Posted on 05/17/2011 4:49:48 AM PDT by iowamark
Runaway spending and deficits continue to grow unabated in part because any attempts to rein them in are relentlessly demagogued by defenders of big government. The latest example is the budget recently authored by House Budget Committee chairman Paul Ryan (R–WI) and passed by the House of Representatives.
Most critics have failed to provide any credible alternative to the House budget. Yet that has not stopped them from relentlessly misrepresenting the House budget with the following myths.
Myth #1: The House budget recklessly cuts taxes by $4 trillion.
Fact: It cancels a future tax increase.
Critics charge that the House budget is not serious about deficit reduction because it includes a $4 trillion tax cut. This is patently false. The budget would keep tax rates at current levels. What critics call a $4 trillion “tax cut” is actually the cancellation of a $4 trillion tax increase that is currently scheduled to go into effect in 2013. Only in Washington is keeping tax rates at current levels considered a reckless tax cut. The House budget would leave tax revenues slightly above their 18 percent of GDP historical average.
Myth #2: The House budget increases the deficit by giving tax cuts to the rich.
Fact: The proposed change is a revenue-neutral tax reform plan that simplifies the tax code.
The House tax plan proposes reducing the top individual and corporate tax rates from 35 percent to 25 percent—and this is fully paid for by eliminating extraneous tax deductions, exemptions, and loopholes that currently allow some wealthy individuals and businesses to escape their fair share of taxes. Because this plan raises the same amount of revenue year by year as does current policy, it is not a net tax cut. The President’s fiscal commission endorsed similar tax reforms because these reforms would make the tax code more efficient, fair, and pro-growth.
Myth #3: The House budget represents only minor deficit reduction.
Fact: It substantially reduces both short- and long-term budget deficits.
Critics claim that the House budget cuts just $1.7 trillion out of the 10-year deficit. As stated above, this measures the House budget against a baseline that already assumes $4 trillion in tax increases—which even President Obama largely opposes. Since the House budget is relatively revenue-neutral compared to current tax policies, the main deficit reduction consists of $5.8 trillion in spending reductions over the next decade. The savings include $1 trillion from phasing down overseas contingency operations, $1.6 trillion from non-defense discretionary spending, $2.2 trillion from repealing Obamacare and block-granting Medicaid, and $1 trillion from other entitlement and net interest savings.
Overall, the House budget would run $5.1 trillion in deficits over the next decade, compared to President Obama’s proposed $9.5 trillion in deficits.
And these savings grow immensely in future decades. The Congressional Budget Office’s (CBO) long-term baseline shows runaway spending driving the national debt to 95 percent of gross domestic product (GDP) within a decade and a staggering 344 percent by 2050.[1] By contrast, the House budget would quickly stabilize the debt around 70 percent of GDP before reducing it to just 10 percent by 2050.
Myth #4: The House budget exaggerates the long-term spending challenge.
Fact: The challenge is real and potentially calamitous.
Some suggest there is no long-term fiscal crisis. This is demonstrably false. The coming retirement of 77 million baby boomers is not a theoretical projection. Social Security is already in deficit, and the trust fund represents IOUs that must be redeemed by immediately raising taxes, cutting spending, or running additional deficits. Obamacare is projected to increase federal spending by trillions of dollars over the next few decades. Small reforms like eliminating corporate welfare, ending foreign aid, or repealing the 2001 and 2003 tax cuts for upper-income families would close merely a small fraction of the long-term debt.
In reality, the CBO estimates that the absence of fundamental entitlement reform would push the debt to levels that would create an economic catastrophe.[2]
Myth #5: The House budget balances the budget on the backs of seniors.
Fact: Current and near-retirees are exempt from reforms.
Much of the attention given to the House budget has focused on the effects on retirees. However, virtually none of the $5.8 trillion in spending reductions in the first decade would affect Social Security and Medicare. In fact, seniors would benefit from averting the large tax increases planned in current law and from tax reforms that lower their rates while closing unneeded loopholes. Those currently older than age 55 would be exempt from any future changes to their Social Security and Medicare benefits.
Myth #6: The House budget would privatize Medicare and hand seniors vouchers.
