GOP “Path to Prosperity” unveiled

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Today, House budget chairman Rep Paul Ryan (R-WI) unveiled the GOP 2012 budget. While DC currently debates whether to shave $30 billion or $60 billion off of 2011’s budget, new budget proposals for next year and beyond bring the savings into the trillions. Utah’s Jason Chaffetz joined him for the unveiling.

It seems that everyone agrees that both Democrats and Republicans are responsible the looming crisis, yet the last couple of years have seen an acceleration of our debt and spending that is unprecedented. According to a Wall Street Journal editorial by Rep Ryan, “Major spending increases have failed to deliver promised jobs. The safety net for the poor is coming apart at the seams. Government health and retirement programs are growing at unsustainable rates. The new health-care law is a fiscal train wreck. And a complex, inefficient tax code is holding back American families and businesses.”

Further, “The president’s recent budget proposal would accelerate America’s descent into a debt crisis. It doubles debt held by the public by the end of his first term and triples it by 2021. It imposes $1.5 trillion in new taxes, with spending that never falls below 23% of the economy. His budget permanently enlarges the size of government. It offers no reforms to save government health and retirement programs, and no leadership.”

The GOP budget, in contrast, cuts $6.2 trillion from the president’s budget, reduces debt to approximately 20% of GDP and gets us on the path to actually pay off our national debt. It also reduces deficits by $4.4 trillion and still maintains a safety net system.

Medicaid reform – one of the “entitlements” people mean when they talk about “entitlement reform” – would be converted into a block-grant system to be administered by each state. Utah just did that in the 2011 legislative session. It also proposes that same type of reforms for the food-stamp program, eliminating the perverse incentive of rewarding states each time they grow their food-stamp rolls. These reforms will strengthen and improve these safety net programs for the people who truly need them, yet we will be able to eliminate welfare for those who do not – like Wall Street.

There are also proposed changes to Medicare. Representative Ryan explained:

The open-ended, blank-check nature of the Medicare subsidy threatens the solvency of this critical program and creates inexcusable levels of waste. This budget takes action where others have ducked. But because government should not force people to reorganize their lives, its reforms will not affect those in or near retirement in any way.

Starting in 2022, new Medicare beneficiaries will be enrolled in the same kind of health-care program that members of Congress enjoy. Future Medicare recipients will be able to choose a plan that works best for them from a list of guaranteed coverage options. This is not a voucher program but rather a premium-support model. A Medicare premium-support payment would be paid, by Medicare, to the plan chosen by the beneficiary, subsidizing its cost.

In addition, Medicare will provide increased assistance for lower-income beneficiaries and those with greater health risks. Reform that empowers individuals—with more help for the poor and the sick—will guarantee that Medicare can fulfill the promise of health security for America’s seniors.

Does more need to be done? Absolutely. But this is a good start.

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28 Responses to “GOP “Path to Prosperity” unveiled”

  1. Sue Connor Says:

    “But because government should not force people to reorganize their lives, its reforms will not affect those in or near retirement in any way.”

    But I will be “forced to re-organize my life” because I will no longer be able to depend on Medicare when I am 65 even though I have paid into the system as an employee and an employer for 20+ years. Those currently over 55 will vote for this, but what about all of us who are younger than that?

    How can we possibly trust that Ryan’s plan protects us or our children?

  2. reffaree Says:

    Go Paul Ryan and Jason Chaffetz! WE THE PEOPLE will Defeat this Liberal Cancer better know as the BARACK HUSSAIN OBAMA Administration AKA Crime INC.

  3. reffaree Says:

    SUE: looks like more “CRAPPY LIFE” for you. HAHAHAHAH dummy.
    PS: the crappy life words are yours not mine.

  4. Cynthia Says:

    Sue,

    The current programs you’re depending on are not sustainable. They will be gone either through cutting (Rep plan) or bankrupcy (Dem plan) . I’m 39. I’ve known since I started working in a job with a retirement plan at 22 that I’d be in a world of hurt if I depended solely on government programs for my retirement. The unstainability of goverenment funded retirement is not a new development and it’s no secret that the program will ultimately fail.

    We all want cuts to be made but it seems everyone wants the cut to be from someone else’s piece of the pie. There is only one pie!

