almost everybody.
As late as 1998, the Congressional Budget Office was predicting a deficit for 1999. In fact, Washington ran its biggest surplus in five decades.
What happened? Above all, economic growth. And that may be a big part of the answer to our current problems.
Yes, the government became more fiscally conservative in the 1990s. Both President George H. W. Bush (who doesn’t get enough credit) and President Bill Clinton, working with Congress, raised taxes to attack the 1980s deficits.
But those tax increases were the second most important reason for the surpluses that followed. The most important was the fact that the economy grew more rapidly than expected. The faster growth pushed up incomes and caused more tax revenue to flow into the Treasury.
Today’s looming deficits are almost surely too large to be closed exclusively with growth. The baby boom generation is too big, and the rise in Medicare costs continues to be too steep. Yet growth could still make an enormous difference.
If the economy grew one half of a percentage point faster than forecast each year over the next two decades — no easy feat, to be fair — the country would have to do roughly 40 to 50 percent less deficit-cutting than it now appears, based on my reading of budget data from the economists Alan Auerbach and William Gale.
To get a concrete sense for what this would mean, you can play around with the The Times’s online deficit puzzle. It asks you to find almost $1.4 trillion in annual spending cuts and tax increases by the year 2030. If growth were a half point faster than expected, the needed savings would instead drop to less than $700 billion. That would mean many fewer painful choices, be they tax increases or Medicare cuts.
So arguably the single best way to cut the deficit is to make sure that any deficit-cutting plan does not also cut economic growth. Ideally, it will lift growth.
There are two main ways to do so. First, we shouldn’t plunge ourselves back into another economic slump by raising taxes and cutting spending too quickly. President Franklin Roosevelt made that mistake in 1937, and this time (one hopes) the country won’t be able to rely on war mobilization spending to undo the error.
In the short term, we should actually spend more. “Some politicians and economists present a false choice: reduce unemployment or stabilize the debt,” argues a new bipartisan deficit plan that will be released Wednesday, the second such plan to come out in the last week. As Alice Rivlin, a Democrat who oversaw the writing of the plan with Pete Domenici, a Republican, put it: “We can do both. We can put money in people’s pockets in the short run and trim government spending in the long run.” .
The plan calls for a one-year payroll tax holiday for employers and workers, costing $650 billion. But remember that’s a one-time sum, while the needed deficit cuts will be hundreds of billions of dollars a year. Relative to those cuts, a payroll tax holiday — or more spending on roads and bridges, as President Obama favors — is a rounding error. And, of course, putting people back to work has its own benefits.
Even more important than the next couple of years is the second part of a pro-growth strategy: the long term. A good deficit plan doesn’t simply make across-the-board cuts for years on end. It cuts funding for programs that do not spur economic growth and increases funding for those relatively few that do. Likewise, it raises tax rates that do not have a clear record of promoting growth and cuts those that do.
This task is not an easy one, because advocates and lobbyists inevitably claim that their idea, whatever it is, will help the larger economy. Just look at farm subsidies, a form of welfare for agribusiness that is supposedly crucial to the American economy. Or look at President George W. Bush’s tax cuts, which, after being sold as an economic elixir, were followed by the slowest decade of growth since before World War II.
The two bipartisan deficit proposals that have come out over the last week each do a pretty good job, but not quite good enough, of focusing on economic growth. The most pro-growth part of both proposals — the Domenici-Rivlin plan and the one from Erskine Bowles and Alan Simpson — is their emphasis on tax reform.
Today’s tax code is a thicket of deductions, credits and loopholes that force people to change their behavior and waste time trying to avoid too large of a tax bill. A tax code with fewer deductions and lower rates — which, to be clear, is not the same thing as a tax cut — would instead let businesses and households focus on being as productive as possible. The potential to make good money would drive more decisions, and the ability to qualify for a tax break would drive fewer.
Beyond tax reform, both deficit plans mention the importance of making investments that will lead to future growth. In particular, the Bowles-Simpson plan calls for a gradual 15-cents-a-gallon increase in the federal gasoline tax to pay for highways, mass transit and other projects. The plans also urge the government to prioritize education and science.
These are clearly among the best ways to promote growth. The United States created the world’s most prosperous economy last century in large measure because it was the world’s most educated country. It no longer is. Federal science dollars, meanwhile, led to the creation of the intercontinental railroad, the airline industry, the microchip, the personal computer, the Internet and numerous medical breakthroughs. Yet science funding is scheduled to decline as stimulus money runs out.
