In a previous column, we looked at the Republican agenda. Knowing how Republican’s plan to govern as they take control of the House next year should be of interest to every U.S. Citizen. Specifically, our column looked at the Republicans’ “Pledge to America.” The Pledge is one of two recent Republican platform proposals. The second document is Representative Paul Ryan’s (R – WI) “A Roadmap for American’s Future.” The Roadmap continues the conservative fear-mongering about deficit spending, which we have also addressed in a previous column.
See this Critique of Paul Ryan’s “Road Map by economist Dean Baker; and this report. Dean Baker found 20 inaccuracies and 4 references to raiding Medicare in the Road Map. See also Nobel Prize-winning economist Paul Krugman’s critique of the Road Map. He points out that Ryan’s plan would reduce federal government revenues by $4 trillion over the next decade, which would add significantly to the current deficit (something Republicans see to worry about on the surface). Krugman goes on to state that, “the Road Map wouldn’t reduce the deficit. All it would do is cut benefits for the middle class while slashing taxes on the rich…even as it slashed taxes at the top, the plan would raise taxes for 95 percent of the population.” The Road Map assumes zero dollar growth in domestic discretionary spending (including energy, education, the courts, etc.), but, outside of Medicare, he does not say specifically what specific programs he would slash.
Representative Ryan’s proposal, if implemented, would be a disaster for the economy, for working families, and would essentially redistribute wealth upward. Ryan is really proposing the same destructive policies that have been pushed bu Republicans for the past thirty years, usually with painful result for low-income and middle class families. In 2012, voters will have a choice about whether they want to live in a society of massive inequality and increased vulnerability for the majority of hard working Americans, or the more-centrist approach that Obama and the Democrats are pushing for. To read excerpts from Paul Ryan’s Roadmap, click the “more” button.
- A Roadmap for America’s Future is a comprehensive alternative to the heavily government-centered ideology now prevailing in Washington, which pursues a relentless expansion of government, creates a growing culture of dependency, and in the process worsens a status quo that already threatens to overwhelm the budget and smother the economy.
- This domineering government brings taxes, rules, and mandates; generates excessive levels of spending, deficits, and debt; leads to economic stagnation and declining standards of living;and fosters a culture in which self-reliance is a vice and dependency a virtue – and as a result, the entire country weakens from within. (p.1)
- This proposal does not attempt to abandon commitments Americans established over the past century, or to dismantle government. It recognizes that government has a necessary role in supporting the institutions through which Americans live their lives, and in providing a safety net for those who face financial or other hardships. But it rests on the conviction that government’s principal role is to maintain the freedoms through which individuals can pursue their own destinies. (p.2)
- The effect [of the New Deal] has been to increase, step by step, the extent to which Americans depend on their government – not only for assistance during temporary hardships, but for their livelihoods, housing, savings, and means of retirement.
- These so-called “progressive” reforms had well-intentioned aims as they unfolded in the Great Society programs of the 1960s. But addressing the challenges of modern society with a steady expansion of government brought its own unintended burdens – and they are looming larger every day. One is that public programs have extended their reach into America’s economy and Americans’ lives. Further, the government’s largest entitlement programs, now deeply entrenched, are driving an unsustainably rapid rate of spending growth – one that threatens to overwhelm the Federal budget and smother the economy. (p.3)
- Equally troubling has been the effect on national character. Until recently, Americans were known and admired everywhere for their hopeful determination to assume responsibility for the quality of their own lives; to rely on their own work and initiative; and to improve opportunities for their children to prosper in the future. But over time, Americans have been lured into viewing government – more than themselves, their families, their communities, their faith – as their main source of support; they have been drawn toward depending on the public sector for growing shares of their material and personal well-being. The trend drains individual initiative and personal responsibility. It creates an aversion to risk, sapping the entrepreneurial spirit necessary for growth, innovation, and prosperity. In turn, it subtly and gradually suffocates the creative potential for prosperity. (p.3)
- The [2009 stimulus] legislation rested on the Keynesian-inspired notion that government can somehow “manage” a free-market economy, commanding it to grow with heavy doses of borrowed money. (p.4)
- For several decades, fiscal experts have warned of the untenable and overwhelming nature of the Federal Government’s budgetary trends. The threat comes entirely from domestic entitlement programs, as clearly reflected in CBO’s biennial report, The Long-Term Budget Outlook, the most recent of which was released in June 2009.4 The report, looking forward 75 years, shows that within the next several decades, the government’s current fiscal path will lead to catastrophic levels of debt, even if Congress imposed substantial tax increases. (p.7)
- From the Brookings-Heritage Fiscal Seminar, a group of policy experts spanning the ideological spectrum: [R]estoring tax rates to pre-2001 levels will not close the gap between spending and revenues. . . . Even raising revenues as a percent of GDP to European levels – levels that are unprecedented in the United States – will not be sufficient. If the wedge between spending and revenues attributable to social insurance programs continues to grow, taxes would have to be raised continuously and would eventually cripple the economy. (p.9)