  5. Sue Connor Says:

    @cynthia I get that there is only one pie. But still think there is room for compromise. Most jobs do not have pension plans anymore only 401K plans, but these only work if you have a living wage and can afford to put money into your retirement plan. I am not in a position where I depend on government funded retirement, but I am one of the lucky ones with a good job, spouse, health insurance, etc. What about the less fortunate? Do we really think they should work until they die or become disabled, or be able to have some live able subsidy post 65 or 67 years of age? Changes need to be made, but carefully with a scalpel not an ax. But this requires our elected officials to work together on a plan, not just posture or oppose.

  6. rmwarnick Says:

    How Orwellian can you get? The so-called “path to prosperity” budget is a reverse-Robin Hood scheme that proposes to take from the poor and give to the rich. It would abolish the Medicare, Medicaid and food stamp programs. It would increase the tax burden on most Americans by repealing estate and corporate taxes, slashing income taxes for the wealthiest, and instituting a regressive national sales tax.

    No one is his or her right mind could possibly support this. It would be a final death blow to the middle class.

  7. Ronald D. Hunt Says:

    “The unstainability of goverenment funded retirement is not a new development and it’s no secret that the program will ultimately fail.”

    Social security is 100% fully funded under current(and very conservative projections) until 2037 where it will be 78% funded from that point on assuming no modifications are made. Every five years or so they bump that date up 5 years so their is a good chance that day will never come, either way we have 27 years to figure it out, plenty of time no need to rush.

    And when compared to 401K plans that lost around $18 trillion dollars in 2007, a number twice as large as the worst case scenario shortfall in social security(with 40 years of interest added on top by the intellectually corrupt even know social security cuts benefits and doesn’t run deficits as an automatic function by LAW). Or privately ran pension plans where many large companies used the pension fund as their own piggy banks, leading to the bankruptcy of a long list of corporations including GM(but hey those execs got a good bonus in the years prior).

    401K’s are a terrible model by any standard, you are stuck with the plan chosen by your employer and it doesn’t have to be a good one, the tax benefit just applies to them having one. 401K’s are entirely dependant on the stock market, and after 2007 clearly that is a bad idea. And 401K’s force you to invest into corporations that may in an effect use your money for speech you disagree with, Image it your retirement savings and hense partial ownership of a company reduces your dividend to drop $$$$ into some political campaign(for example Obama’s), That is compelled speech.

    To say nothing of the fact that 401K’s are broken for a second reason, their is no way to design a withdrawal plan as you don’t know how long you will live. Or in other words without social security the 401K’s wouldn’t work in the first place, that is to say without social security once your 401K ran out and it will because of the market or you live longer then you expected, inability to save every year due to one circumstance or another whatever, then you will no longer have any income, and by this point probably unable to earn an income due to age/disability.

    The only reason to replace social security with a 401K(or something similar) plan is if you desire an ineffective broken retirement system that leaves 10’s of millions of people without retirement and leaves the rest who are lucky enough to save a bit at the mercy of the markets.

  8. Pops Says:

    Social security is 100% fully funded…

    There you go again, Ron. Social Security is broke today! Special-issue bonds in the so-called trust fund have zero value. They cannot be redeemed without borrowing, taxing, or printing the face value amount. We are currently borrowing money to pay benefits.

    The reality is that we, as a nation, have consumed the seed corn. There is nothing left, and our grandchildren and great-grandchildren are going to have to pick up the tab if they can. I doubt that they can. Forget about retiring unless you have personally created and saved sufficient wealth to sustain yourself. Don’t leech off younger folks who are trying desperately to survive.

    “But I paid into the system for x years!” Yes, we all did. We all fell for the pyramid scheme that is Social Security (although it wasn’t necessarily voluntary in every case). And we’re left with nothing, because all that money was spent, just like in any other scam.

    rm advocates stealing from the rich to pay the poor, as opposed to stealing from the poor to pay the rich. [Of course the latter is a patently dishonest characterization of what is being proposed – new math, perhaps?]

    How about we all just stop stealing?!?

  9. Ronald D. Hunt Says:

    “Special-issue bonds in the so-called trust fund have zero value. They cannot be redeemed without borrowing, taxing, or printing the face value amount. We are currently borrowing money to pay benefits.”