Unfortunately, the plans don’t get more specific than saying that education and science are important. The only dedicated money for specific investments in either plan is the infrastructure fund financed by the gas tax. And, realistically, exhorting a future Congress to avoid wasteful spending and prioritize growth has about as much chance of success as exhorting it to find the political will to revamp Medicare.
The two bipartisan deficit groups deserve a lot of credit for starting to move the debate beyond vagaries. There is one more step they can take, though: making sure we remember that cutting the deficit is not only about making cuts.
Monday, November 15, 2010
The Party of No By ROSS DOUTHAT
November 14, 2010
The Party of No By ROSS DOUTHAT
By offering up their joint recommendation last week for balancing the budget, the co-chairmen of Barack Obama’s fiscal commission didn’t solve our deficit problem once and for all, or clear a path through the political thickets facing would-be budget cutters. But Erskine Bowles and Alan Simpson performed a valuable public service nonetheless: the reaction to their proposals demonstrated that when it comes to addressing the long-term challenges facing this country, the Democrats, too, can play the Party of No.
Last week’s media coverage sometimes made it sound as if Bowles and Simpson were taking the same amount of fire from left and right. But the reaction from Republican lawmakers and the conservative intelligentsia was muted, respectful and often favorable; the right-wing griping mostly came from single-issue activists and know-nothing television entertainers. The liberal attacks, on the other hand, came fast and furious, from pundits and leading Democratic politicians alike — starting with the speaker of the House, Nancy Pelosi, who pronounced the recommendations “simply unacceptable” almost immediately after their release.
Liberals defended this knee-jerk response on the grounds that the commissioners’ vision, ostensibly bipartisan, was actually tilted toward Republican priorities. And it’s true that Bowles and Simpson proposed more spending cuts than tax increases over all. But most of the programs and tax breaks that they suggested trimming — from farm subsidies to Defense Department bloat and the home-mortgage tax deduction — represent the American welfare state at its absolute worst. And the duo went out of their way to avoid balancing the budget on the backs of the poor. (Social Security, for instance, would be strengthened through a mix of tax increases and benefit cuts for wealthier seniors; retirees close to the poverty line would see their benefits increase.)
Their proposals certainly weren’t flawless, but they did manage to include good ideas from right and left alike. And it’s illuminating, and very depressing, that Democrats were so immediately outraged by a plan that reduces corporate welfare, makes Social Security more progressive, slashes the defense budget, raises the tax rate on millionaires’ summer homes — and does all of this while capping the government’s share of gross domestic product, not at some Scrooge-like minimum but at the highest level in modern American history.
Needless to say, none of the liberal lawmakers attacking the Simpson-Bowles proposals offered alternative blueprints for restoring America’s solvency. The Democratic Party has plans for many things, but a balanced budget isn’t one of them.
But pondering what Nancy Pelosi and her compatriots are rejecting gives us a pretty good sense of what they’re for. It’s a world where the government perpetually warps the real estate and health care marketplaces, subsidizing McMansions and gold-plated insurance plans to the tune of billions every year. It’s a world where federal jobs are sacrosanct, but the private sector has to labor under one of the higher corporate tax rates in the developed West. It’s a world where the Social Security retirement age never budges, no matter how high average life expectancy climbs. And it’s a world where federal spending rises inexorably to 25 percent of G.D.P. and beyond, and taxes rise with it.
Liberals sometimes justify this vision by arguing that government has to permanently subsidize the middle class and affluent in order to maintain public support for any safety net at all. (Most voters won’t support a system of basic social insurance for the poor, the theory goes, unless they’re getting something out of it as well.) And they defend the ever-rising tax rates required to finance these ever-expanding entitlements by noting that America thrived economically in the wake of World War II, when income-tax rates were much higher than they are today.
The first argument ignores the lessons of liberalism’s usual teacher, Western Europe, where governments have successfully reduced spending on their pension and entitlement systems without compromising their commitment to their neediest citizens. The second argument ignores the fact that the postwar United States didn’t have any serious economic competitors (the rest of the globe having been brought to its knees by total war), whereas today, an overtaxed America would struggle to compete with China and India and Brazil.
But the deeper problem is that the entire approach treats Americans as moral midgets, incapable of providing for the elderly and indigent without being bribed with giveaways and propped up with subsidies. The alternative sketched by Bowles and Simpson last week has its weaknesses, but it has this great virtue: It treats Americans not as clients but as citizens, and not as children but as adults.
The Party of No By ROSS DOUTHAT
By offering up their joint recommendation last week for balancing the budget, the co-chairmen of Barack Obama’s fiscal commission didn’t solve our deficit problem once and for all, or clear a path through the political thickets facing would-be budget cutters. But Erskine Bowles and Alan Simpson performed a valuable public service nonetheless: the reaction to their proposals demonstrated that when it comes to addressing the long-term challenges facing this country, the Democrats, too, can play the Party of No.