- Without fundamental changes, the government would have to finance these obligations with higher taxes, higher debt, or a combination of the two. Either way, the results would be crippling for the U.S. economy: they would entail shifting unprecedented amounts of economic resources away from growth-generating activities of the private sector: [A]bsent a significant rise in revenue beyond the historical level of GDP, spending on Social Security, Medicare, and interest on the debt could squeeze out all other areas of the budget. Taxes could, in principle, be increased to cover these costs, but the unprecedented tax levels required would have an extremely negative impact on employment, wage growth, and our ability to compete internationally. Borrowing to pay for the programs, on the other hand, would lead to such high deficits that the debt would be unsustainable. (p.11)
- More ruinous in the long run is the extent to which the “safety net” has come to enmesh more and more Americans – reaching into middle incomes and higher – so that growing numbers have come to rely on government, not themselves, for growing shares of their income and assets. By this means, government increasingly dictates how Americans live their lives; they are not only wards of the state, but also its subjects, increasingly directed in their behavior by the government’s “compassion.” But dependency drains individual character, which in turn weakens American society. The process suffocates individual initiative and transforms self-reliance into a vice and government dependency into a virtue. The Nation becomes a sort of vast Potemkin Village in which the most important elements – its people – are depleted by a government that increasingly “takes care” of them, and makes ever more of their decisions for them. They take more from society than they provide for themselves, which corrodes society itself, from the inside out. The environment also becomes ripe for exploitation and control by the few who remain “ambitious”…If the government continues following the “progressive” ideology now prevailing in Washington, America will increasingly resemble a European welfare-state – a society in which the majority of the people pay little or no taxes but grow dependent on government benefits; where tax reduction is impossible because more people have a stake in the welfare state than in free enterprise; where permanent high unemployment is a way of life; and where the spirit of risk-taking is smothered by a thick web of regulations and mandates from an all-providing centralized government.(p.13)
- The Tax Foundation estimates that today 60 percent of Americans receive more in benefits and services from the government than they pay in taxes. (p.13)
- Another analysis shows that from 1950 through 2007, the share of the population reliant on the government rose from 28.7 percent to 58.2 percent (see Figure 3). The study predicted that even without enactment of legislation such as cap-and-trade and health care, the share of the population dependent on the government will rise to 67.3 percent by 2018.(p.14) – 13A. Gary Shilling’s Insight, September 2009. The very idea of “equal rights” implies that individuals’ results should differ from one another, because “justice” or “fairness” requires that each individual obtains what each has earned and merited.(p.15)
- Nevertheless, government does have important roles. Government must secure property rights, enforce laws that protect individual freedoms and personal security, and provide for the society’s defense. It can play a useful role in providing for needed public works. It must also ensure a safety net, maintained by government if necessary, for those facing financial or other hardships. Less obvious is that it is up to government to ensure the maintenance of a competitive, free market system. The participants will always seek advantages over their competitors – even through anti-competitive means (monopolies, trade barriers, and so on) – and only the government can prevent this. While government should limit itself to maintaining the rules of the game – not choosing winners and losers – it should maintain those rules with conviction: it is government’s responsibility to uphold the principles of free and competitive markets. (p.17)
- Obviously, some government spending is necessary to foster a functioning market economy. Governments must provide for a limited set of public goods: they must build roads and other infrastructure, foster the protection of property rights, and maintain internal and external security. As the upward-sloping portion of the curve illustrates, this “core” government spending tends to foster economic growth.(p.40)
- The problems in American health care have been caused not by a failure of the health care market, but mainly by distortions imposed on the market from several directions; and the most significant of these are Federal tax subsidies and programs that have created a third-party payment system, which insulates consumers from prices and market forces.(p.27)
- Medicare was created with the worthy mission of providing health coverage for America’s retirees, and for many it has done so. But the program suffers from unsustainably rapid spending increases that continue to drain economic and fiscal resources on its way to insolvency.(p.31)
- Medicaid: Some 34 million of these beneficiaries were children, and 18 million were adults in families with dependent children. The program has provided Americans of limited means access to health care they could not have obtained otherwise. But Medicaid spending, too, is spiraling out of control…(p.30)
- He has four issues with Social Security: (1) the real rate of return from Social Security is between 1 percent and 2 percent; (2) the current system is unfair to minorities. The projected shorter life expectancies of minorities significantly reduces their benefits compared with Caucasians; (3) today’s workers have no legal rights to the taxes they have paid into Social Security. According;(4) Social Security benefits are not inheritable. (p.34)
