Thursday, April 14, 2011

Obama versus Ryan

Let's be clear - I am not enamored of Obama's deficit reduction plan and budget for 2012. While the message and philosophy of his speech was honest and fundamental to promoting "the general welfare" of the United States, the plan falls short in several areas of necessary spending cuts and tax revisions. However, while Obama's plan disappoints me, Ryan's plan is, in my opinion, far worse. The Path to Prosperity is a specific budget cutting proposal, no doubt. However, the assumptions it makes about future growth and prosperity are ideological and naive at best, but more likely reckless.

The audacity of crying bankruptcy and slashing social spending is simply wrong when it is being balanced by $4 trillion in tax cuts. If the problem is being broke and not having enough money, the answer is most definitely not to cut revenue further. Of course, the Ryan plan is taking that course on the misguided notion that the US can't tax the "job creators" as Colorado representative Mike Coffman calls them. Keeping the 01/03 tax cuts has no definitive impact on job and economic growth. It simply doesn't. That ideology has been discredited time and again. Increased demand grows jobs, and investors create new businesses whenever they want. There is no shortage of investment capital right now, and no shortage of business who could hire people. And it's not taxes that are preventing that from happening.

Obama's plan on the other hand is not clear enough on the tax increases that need to happen. But the deductions problem is pretty clear. Deductions are meant to ease the tax burden of people whose living allowance margin is thin. And the more deductions they have, they greater chance they will buy a house or purchase consumer goods. That's simply not the case with people earning more than a million dollars. They need no incentive to spend their extra cash. They spend whenever they want. Arguing that fewer deductions means these people have less money to hire people and start business is simply wrong and ideologically bullheaded.

Thus, I predict that Obama can win the next election with this plan - and I think the Democrats can even take back some lost seats. But that doesn't mean I think it's a great plan. It's simply not the disaster that Mr. Ryan presents. As I've noted before, you can't trust economic policy from a man who rants about the high corporate tax rates and seems willingly naive to the idea of corporate tax deductions.

1 comment:

abellia said...

The government is not "broke". Nor will it ever become broke unless it wishes to cease existing.

Both plans seem to have fallen pray to fear-mongering and misunderstanding on the part of pretty much everyone. The plans worry about some numbers that they _think_ will lead to pain for people in the future. But their logic is totally flawed. Government debt is a choice made by people who don't much understand that they have the right to create money. If you could create money, would you borrow money that you could otherwise simply create? I sure wouldn't.

The real tragedy is that people who want to work are sitting at home when there is work to be done that could benefit our society. The real tragedy is that people go without healthcare who need it for lack of money (which the government can create at will). I could go on, but you get the idea.