Fact: Seniors would receive government support to purchase health insurance coverage on a tightly regulated government exchange system.
A “voucher” is usually a certificate of specified cash value that is redeemable for the purchase of goods or services. Under Ryan’s House budget plan, seniors would instead choose health plans and the government would make direct and adequate contributions to the premium cost of the plans of their choice. This “premium support” would go to Medicare-certified and -regulated plans that would compete in a Medicare “exchange,” which Ryan himself has described as “tightly regulated.”
In effect, this premium support system is broadly similar to the kind of system that Members of Congress and federal employees and retirees enjoy today in the widely popular and successful Federal Employees Health Benefits Program (FEHBP). As for “privatization,” virtually all participating Medicare doctors and hospitals (except public hospitals) are private, a quarter of all seniors are enrolled in private plans in Medicare Advantage, and 60 percent of seniors already purchase drug benefits through private plans in Medicare Part D. So, in effect, the House budget proposal extends the successful Part D financing model to the coverage of benefits under Parts A and B.[3]
Myth #7: Medicare is more efficient than private health insurance.
Fact: Medicare’s administrative burdens are hidden and they outweigh private-sector costs.
On paper, Medicare’s administrative costs compared to the private sector appear comparatively small: 2–3 percent of benefit expenditures. Even accounting for radically different patient profiles and functions of Medicare and private insurance, administrative costs per person under Medicare compared to private insurance plans shows that Medicare’s administrative costs exceed those of private health insurance.[4]
Furthermore, Medicare’s administrative costs do not include the enormous costs of provider compliance with massive Medicare red tape and paperwork. A 2001 PricewaterhouseCoopers study showed that for every hour spent treating a typical Medicare patient, hospital officials spent 30 minutes complying with Medicare paperwork.[5]
One administrative cost that is often overlooked is the tens of billions of dollars annually of Medicare waste, fraud, and abuse. In sheer volume, there is no comparable cost in the private sector or in the FEHBP. Private insurers have strong incentives to detect fraudulent claims, as undetected fraud hurts their bottom lines.
Myth #8: The House budget plan would end Medicare as we know it.
Fact: Obamacare ended Medicare as we know it.
Obamacare imposes record-breaking payment cuts for Medicare providers—plus an unprecedented hard cap on Medicare spending to be enforced by the newly created Independent Payments Advisory Board, an unelected board of bureaucrats empowered to lower provider payments to preordained levels indexed to inflation and economic growth. This will ensure rationing of care through provider payment cuts.[6]
Furthermore, under Section 3021 Congress tasks the new Center for Medicare and Medicaid Innovation with transitioning from the current fee-for-service reimbursement system toward capitated or salary-based reimbursements. This would literally be the end of traditional Medicare fee for service “as we know it.”
Both the House and Obama proposals impose external spending caps on Medicare. But the House proposal aims to control costs primarily through intense market competition—not just deeper payment cuts for Medicare providers—while preserving and enhancing the right of seniors to choose health care options.
Myth #9: The House budget plan would shift Medicaid costs to the states and hurt the poor.
Fact: Medicaid block grants would help states lower Medicaid costs and provide them with the flexibility to better serve the poor.
The House budget plan would remove the perverse incentives resulting from the open-ended federal reimbursement of state Medicaid spending. The block grant proposal would provide greater budget certainty at the federal and state levels. In addition, states would have greater flexibility and greater incentives to reduce costs. The proposal would also encourage states to spend their Medicaid dollars wisely and to consider innovative ways to deliver better care at lower costs.[7]
Myth #10: Most Medicare costs would continue to rise, and retirees would bear those costs with insufficient assistance.
Fact: Intense market competition would reduce costs and enable Medicare patients to secure value for their dollars.
Projecting far into the future, CBO predicts that under the House budget proposal the government’s share of retirees’ health care costs would decrease from currently about 70 percent to just 32 percent by 2030.[8] But that static analysis assumes that—despite a major change in economic incentives and intense market competition—health care costs will not be reduced. Behavioral responses to such powerful new economic incentives should not be ignored; experience with such changes proves otherwise.
Just What the Doctor Ordered
The House budget finally puts the brakes on soaring government spending.[9] It is just what the nation needs in order to avert a debt-induced economic calamity. Its critics would do well to read the plan and understand it—and put forward their alternative—before dismissing it.