- Tax Code: groups. The code is so complex that 60 percent of Americans have to use paid tax preparers to complete their forms correctly…The special tax breaks and preferences now add up to more than $875 billion per year. These layers of carve-outs and changes have made the code unfair, inefficient, and wildly complex.(p.36)
- The U.S. tax system also discourages capital investment, a necessary component of longterm growth and rising living standards, by essentially taxing savings twice. Individuals pay income taxes on their wages and salaries and, if they choose to save these funds, pay another round of taxes when they reap investment gains. This arrangement encourages individuals to consume their wages and salaries immediately rather than saving and investing them.(p.37)
- Many countries have been lowering business taxes. But the U.S. risks falling behind: it already has the second highest corporate income tax in the Organisation of Economic Cooperation and Development [OECD].(p.37)
- The Joint Economic Committee has studied the relationship between the size of government and economic growth in 23 industrialized countries during 1960 through 1996. The results show, for instance, that countries with government spending in excess of 40 percent of GDP experienced less than half the rate of GDP growth, on average, than countries with leaner governments (i.e. between 25 percent and 39 percent of GDP). The committee’s econometric analysis of the international data yields a convenient rule of thumb: an increase in government spending of 10 percentage points tends to reduce a country’s annual rate of GDP growth by about 1 percentage point.(p.41)
- Every American should have access to affordable health insurance. (p.43)
- Now America is approaching a “tipping point” beyond which the Nation will be unable to change course – and this will lead to disastrous fiscal consequences, and an erosion of economic prosperity and the American character itself. The current administration and Congress are propelling the Nation to the brink of this precipice. (p.3)
- The current administration and Congress have not only ignored this crisis, but are hastening its approach with policies that vastly increase Federal Government spending. (p.12)
- President Reagan more than a quarter century ago: “It is not my intention to do away with government. It is, rather, to make it work – work with us, not over us; to stand by our side, not ride on our back. Government can and must provide opportunity, not smother it; foster productivity, not stifle it.”(p.15)
- Avoiding reforms of the government’s major entitlement programs does not protect them. Indeed, a failure to reform puts those programs, and their benefits, in greater jeopardy; and the longer reform is delayed, the more wrenching the inevitable changes will be. (p.22)
- Unfortunately, America’s status as the world’s leading economic power is clearly threatened by the trajectory of current Federal Government fiscal policies.
A Roadmap for America’s Future is a comprehensive alternative to the heavilygovernment-centered ideology now prevailing in Washington, which pursues a relentlessexpansion of government, creates a growing culture of dependency, and in the processworsens a status quo that already threatens to overwhelm the budget and smother the economy.
PROVIDING HEALTH AND RETIREMENT SECURITY. The plan ensures universal
access to health insurance; and it rescues and strengthens Medicare, Medicaid,
and Social Security – allowing them to fulfill their missions and making them
permanently solvent.
LIFTING THE DEBT BURDEN. It returns Federal spending growth to sustainable
rates, and lifts the huge projected debt burden from the shoulders of future
generations.
PROMOTING AMERICAN JOB CREATION AND COMPETITIVENESS. It promotes
solid, sustained economic growth and job creation here in America, and puts the
United States in a position to lead – not merely survive – in the global
marketplace. The plan also modernizes job training programs to meet the effects
of globalization.
HEALTH CARE. The plan ensures universal access to affordable health insurance
by restructuring the tax code, allowing all Americans to secure affordable health
plans that best suits their needs, and shifting the ownership of health coverage
away from the government and employers to individuals.
MEDICARE. The Roadmap secures Medicare for current beneficiaries, while
making common-sense reforms to keep it solvent for the long term.
SOCIAL SECURITY. The proposal saves and strengthens this important retirement
program and makes it sustainable for the long term.
TAX REFORM. This plan offers an alternative to today’s needlessly complex and
inefficient tax code, providing the option of a simplified mechanism that better
promotes and rewards work, saving, and investment.
JOB TRAINING. The Roadmap helps the Nation’s workforce prepare for success
in the global economy by transforming 49 job training programs, scattered across
eight agencies, into a flexible, dynamic strategy focused on results, and
accompanied by clear measures of transparency and accountability. The plan
requires the development of performance measures, and gives each State the
option to consolidate funding into one program, if such an approach can be
shown to improve outcomes and achieve job training goals.
A TRUE ALTERNATIVE. This plan is based on a fundamentally different vision. It
focuses government on its proper role; it restrains government spending, thus
limiting the size of government itself; it rejuvenates the vibrant market economy
that made America the envy of the world; and it restores an American character
rooted in individual initiative, entrepreneurship, and opportunity – qualities that
make each American’s pursuit of personal destiny a net contribution to the
Nation’s common good as well. In short, it is built on the enduring truths from
which America’s Founders established this great and exceptional Nation.