Last week’s media coverage sometimes made it sound as if Bowles and Simpson were taking the same amount of fire from left and right. But the reaction from Republican lawmakers and the conservative intelligentsia was muted, respectful and often favorable; the right-wing griping mostly came from single-issue activists and know-nothing television entertainers. The liberal attacks, on the other hand, came fast and furious, from pundits and leading Democratic politicians alike — starting with the speaker of the House, Nancy Pelosi, who pronounced the recommendations “simply unacceptable” almost immediately after their release.
Liberals defended this knee-jerk response on the grounds that the commissioners’ vision, ostensibly bipartisan, was actually tilted toward Republican priorities. And it’s true that Bowles and Simpson proposed more spending cuts than tax increases over all. But most of the programs and tax breaks that they suggested trimming — from farm subsidies to Defense Department bloat and the home-mortgage tax deduction — represent the American welfare state at its absolute worst. And the duo went out of their way to avoid balancing the budget on the backs of the poor. (Social Security, for instance, would be strengthened through a mix of tax increases and benefit cuts for wealthier seniors; retirees close to the poverty line would see their benefits increase.)
Their proposals certainly weren’t flawless, but they did manage to include good ideas from right and left alike. And it’s illuminating, and very depressing, that Democrats were so immediately outraged by a plan that reduces corporate welfare, makes Social Security more progressive, slashes the defense budget, raises the tax rate on millionaires’ summer homes — and does all of this while capping the government’s share of gross domestic product, not at some Scrooge-like minimum but at the highest level in modern American history.
Needless to say, none of the liberal lawmakers attacking the Simpson-Bowles proposals offered alternative blueprints for restoring America’s solvency. The Democratic Party has plans for many things, but a balanced budget isn’t one of them.
But pondering what Nancy Pelosi and her compatriots are rejecting gives us a pretty good sense of what they’re for. It’s a world where the government perpetually warps the real estate and health care marketplaces, subsidizing McMansions and gold-plated insurance plans to the tune of billions every year. It’s a world where federal jobs are sacrosanct, but the private sector has to labor under one of the higher corporate tax rates in the developed West. It’s a world where the Social Security retirement age never budges, no matter how high average life expectancy climbs. And it’s a world where federal spending rises inexorably to 25 percent of G.D.P. and beyond, and taxes rise with it.
Liberals sometimes justify this vision by arguing that government has to permanently subsidize the middle class and affluent in order to maintain public support for any safety net at all. (Most voters won’t support a system of basic social insurance for the poor, the theory goes, unless they’re getting something out of it as well.) And they defend the ever-rising tax rates required to finance these ever-expanding entitlements by noting that America thrived economically in the wake of World War II, when income-tax rates were much higher than they are today.
The first argument ignores the lessons of liberalism’s usual teacher, Western Europe, where governments have successfully reduced spending on their pension and entitlement systems without compromising their commitment to their neediest citizens. The second argument ignores the fact that the postwar United States didn’t have any serious economic competitors (the rest of the globe having been brought to its knees by total war), whereas today, an overtaxed America would struggle to compete with China and India and Brazil.
But the deeper problem is that the entire approach treats Americans as moral midgets, incapable of providing for the elderly and indigent without being bribed with giveaways and propped up with subsidies. The alternative sketched by Bowles and Simpson last week has its weaknesses, but it has this great virtue: It treats Americans not as clients but as citizens, and not as children but as adults.
Wednesday, November 10, 2010
Editorial Some Fiscal Reality
November 10, 2010 Editorial Some Fiscal Reality
The draft proposal by the chairmen of President Obama’s deficit-reduction commission was a welcome antidote to the low-minded debate that dominated the midterm elections, in which politicians all vowed to reduce the deficit but offered no credible plans.
The proposal, released Wednesday, comes from Erskine Bowles, formerly the chief of staff for President Bill Clinton, and Alan Simpson, the former Republican senator from Wyoming. It frankly acknowledges what most politicians are too cowardly to admit — that deficit reduction will require shared sacrifice.
It lays out sensible principles, prominent among them that deficit reduction should start gradually, beginning in 2012, to avoid disrupting the fragile economic recovery. It also affirms the need to protect the most vulnerable Americans and to invest in education, infrastructure and research and development.
Then it does what any successful deficit reduction plan must do: It puts everything on the table, including tax reform to raise revenue and cuts in spending on health care and defense. It even dares to mention the need to find significant savings in Social Security, Medicare and other mandatory programs.
