A plan being sold to the public as a “serious” attempt to reduce the federal deficit would cut the budget gap by just one-seventh of one percent over the next decade.
May 31, 2011
Photo Credit: Wikimedia
The Republican budget plan is the purest expression of the Right's longstanding desire to dismantle the social safety net. It's not about the budget deficit—that's simply a premise -- it's the "Shock Doctrine" in action.
How radical is it? According to an analysis by the non-partisan Center for Budget and Policy Priorities (CBPP), the plan would slash all public spending other than Social Security, Medicare and Medicaid by almost three-quarters by 2050. And because the “budget does not envision defense cuts in real terms,” what this means is that “most of the rest of the federal government outside of health care, Social Security, and defense would cease to exist.”
It's the epitome of anti-tax zealot Grover Norquist's fantasy of shrinking the government down to a point where he could “drown it in a bathtub.”
And it's not just a matter of bait-and-switch; the entire proposal is a fraud. Just consider this: while selling their plan to the public as a “serious” and “bold” attempt to reduce the federal deficit, Republicans are overstating how much it would cut the budget gap by ten-fold.
That's right, Rep Paul Ryan, R-Wisconsin, says his plan would reduce the deficit by $160 billion per year over the next decade, but it actually trims just $15 billion per year over that period – which is next to nothing in the context of budgets that run well over $3 trillion. To put that figure in perspective, it represents less than half of the spending cuts proposed by Barack Obama for next year; the average savings would have reduced this year's deficit by just one measly percent.
Yet despite that simple mathematical truth, media outlets like CBS mindlessly report that the GOP's budget “would reduce the deficit by $4.4 trillion over ten years.” How did the media get so thoroughly duped? According to CBPP, Wisconsin Rep. Paul Ryan's staff inflated the cuts in spending by $1.5 trillion over the next decade (which still doesn't get to CBS' claimed savings -- reporter Jill Jackson apparently looked at the spending cuts but didn't factor in the plan's reduced tax revenues). First, they took credit for the costs of the Iraq and Afghanistan conflicts decreasing with previously planned troop withdrawals that have nothing to do with the GOP's budget plan– something Ryan himself criticized the White House for doing in its own budget projections. Then they made a “math error” that exaggerated how much we'd save in interest payments by $230 billion over the next decade – a number significantly higher than the amount of deficit reduction they'd get out of the plan. Oops!
After 10 years, the deficit reduction gets bigger, but largely by sticking seniors with more health-care costs (as discussed below), and through unspecified “tax reforms” that are supposed to raise revenues. The GOP promises to create and pass some sort of tax scheme sometime over the next decade, but they've also sworn not to increase taxes in order to balance the budget and history suggests they'd fight tooth-and-nail to block such a measure. Again, we see a scam packaged as a “brave” budget proposal.
Make no mistake, however – while the plan's deficit reduction is largely fantasy, the pain it would impose on working America is very real. Almost two-thirds of the $4.5 trillion in spending cuts over the next 10 years come from programs that help those with lower incomes. Another big chunk of “savings” doesn't save any money at all – according to the Congressional Budget Office (CBO), the GOP's Medicare privatization scheme would increase the cost of the program by upwards of 40 percent, but it would sharply cut the tab the government picks up, instead shifting the burden onto older people themselves.
CBO tells us a “typical senior” in 2022 would face more than twice the health-care costs under the GOP plan than under Medicare as it exists today. The Republicans, having been burned badly by Bush's attempt to privatize Social Security, largely left it alone, but as Daniel Marans of Social Security Workspoints out, the plan “creates an unprecedented new fast-track procedure to ram through Social Security benefit cuts.”
You may be wondering how it's possible that a budget which cuts so much public spending barely touches the deficit. The answer is simple. The GOP's plan would not only make the “Bush tax cuts” permanent – CBO says if they don't expire on schedule those cuts will represent the biggest contributor to the deficit going forward – it goes further still, reducing the top marginal tax rate (paid only by multi-millionaires) to its lowest level since the mid 1930s, before the New Deal was established. It would slash the top rate paid by corporations by almost 30 percent, and it would also repeal a small surcharge high earners pay into the Medicare system. As CPBB notes, the tax proposals “place a top priority on cutting taxes for high-income people, while doing nothing to reduce budget deficits, themselves.” It's basically a wash, simply redistributing more of the nation's wealth to those at the top of the economic heap.
Slashing taxes on top earners and corporations can make sense in certain circumstances, but it's nothing short of lunacy in our current situation. That's because, contrary to the popular and longstanding Republican talking-point, we have a revenue problem, not a spending problem. The federal government collected taxes equaling 18.5 percent of our economic activity, on average, ever since World War II. Under Ronald Reagan, it averaged 18.2 percent. But over the past three years, the government took in just under 15 percent, the lowest level since 1950, before Medicare was enacted.
As I noted in April, while our corporate tax rates are high on paper, corporations have successfully lobbied for so many shelters and loopholes that, expressed as a share of GDP, American firms paid less than those in all of the other affluent countries in 2008 (we tied with Turkey for the bottom spot). And in 2011, they'll pay almost a third less than they did that year, according to former Reagan adviser Bruce Bartlett.
It's no wonder Americans don't like the plan – and they hate it when they learn the details. Newt Gingrich has never been more correct than when he characterized it as right-wing “social engineering.” But the real crime has been committed by the corporate media-- not only for calling the plan “courageous” and “serious,” but for referring to it in the context of deficit reduction in the first place.
Joshua Holland is an editor and senior writer at AlterNet. He is the author of The 15 Biggest Lies About the Economy (and Everything else the Right Doesn't Want You to Know About Taxes, Jobs and Corporate America)
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