    Nonsense, Social security cashing in it bond’s is little more then causing the federal government general fund to balance transfer their debt to a different holder. Tho I suppose a social security lock box of sorts would be a fine addition, also allowing SS to buy infrastructure bonds from State governments would be a fine change as well(slightly higher interest rate returns from this would be great for the program).

    And calling for taxation on the rich “stealing”? Hardly, Those who disproportionately gain from the works of society should pay disproportionately for the works of society, Where would the Koch brothers fortunes be without the Eisenhower interstate Hi-way system. Where would the Haliburton, Exxon, Kenncot corporations be without roads, wars, and wide availability of electricity?

    We all benefit from the works of society so we all pay for it, and the amount we pay should be relative to the amount we benefit from those works.

    Their is also the argument of what is purely functionally practical, but I am guessing that argument is lost on you!

  10. rmwarnick Says:

    Rep. Ryan is proposing to cut income taxes for the rich by another 10 percent, and repeal estate and corporate taxes. His theory of a balanced budget relies on draconian cuts in the social safety net, rainbows, unicorns and the Laffer Curve– the numbers don’t work.

    And yeah, he hasn’t even gotten around to attacking Social Security a la Bush.

  11. rmwarnick Says:

    Paul Krugman explains how much of Ryan’s plan depends on the existence of unicorns.

  12. Dwight Says:

    So the CBO says that in 10 years public debt will be higher under Ryan’s plan than doing nothing different. 67% GDP versus 70%. That certainly is a path to prosperity.

  13. Greg Says:

    @Dwight – do you have a reference?

  14. rmwarnick Says:

    Rep. Ryan’s plan even gets us down to 2.8 percent unemployment — using the magic of wildly optimistic assumptions. Harry Potter couldn’t even do that.

  15. Dwight Says:

    @Greg http://www.cbo.gov/ftpdocs/121xx/doc12128/04-05-Ryan_Letter.pdf Table 1 includes the baseline (no changes) and the proposal by Ryan.

    It is projected better farther out, but let’s be honest that the further you go the less likely projections can be counted on.

  16. Greg Says:

    @Dwight – Kudos for acknowledging that the projection “get better” over time. And it is true that projection are less accurate over time.

    The table projections do indicate dramatic reductions in public debt over the current trajectory if nothing changes.

    2030 2040 2050
    74 84 90
    64 48 10

    The text explaining the report:

    “Both of those scenarios deviate significantly from the nation’s past budgetary experience: In the extended-baseline scenario, both spending and revenues are well above historical norms as a share of GDP, and
    federal debt rises to 90 percent of GDP by 2050; under the alternative fiscal scenario, tax revenues remain within their historical range relative to GDP, but with spending above that range, federal debt skyrockets on an unsustainable path and exceeds its historical peak relative to GDP by the mid-2020s.”

    The message is clear – doing nothing is not an option. It will lead to bankruptcy.

    Whether you agree with Ryan’s proposal or not, it leads away from that particular cliff. Any statement to the contrary misrepresents the CBO report.

  17. Pops Says:

    Nonsense, Social security cashing in it bond’s is little more then causing the federal government general fund to balance transfer their debt to a different holder.

    I certainly hope you’re not an accounting major. The bonds cannot be redeemed without raising taxes, incurring debt, or printing money. If there were no bonds, benefits would have to be paid by raising taxes, incurring debt, or printing money. Notice the striking similarity.

    Those who disproportionately gain from the works of society should pay disproportionately…

    They already do. It’s called a graduated income tax. Your position is apparently that they don’t pay enough. How much is enough? 100%? Give us a number.

  18. Ronald D. Hunt Says:

    “The bonds cannot be redeemed without raising taxes, incurring debt, or printing money.”

    No, When SS redeems their bonds the federal government will simply find a different debt holder. The amount of debt will remain unchanged, The only difference is who is the holder of that debt, It is just like a balance transfer on a credit card from one bank to another the debt amount remains unchanged they just owe it to a different entity.

    “Your position is apparently that they don’t pay enough. How much is enough? 100%? Give us a number.”