In a misguided provision, it assumes that spending and revenues should not exceed 21 percent of gross domestic product — a numeric limit that could make it impossible to meet future national needs. In all, however, the proposal is both broad and deep.
It is not clear what the commission’s final report will say. It is even doubtful that this plan would garner the 14 votes from the 18-member commission that are required to send the package to Congress for a vote in December.
At a time when good ideas are depressingly scarce in the political and economic debate, and bipartisan agreement even scarcer, this is a commendable start.
Some first impressions:
TAXES The proposal includes three options for tax reform, two of which would simplify the code by reducing income tax rates while modifying or repealing many tax deductions and other tax breaks. The third calls on Congress to undertake tax reform, while putting in place automatic tax increases if it fails to act by 2013.
The sensible aim is to raise more money — roughly $1 trillion over 10 years — than under the current system. We wish the co-chairmen had come right out and said directly that the country needs to raise taxes. Instead, the proposal says coyly that the tax changes would “reduce the deficit.”
Tax simplification is a benefit in itself. A tax code that is easier to understand is also one that is more likely to be perceived as fair, without which it would be impossible to get public support for reform.
The reforms should go farther. Raising enough revenue in a global economy driven by trade, finance, services and spending will require new sources, such as energy taxes, a financial transactions tax or a value-added tax. A value-added tax that doesn’t fall most heavily on lower-income Americans could be a significant spur to growth, because it doesn’t tax savings.
THE MILITARY The Pentagon, which accounts for half of all discretionary spending, got virtually all it wanted after 9/11. Since the recession, Defense Secretary Robert Gates has cut back several dozen unneeded weapons programs for a long-term savings of $330 billion. He has called for $100 billion in administrative cuts and efficiencies over five years. But he would plow the savings into troops and weapons modernization, maintaining modest growth in overall spending.
The new proposal would go far beyond that, anticipating $100 billion in military budget cuts in 2015 alone — and would put the savings into deficit reduction.
It calls for freezing salaries and bonuses for the Pentagon’s civilian work force and noncombat military pay, cutting weapons procurement by 15 percent and slashing military personnel at bases in Europe and Asia by one-third. All ideas well worth debating.
The most politically volatile suggestion may be to tackle military health care costs, which rose from $19 billion to an unsustainable $50 billion over the last decade. The commission blueprint would raise premiums and co-payments on military retirees who now pay no premiums and very low deductibles. Many of these retirees work in the private sector but opt for much cheaper government health insurance. Their employers would be required to reimburse the government for the employer share of the retiree’s health cost, eliminating what the chairmen say is a government subsidy for a normal business expense.
SOCIAL SECURITY To ensure the system’s solvency over 75 years, the proposal would reduce benefits to most future retirees. It would also subject higher levels of income to the payroll taxes that support the program, while building in safeguards for both low-income and long-lived beneficiaries.
The cuts to middle-class benefits are too large — a function of the fact that the proposal tilts too heavily toward cuts in benefits rather than increases in revenue.
What is important is that the proposal preserves the system’s basic character and successful design: the young support the old via payroll taxes and the rich help the poor via a benefits formula that favors the neediest.
HEALTH CARE The proposals for reducing federal health care costs include some worthy ideas that are usually ducked or weakened because of political or interest-group opposition.
In some cases, the chairmen would go beyond the new health care reform law by strengthening some of the most important cost-cutting provisions that were watered down in the struggle to pass the legislation. It would strengthen a Medicare payment advisory board and cap tax exclusions for employer-sponsored plans at a lower level than the law does.
The chairmen would spread the pain in both ideological directions. They propose caps on malpractice awards that can drive up costs, which is anathema to Democratic-leaning trial lawyers, and, if costs rise faster than targets, they back the introduction of a public plan on the new insurance exchanges, which is anathema to Republicans. All of this is described so sketchily that it is hard to predict the impact.
As we read the chairmen’s proposal, we had one very strong reaction: We hoped the Republicans would pause long enough in their gleeful planning of President Obama’s final defeat, and the Democrats would stop wringing their hands, long enough to read this important document — and then act on it.
The draft proposal by the chairmen of President Obama’s deficit-reduction commission was a welcome antidote to the low-minded debate that dominated the midterm elections, in which politicians all vowed to reduce the deficit but offered no credible plans.
The proposal, released Wednesday, comes from Erskine Bowles, formerly the chief of staff for President Bill Clinton, and Alan Simpson, the former Republican senator from Wyoming. It frankly acknowledges what most politicians are too cowardly to admit — that deficit reduction will require shared sacrifice.