Send it around.
Too many folks just close their eyes and listen tot he msm lie about the House plan because they don’t want to think about it or can’t understand it.
It may not be the best plan but its way better than the mess we are in now which is soon to be further complicated by full blown zerocare.
It’s still just rearranging deck chairs on a socialist Titanic.
Not nearly enough.
And it still ignores the 800-pound gorilla in the room, which is the fact that a good portion of the spending (which is the real problem, after all) remains unconstitutional.
The part that makes it harder to swallow is ironically it's political gimmick by having a single age threshold. :
“ Those currently older than age 55 would be exempt from any future changes to their Social Security and Medicare benefits. “
This is sometimes stated by Republicans : "Those over 55 and current seniors are protected from..." . The unpleasant reality is that seniors do not make up a desireable risk pool for private insurance companies, they would all be high risk. So this gimmick is intended to keep those over 55 from opposing the plan by making them lottery winners.
A (slower) phased in approach that affects everyone retired would be have been a better proposal.
sfl
This is similar to what happened at a company I worked at. They decided to phase out the old retirement plan (medical plus pension) for some employees who had not been there long enough or were not old enough. They tried to sell the "new, improved" plan (no pension but they got a lump sum fund to cover all future medical expenses) as better because it was portable, but quite a few were unhappy. The ones who did not qualify for the old plan found some lawyers (more likely the lawyers found them) for a class action suit (even though they had signed away such rights when they started), and eventually some of them got the old plan (probably out of court settlement because the company wanted to stop the torture of endless litigation and bad press).
Obviously, suing the fed. government wouldn't help unless Obama was able to pack the SCOTUS with some bizarre characters.
It would have been fairer, but I think it would have been at least as difficult politically at this time. The obvious question is how broke we will have to be before reality dawns on enough voters. I say "enough" voters because some of them will always believe that "taxing the rich" will solve the problem, and some believe that borrowing can increase forever.
You are getting a bit off-track here. The Federal government can discriminate on who it gives benefits to, and taxes, based on current law. It is an expert at that.
This reform is a political battle because it has to be passed into law by those elected, and who generally would like to be re-elected. There are some who advise congressional Republicans to forget about re-election and “ Do the right thing ”(vote for the Ryan plan.) But if they cant explain or defend it very well how can they be sure it's the right thing? Clinton and obama told House Democrats that voting for Obama-care was ‘the right thing’ and would become more popular as time went on, "as soon as it passes we will find out what's in it" Pelosi's famous words. Boehner’s response :” Democrats are ignoring the will of the American people ”. It's a tough game.
The single 55 year old threshold is a gimmick. A better political gimmick? Make the threshold 30 years old. Those people wont fight it.
2007 to 2008 Republicans were is a (political) lose-lose situation, no credit, all blame. But the 2009-2010 Democrat majority and WH provided Republicans with easy win-wins by opposing nearly everything. Taxes were easy, if Obama raised them Republicans won, if Obama caved on taxes Republicans won too.
But 2010-2011 Democrats mainly Obama seems to have quickly taken back the political advantage. By losing on tax increases Obama can continue to claim that they would fix the deficit, heal the economy, fund entitlements, heal the sick, fix climate change, cure cancer. etc. And what do we have to counter? The GWB record?
Republicans cannot (go along with) raising any taxes themselves, it's not an option for them and Democrats can no longer do it on their own to get the blame. When Dems could raise the taxes they claim they want now they wouldnt, but you never hear congressional Republicans ask why.
2007 to 2008 Republicans were in a (political) lose-lose situation, no credit, all blame. But the 2009-2010 Democrat majority and WH provided Republicans with easy win-wins by opposing nearly everything. Taxes were easy, if Obama raised them Republicans won, if Obama caved on taxes Republicans won too.
But 2011 Democrats mainly Obama seems to have quickly taken back the political advantage. By losing on tax increases Obama can continue to claim that they would fix the deficit, heal the economy, fund entitlements, heal the sick, fix climate change, cure cancer. etc. And what do we have to counter? The GWB record?