    I not so sure taxes need to be raised much(Clinton rates or maybe a few pct points higher), as far as a function of the nominal rate goes. It is more an issue of the amount of tax evasion that occurs through games involving international trade. The number of large corporations that pay nothing is far far to high. Frankly we need the brackets spread out a bit and the closure of a whole pile of loopholes.

    The sad bit about our tax system as it stands now is that the small time millionaire’s(the “small” business owners basically) are the guys that get screwed the most. Not so much as that they pay to much, but as a function of the fact that they have to compete with much larger businesses that are more able to exploit the tax system in ways that shouldn’t be allowed.

    GE not only payed nothing in taxes they received $1.5 billion dollars back, this type of thing is just disgusting. Their are many other examples of this and it is plainly outrageous. It really doesn’t take much to understand the small business guy who has to compete with an international corporation that has no allegiance to any nation and uses the international tax book switcharoo game to pay nothing in taxes.

    To give you direct numbers, say plus or minus 10% from a nominal rate of 45% with the highest bracket at around $1 billion dollars, and all brackets should be adjusted yearly based on inflation. With a soft aim that generally no one can write off more then 30% of their taxes in deductions/credits/subsides/whatever.

  19. Pops Says:

    No, When SS redeems their bonds the federal government will simply find a different debt holder.

    That’s called, in common parlance, “borrowing money”.

    What you’re missing is that the special-issue bonds in the “trust fund” are not included on the federal government’s balance sheet as debt. So redeeming the bonds results in new debt. What they’re doing is very similar to Enron-style accounting, wherein a wholly-owned subsidiary is used to hide debt and create the appearance of non-existent assets.

    With regard to your rant about international corporations: why do you suppose companies leave the United States? Take a stab at it.

  20. Pops Says:

    To give you direct numbers, say plus or minus 10% from a nominal rate of 45% with the highest bracket at around $1 billion dollars, and all brackets should be adjusted yearly based on inflation.

    You’re living in fantasy-land. Nobody makes $1B per year. Or are you proposing we implement an annual tax on assets?!? That should reduce everybody to poverty in short order, if that’s what you’re shooting for.

  21. Ronald D. Hunt Says:

    “Nobody makes $1B per year.”

    Other then the fortune 400, bill gates, the Koch brothers, GE, IBM, etc. etc. etc.

    “What you’re missing is that the special-issue bonds in the “trust fund” are not included on the federal government’s balance sheet as debt.”

    It’s my understanding that was changed in 2008. Not that is matters as whether or not the debt is reported its still debt, and as such still nothing more then a situation of the debt holder changing no different then someone balance transferring their credit card debt from BoA to America First credit union.

    “why do you suppose companies leave the United States? Take a stab at it.”

    They don’t “leave” the united states, they just use third party governments as pass throughs to legally launder money. For example a common trick used by cell phone companies, on a phone that costs $100 to manufacture their foreign subsidiary will charge the domestic subsidiary $1000 for it then the domestic subsidiary will sell it to customers for $600 dollars, They write the sell off as a $400 dollar loose(even know it isn’t), and use another country to move the money back to the US under capital gains rates or over time using tax credits in our system on foreign taxes paid by that corp. Other corps have found even better games, using the Irish sandwich they can hand multiple governments tax books with different numbers and screw both sides.

    THIS HAS NOTHING TODO WITH THE RATE WE CHARGE so long as we collect any taxes what so ever, because at any rate over 0% it will still be profitable to play the games.

    Same story with outsourcing, most of the profitable outsourcing disappeared 5-6 years ago but the tend didn’t stop. This is because other nations directly subsidise their industries, or use their sovereign wealth funds to buy and move corps into their nations without regard to the profit motive, or often like in China the government will pay the corp executives a hansom fee so outsourcing without regard to what is best for the share holders.

  22. Pops Says:

    Other then the fortune 400, bill gates, the Koch brothers, GE, IBM, etc. etc. etc.

    No question corporations can earn more than $1B, but not so much individuals. There’s no way Bill Gates earned $1B last year – he’s busy giving stuff away, not earning it. In fact, it’s absurd to think he ever earned that much in a year. (Note that an increase in net worth is not the same as earning.)

    ..a situation of the debt holder changing no different then someone balance transferring their credit card debt from BoA to America First credit union..