It lays out sensible principles, prominent among them that deficit reduction should start gradually, beginning in 2012, to avoid disrupting the fragile economic recovery. It also affirms the need to protect the most vulnerable Americans and to invest in education, infrastructure and research and development.
Then it does what any successful deficit reduction plan must do: It puts everything on the table, including tax reform to raise revenue and cuts in spending on health care and defense. It even dares to mention the need to find significant savings in Social Security, Medicare and other mandatory programs.
In a misguided provision, it assumes that spending and revenues should not exceed 21 percent of gross domestic product — a numeric limit that could make it impossible to meet future national needs. In all, however, the proposal is both broad and deep.
It is not clear what the commission’s final report will say. It is even doubtful that this plan would garner the 14 votes from the 18-member commission that are required to send the package to Congress for a vote in December.
At a time when good ideas are depressingly scarce in the political and economic debate, and bipartisan agreement even scarcer, this is a commendable start.
Some first impressions:
TAXES The proposal includes three options for tax reform, two of which would simplify the code by reducing income tax rates while modifying or repealing many tax deductions and other tax breaks. The third calls on Congress to undertake tax reform, while putting in place automatic tax increases if it fails to act by 2013.
The sensible aim is to raise more money — roughly $1 trillion over 10 years — than under the current system. We wish the co-chairmen had come right out and said directly that the country needs to raise taxes. Instead, the proposal says coyly that the tax changes would “reduce the deficit.”
Tax simplification is a benefit in itself. A tax code that is easier to understand is also one that is more likely to be perceived as fair, without which it would be impossible to get public support for reform.
The reforms should go farther. Raising enough revenue in a global economy driven by trade, finance, services and spending will require new sources, such as energy taxes, a financial transactions tax or a value-added tax. A value-added tax that doesn’t fall most heavily on lower-income Americans could be a significant spur to growth, because it doesn’t tax savings.
THE MILITARY The Pentagon, which accounts for half of all discretionary spending, got virtually all it wanted after 9/11. Since the recession, Defense Secretary Robert Gates has cut back several dozen unneeded weapons programs for a long-term savings of $330 billion. He has called for $100 billion in administrative cuts and efficiencies over five years. But he would plow the savings into troops and weapons modernization, maintaining modest growth in overall spending.
The new proposal would go far beyond that, anticipating $100 billion in military budget cuts in 2015 alone — and would put the savings into deficit reduction.
It calls for freezing salaries and bonuses for the Pentagon’s civilian work force and noncombat military pay, cutting weapons procurement by 15 percent and slashing military personnel at bases in Europe and Asia by one-third. All ideas well worth debating.
The most politically volatile suggestion may be to tackle military health care costs, which rose from $19 billion to an unsustainable $50 billion over the last decade. The commission blueprint would raise premiums and co-payments on military retirees who now pay no premiums and very low deductibles. Many of these retirees work in the private sector but opt for much cheaper government health insurance. Their employers would be required to reimburse the government for the employer share of the retiree’s health cost, eliminating what the chairmen say is a government subsidy for a normal business expense.
SOCIAL SECURITY To ensure the system’s solvency over 75 years, the proposal would reduce benefits to most future retirees. It would also subject higher levels of income to the payroll taxes that support the program, while building in safeguards for both low-income and long-lived beneficiaries.
The cuts to middle-class benefits are too large — a function of the fact that the proposal tilts too heavily toward cuts in benefits rather than increases in revenue.
What is important is that the proposal preserves the system’s basic character and successful design: the young support the old via payroll taxes and the rich help the poor via a benefits formula that favors the neediest.
HEALTH CARE The proposals for reducing federal health care costs include some worthy ideas that are usually ducked or weakened because of political or interest-group opposition.
In some cases, the chairmen would go beyond the new health care reform law by strengthening some of the most important cost-cutting provisions that were watered down in the struggle to pass the legislation. It would strengthen a Medicare payment advisory board and cap tax exclusions for employer-sponsored plans at a lower level than the law does.
The chairmen would spread the pain in both ideological directions. They propose caps on malpractice awards that can drive up costs, which is anathema to Democratic-leaning trial lawyers, and, if costs rise faster than targets, they back the introduction of a public plan on the new insurance exchanges, which is anathema to Republicans. All of this is described so sketchily that it is hard to predict the impact.
As we read the chairmen’s proposal, we had one very strong reaction: We hoped the Republicans would pause long enough in their gleeful planning of President Obama’s final defeat, and the Democrats would stop wringing their hands, long enough to read this important document — and then act on it.
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