That would be an improvement over what we have now, but
1) Can we keep increasing the amount we borrow for 25 years, to make up for all the underfunded retirees?
2) 30-year-olds would now be the ones who missed the boat, but will be paying for the boat and the interest on the boat. There would be some discontent.
My first 2 comments:
1) Can we keep increasing the amount we borrow for 25 (actually I think it would be 30 or more) years, to make up for all the underfunded retirees?
2) 30-year-olds would now be the ones who missed the boat, but will be paying for the boat and the interest on the boat. There would be some discontent.
This leads to #3:
3) Unless this was a constitutional amendment, 30 years from now, in 2041, when the current 30-year-olds became 60 years old, couldn't congress change the threshold to be the those who were 30 years old in 2041?
Does this become a political application of Zeno's Paradox (LINK)?
Go back and read what I saying. I was saying changing the threshold to 30 was a better political gimmick than 55, not that it was a plan to solve anything.
The 55 gimmick was added to the Ryan bill to :
1) Make those over 55 lottery winners who will hopefully support the bill to ‘save the country’, and get a much better deal than those affected (see. you can have your cake and eat it!).
2) So no-one will be directly affected (adversely) anytime such that they might be able to voice their dissatisfaction at the polls against those that passed it, if it ever became law, By 2021 no one would remember how it got passed, which is the plan apparently.
My sarcastic idea is just as good as another bill that will never be law.
Thanks sickoflibs.
Kill Obamacare and trade lower tax rates for eliminations of all Tax deductions.
(The Government should not be trying to drive economic choices, too much of American business is about finding ways to avoid taxes rather then being more productive.)
If the Democrats can’t sallow the pill let them run the Government on revenue. Tell them we don’t care about a goverment shutdown, or even about failing to pay for the debt obligations they incurred for us.
There is something to be said for needing people to stop lending the Federal Government money. If we keep paying them back they will keep lending us more and more money continuing to make our situation progressively worse.
Here’s my own list:
Myth #1: The Ryan Plan will prevent a collapse of the US dollar because it brings down the deficit fast enough. False.
Myth #2: The Ryan Plan will balance the budget. False. Not even remotely close.
Myth #3: The Ryan Plan will solve the entitlement programs’ unfunded liabilities. False. Again, not even close.
The worst thing about the Ryan Plan is that the GOP and supporters of the Ryan Plan will take on an expensive political fight for results that are timid and insufficient. At the end of the Ryan Plan, we’re still running up ever-greater national debt, we still have an unsustainable structural deficit and there is no path, nor any plan for a path, to a balanced budget.
Although I agree with you in principle, there is a sad reality of politics in that; the majority of the voting public are not intellectuals or patriots.
Voting realties:
1) what’s in it for me?
2) what’s in it for me?
3) can it be summarized in 6 seconds or less?
I believe some move to the right is preferable to a fast track to the left. (complete centralized federal control)
Mr Ryan’s plan is better than anything proposed mainsteam and digestable that I have seen.
Let’s keep fighting.
It’s essential.
God bless
for later
That's more like the presidential election campaign.
The case of fixing the deficit is the mirror image of that argument:
1) “ How are you going to screw me?
2) “Why can we afford to give that OTHER guy something when you are claiming you have to take mine away.
A single abrupt change like that with a simple 55 year old threshold would have real practical problems for those affected, under 55.
Politically Republicans brought some of this on themselves by running last years election on ‘protecting medicaid benefits’ then getting in office acting like they have a mandate to remove them.
At a press conference yesterday, House GOP freshmen, led by Rep. Adam Kinzinger (R-IL), called on President Obama to stop the “MediSCARE” tactics that Washington Democrats have used to demagogue the new House majority’s plan to protect Medicare for current retirees, and preserve the program for future generations.
House GOP Freshmen Call on President Obama to Stop the MediSCARE Tactics (Seaker GOP website on May 12, 2011)
Republicans have lately intensified their health-care message toward the elderly. The Republican National Committee's “bill of rights” includes calls to “protect Medicare,” “prohibit efforts to ration health care based on age” and “ensure seniors can keep their current coverage. ”
GOP Pushes Health ‘Bill of Rights’(FR post of Washington Post ^ | 8/25/09 | Ben Pershing )
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