    There’s a huge difference when a debt is transferred from inside an entity to outside the entity. Internal “debt” isn’t considered debt – it’s nothing more than an accounting entry. External debt is real debt that has to be paid back. (You seem to be in favor of Enron-style accounting practices. You should ask Arthur Anderson, the accounting firm, how well that worked for them.)

    They don’t “leave” the united states, they just use third party governments as pass throughs to legally launder money.

    Of course they do, the ones who are still here. It’s their fiduciary responsibility to do so. But you seem to be ignoring a fundamental law of economics, which is that you get less of what is taxed. Raise taxes on corporations – by changing rates or closing loopholes or whatever – and you will reduce employment. That will reduce personal income taxes and increase the load on the safety nets. It’s a downward spiral. The trick to maximizing tax revenues is to optimize taxes, such that an increase in rates or a decrease in rates reduces revenue.

  23. Ronald D. Hunt Says:

    Bill Gates is currently worth $56 billion dollars down from a peak of $150~ billion dollars, their has been plenty of years where he has made well over a billion dollars a year.

    I will also note both Bill Gates and Warren Buffett support higher income taxes on upper brackets for both individuals and corporations!

    “Raise taxes on corporations – by changing rates or closing loopholes or whatever – and you will reduce employment.”

    Supply side nonsense, Lets cut the gas taxes and stop maintaining the highways and see how many jobs that cut creates.

    Government investment can easily have a multiplier effect in the economy by performing functions that private industry can not effectively do themselves.

    For example Roads and railways have a great economic multiplier effect but other then a few freeway segments their is no way a private corporation could ever collect enough revenue from tolls to pay for maintenance. And this is double true due the need for emanate domain to build roads to where they need to go in the first place.

    Trains and railways are the same as roads in this regard, just as most utilities, electricity and phone service would be rare beasts in much of the united states without government programs that pay for the cost to get it to most places. In fact the utilities we have the most problems with are the private ones, California or Texas electric utility privatisation have been disasters.

    Their is also the problem of nature monopolies, in some cases competing enterprises are not an option, this is the case with rural hospitals, telephone service, roads, police/fire service, etc. Situations like these lead to extremely abusive customer relationships, I mean just look at how Qwest treats their customers, several cities offered to pay Qwest the full cost of installing fiber to their residents and Qwest plainly told them to goto hell.

    “It’s their fiduciary responsibility to do so.”

    Ohh I agree, That does not mean however that we have to enable them in exploiting the tax system. We need to attack the tax book switcharoo game, If they make the money where then they need to be taxed here at whatever rate that tax is at.

    We need to start including in our “freetrade” agreements provisions for the IRS and foreign government equivalents information exchanges for reported earnings, include provisions for how to handle “international” income such that they can’t hide from the tax man. And their is no need for us to trade with governments that explicitly enable corporations to get away from paying their far dues.

    “Internal “debt” isn’t considered debt – it’s nothing more than an accounting entry.”

    It is not “internal”, it is owned to the American people, My original statement states, SS, China, Individuals, Banks its all the same as far as federal government issued debt is concerned.

  24. Pops Says:

    Bill Gates is currently worth $56 billion dollars down from a peak of $150~ billion dollars, their has been plenty of years where he has made well over a billion dollars a year.

    Change in net worth is not income. It isn’t taxed because the gains haven’t been realized. It could go to zero in an instant.

    Lets cut the gas taxes and stop maintaining the highways and see how many jobs that cut creates.

    That wasn’t what we’re talking about. People pay gas taxes, corporations don’t.

    Government investment can easily have a multiplier effect in the economy by performing functions that private industry can not effectively do themselves.

    That’s BS. You’re too young to remember the Bell Telephone, aren’t you?

    And now you’re just making up stuff. Where the *(&^ do you think government gets money to build and maintain roads? Does it come out of thin air?!? No. That means the same money could be spent privately to achieve the same result – well, it would be difficult not to achieve a better result, because bureaucracies have systemic motivational dysfunction that doesn’t exist in the free market.

  25. Pops Says:

    The Social Security thing is getting old. It’s really a simple concept. Here’s another example.

