Monday, November 7, 2011

Samuelson Busts Budget Myths

While I don't feel good about any options for repairing the budget - and I'm still torn between which party I think is more screwed up - I do know what I think about the current budget mess and the shameless campaigning that is going on regarding it. Robert Samuelson of the Washington Post voices my sentiments exactly on this catastrophe today in the Washington Post

Among Samuelson's many - and obvious - insights:

... Many government programs deserve the ax. I’ve railed against some for years: farm subsidies (food would be produced without them); Amtrak (it is non-essential transportation); public broadcasting and culture subsidies (these are unaffordable frills); community development block grants (they generally don’t enrich poor communities).

Entitlements — mainly Social Security and Medicare — should be trimmed. I’ve also made that a crusade. We need higher eligibility ages to reflect longer life expectancies. Wealthier retirees should receive less Social Security and pay more for Medicare.

But plausible savings don’t match conservative rhetoric. All the suspect “discretionary” programs come to tens of billions, not hundreds of billions. Culture subsidies total about $1 billion annually; community block grants in 2010 were $4 billion. Meanwhile, total federal spending was $3.5 trillion. Do conservatives really want to eliminate the national parks? The FBI? Highways? Food inspections?

And, of course, this:

Contrary to liberal dogma, the rich already pay plenty of taxes. Indeed, they pay for government. In 2007, the richest 1 percent of Americans paid 28 percent of all federal taxes; the richest 10 percent (including the 1 percent) paid 55 percent.

For most millionaires, federal tax rates — the share of income taxed — exceed 30 percent. Some rich have lower rates. Raising these rates is justified but wouldn’t balance the budget. The plan by Senate Majority Leader Harry Reid for a 5.6 percentage point surtax on incomes exceeding $1 million would raise an estimated $453 billion over 10 years. Deficits over the decade are realistically projected at $8.5 trillion.

As for the Pentagon, the military was cut sharply after the Cold War. Combat forces are half to two-thirds of 1990 levels. Defense spending as a share of national income is headed toward its lowest level since 1940.

What liberals don’t say is this: Unless Social Security and Medicare benefits — the bulk of the budget — are reduced, we face three dismal choices. Huge, unsustainable deficits. Massive tax increases on the middle class, as high as 50 percent over 10 to 15 years. Or draconian cuts in the discretionary programs that liberals accuse conservatives of wanting to gut.

And, so, we are left with a super-committee that will, by most accounts, accomplish nothing. Where have you gone Tip O'Neill/Ronald Reagan?


Mike Thiac said...

It's not where have you gone Tip/Ron, but where have you gone Newt/John (Kasich). They were the ones who forced Clinton to present a budget plan that balanced within 7 years.

Now Mr Samuelson has some legit points (NPR is something we cannot afford) but the extract you present shows nothing of what has to happen. You must reform Social Security into a form of "mandated IRA" where the Congress cannot get it's hands on the money. Medicaid needs to be retired to the stats and Medicare needs legit reform (make it for people who cannot afford their own medical care...there is no reason I'm paying for a rich liberal's health care). Concurrent we need to rip Obamacare out by the weeds and put in legit medical reform, i.e. market based solutions. And as we do all of this eliminate the bureaucracy that is supporting such a massive waste of funds.

mmazenko said...

It's Tip/Ron because they compromised a lot on revenue and spending. And you give Newt too much of the credit - especially after he railed against Clinton's tax rates and said they would lead to a catastrophic financial meltdown - they didn't and those revenues helped balance the budget. Of course, so did all the deficit spending by American consumers.

The IRA or national 401k is a great idea - but as the stock market meltdown proved, we must still have a defined contribution that the govt can use to provide consistent retirement supplement, or you would have seen tens of millions more thrust into poverty. Sure it would be their fault - but they'd still be a drain on the system that we can't afford.

Medicaid needs federal assistance, just like the schools because no states produce enough revenue to fund it - but it needs heavy regulation and review. And the ACA must not be ripped up because we need the provisions about child's health care, preexisting conditions, lifetime maximums, and the inability of companies to drop paying customers when they get sick.

Don't say repeal it because those components might not pass again. And the GOP has no clear plan. Just eliminate the problem clauses.