    Company A has a wholly-owned subsidiary which is company B. Company B creates a wholly-owned subsidiary named C, which in turn creates a subsidiary named D. Now, let’s say that D goes out there and provides some useful product or service and ends up with a profit of $1M. C is short of cash, so it borrows the $1M from D and gives D a promissory note in the amount of $1M. B is also short on cash, so it borrows the $1M from C and gives C a promissory note. A doesn’t want to be left out, so A borrows the $1M from B and gives B a promissory note.

    Now, let’s do the balance sheet Social-Security-style. Company D has an asset worth $1M in the form of a promissory note. Company C has an asset worth $1M in the form of a promissory note. Company B has an asset worth $1M in the form of a promissory note. And when company A rolls up all the assets in its subsidiaries, it ends up with $3M in promissory notes and $1M in cash for a total of $4M. Just like magic, they turned $1M into $4M.

    Now, let’s say the parent company A blows the entire $1M on bonuses for top executives. They still have a balance sheet of $3M. What a deal! That’s what Enron thought, too, until they got caught.

    This only works because they ignore the debt part, just like the federal government ignores the SS Trust Fund debt. If the debt were rolled up, too, then the result would be a net value of 0 – the money was earned and then spent, leaving the company as a whole with nothing. And if the $1M profit earned by D had been promised to investors, that would leave D – and the corporation as a whole – with an unfunded liability of $1M that can’t be negated by the promissory note held by D because there is nothing of value backing it.

  26. Pops Says:

    Ron,

    My apologies, my sources mislead me. The Social Security Trust Fund debt is listed as part of total debt, and is currently listed at about $2.6T.

    From the perspective of the federal government in general – as from the perspective of President Obama, for example – it is misleading to the taxpayer to say that Social Security is solvent when as he speaks they are borrowing money to pay benefits. In other words, from the perspective of the parent organization the debt cancels the asset, leaving, in the case of Social Security, a large unfunded liability.

    The accounting intricacies also fade in view of the fact that we the taxpayers paid the $2.6T once but will now have to pay again – or at least our grandchildren will have to pay it. The whole thing is a disaster (like any other Ponzi scheme) and should be phased out.

  27. Ronald D. Hunt Says:

    No worries it was a resent change by the Bush administration in 2008, One I agree with that is exactly where that debt should be listed.

    “In other words, from the perspective of the parent organization the debt cancels the asset, leaving, in the case of Social Security, a large unfunded liability.”

    I disagree, Social security has its own income separate of the federal government via the payroll taxes. The only way I could see to your argument is if it could be argued that the federal government would not have ran as large of a deficit in the absence of social security, And I don’t see any evidence that would support that idea.

    In the absence of social security the government would still have just as much debt, it would simply be held by different entities.

    But for the sake of argument, lets write off that $2.6 trillion dollars and compare the different retirement options, So its still 1/7th the size of the lose in 401K’s in 2007 ($18 trillion dollars), and I would suspect its less the loses in pension plans during the same period. And social security without the trust fund can still fund 78-90% of its obligation(on going forever more without any modification save the above “assumption”) which again is far better then the razor cut pensions have been taking, or the 30-50% lose in 401K plans.

    Social security also doesn’t distort the markets from over-investment that causes bubbles, their is a point where more investment in wall-street just bids stuff up as opposed to actually creating any new real “value”, now this is great for banks and market speculators but terrible for investment holders that depend on longer term results(such a say a retirement savings account).

  28. Pops Says:

    Another allegation about the spending of the Social Security trust fund by the general fund is that it was essentially off-budget. That kind of thing, if true, results in an oversizing of government that can’t be sustained with the source of funds dries up (as it has). I’m not sure any more that’s what really happened, though.

    So its still 1/7th the size of the lose in 401K’s in 2007 ($18 trillion dollars)

    But that’s a paper loss, not a real loss. A lot of that has been “recovered”. Spent Social Security taxes can never be recovered.

    I agree with your last paragraph. I hate having any money on Wall Street, but I’m pushed into it in order to get the instant 50% return from company matching. (Of course, if I lose it all, the 50% won’t mean anything.) The over-investment is because of 401(k) laws. Every time the government ventures into the marketplace it distorts everything, creating bubbles and other distortions that eventually have to be corrected by downturns or disasters.

    [Don’t you have homework to do? 🙂 ]

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