April 11, 2011 10:13 am ET
With a government shutdown narrowly averted this weekend, the Sunday shows focused naturally on spending issues. On CBS, Sen. Jeff Sessions (R-AL) made the absurd assertion that government spending caused the recession (and not rampant fraud on Wall Street), and falsely claimed that a balanced budget amendment would help our fiscal situation. On Fox, Rep. Eric Cantor (R-VA) repeated a favorite GOP lie about entitlement programs — that they "are not gonna be there for me when I retire" unless voters allow conservatives to rip holes in the safety net. And on NBC, Rep. Paul Ryan (R-WI) misled viewers about his budget proposal that would undo safety net programs like Medicare, Medicaid and food stamps while cutting taxes for the richest Americans and protecting special interest tax loopholes for Big Oil. Meanwhile on ABC, Rep. Mike Pence (R-IN) seemed to have forgotten that he voted in February to eliminate all Title X funding for family planning services.
CHRIS WALLACE (host): Are you prepared, you the Republicans, prepared to go to the voters next fall and say, stand here right now and say, we will cut entitlements?
REP. ERIC CANTOR: Yes, Chris, because what we've said and what the Ryan budget calls for are spending targets. And the way we get to spending targets is both on the discretionary and the mandatory side of the ledger. As we know, the unfunded obligations on the entitlement programs are really what are so daunting. [...] I know that those programs are not gonna be there for me when I retire, just like everyone else 54 and younger. They can't. We cannot sustain that kind of trajectory.
Brookings: Other Than Medicare And Medicaid, Entitlement Program Costs Will Only Rise "Negligibly" As Share Of The Economy. From the Brookings Institute: "Here is what the projections indicate. Over the next four decades, government spending on all entitlement programs other than Medicare and Medicaid will increase negligibly as a share of national output-by only about 1 percentage point of GDP. That change is the difference between a projected increase of roughly 2-percentage points in the share of income going to pay social security benefits and a nearly 1-percentage point drop in spending on other non-health entitlements." [Brookings.edu, 2/23/09]
Brookings: Health Care Spending Is Projected To Grow To 37 Percent Of GDP By 2050 Because Of 'Ever Larger' Costs Of "Lengthening Menu" Of Treatment Options. From the Brookings Institute: "Meanwhile, Congressional Budget Office projections indicate that national health care spending will skyrocket, rising from 16 percent of gross domestic product to 37 percent by 2050. Aging of the baby-boomers explains some of the increase-the old cost more to care for than do the young-but not much. If population aging were all that is going on, national health care spending would rise by less than a quarter as much as current projections indicate. Most of the increase is expected to come from the continuing-and, on balance, highly beneficial-proliferation of new ways to diagnose and treat disease. This lengthening menu has caused health care spending to take every [sic] larger bites out of total income for more than four decades. The gap has averaged about 2.5 percentage points a year. That difference sounds small, but it has been inexorable and accounts for most of the projected increase in Medicare and Medicaid spending." [Brookings.edu, 2/23/09]
After One-Time Spending Increase In 2014, Costs Grow More Slowly Under The Affordable Care Act Than They Would Without Reform. According to the Washington Post's Ezra Klein:
[W]e're covering about 10 percent of the country and increasing spending growth by 0.2 percent. Seems like a good deal to me. But it's actually a better deal than that. Here's what the cost curve -- or maybe I should say cost line -- looks like:
What you're seeing here isn't the cost curve bending up. It's a one-time increase in the level of spending. That's the big jump in 2014, the year the exchanges and subsidies come online. So when you compare 2014 to 2013, spending growth seems like it's gone up a bunch. But by 2016, we're back to normal. In fact, we're better than normal [according to a September CMS report]: "For 2015-19, national health spending is now projected to increase 6.7 percent per year, on average -- slightly less than the 6.8 percent average annual growth rate projected in February 2010."
In other words, 2014 is a one-time increase in spending level as we get 30 million new people covered. After 2014, costs grow more slowly than they would without the health-care reform bill. [Washington Post, 9/10/10, emphasis added, parentheses added]
Social Security Trustees: Trust Fund Sufficient To Pay Full Benefits Through 2036, 78 Percent Of Benefits Thereafter. According to the Social Security Board of Trustees: "The projected point at which the combined Trust Funds will be exhausted comes in 2037 - the same as the estimate in last year's report. At that time, there will be sufficient tax revenue coming in to pay about 78 percent of benefits." [SSA.gov, 8/5/10]
The Post-2037 Funding Shortfall Is Predicted To Be Less Than 1% Of GDP. According to the Economic Policy Institute: "Social Security spending as a share of the economy is projected to decline after the Baby Boomer retirement, leveling off at around 6% of GDP; this is a little more than 1 percentage point above current revenues as a share of GDP. The Social Security actuaries have projected that an increase in revenues equal to just 0.6% of GDP will be sufficient to cover promised benefits over the 75-year planning period because of the savings built up in the trust fund." [EPI.org, 8/6/10, citations removed for clarity]
The 75-year Social Security shortfall is about the same size as the cost, over that period, of extending the 2001 and 2003 tax cuts for the richest 2 percent of Americans (those with incomes above $250,000 a year). Members of Congress cannot simultaneously claim that the tax cuts for people at the top are affordable while the Social Security shortfall constitutes a dire fiscal threat.
Currently, Social Security Payroll Taxes Are Capped So That High Earners Only Pay Payroll Tax On First $107,000 Of Pay. From the National Academy of Social Insurance: "Benefits are financed by mandatory contributions paid by workers and matched by their employers, by income taxes paid on Social Security benefits, and by interest on Social Security reserves. The contribution rate for both workers and employers is 6.2 percent of earnings up to a cap ($106,800 in 2009)." [NASI.org, October 2009]
Current Payroll Tax Cap Is Significantly Lower As A Percentage Of Total Earnings Than Its Traditional Level. From the National Academy of Social Insurance: "In 2009, only earnings up to $106,800 are taxed and counted toward workers' future Social Security benefits. About 6 percent of all workers earn more than the cap. The cap is indexed to keep pace with the growth in average earnings of all workers. In the past, Congress set the level of the cap to cover 90 percent of the aggregate wages of all workers. Today, it covers only about 83 percent of such earnings. The decline occurred because those at the top of the economic ladder (who make more than the cap) have enjoyed more rapid growth in earnings than those who make less than the cap." [NASI.org, October 2009, internal citations removed for clarity, emphasis added]
Removing The Payroll Tax Cap Would Eliminate Funding Shortfall Over 75-Year Period. From the National Academy of Social Insurance:
Option #8a: Eliminate the Cap - Do Not Count the Additional Earnings toward Benefits. If all earned income above $106,800 a year were subject to Social Security contributions, but those earnings did not count toward benefits, Social Security would be solvent throughout the long-range projection period. Making this change in 2010 would be more than enough to eliminate the 75-year deficit. With this change, workers who earn far more than the tax cap would pay considerably more in taxes. For example, a person making $400,000 per year would pay $18,178 per year more and his or her employer would pay a matching amount, for a total increase of $36,356. The worker's maximum benefit would be no higher than under current law. Ever since Social Security began, all wages that are taxed have counted toward benefits. This proposal would break that traditional link.
Option #8b: Eliminate the Cap - Count the Earnings toward Benefits. If all wages above $106,800 in 2009 were taxed and counted toward benefits, the change would almost make Social Security solvent through the long-range period, eliminating about 95 percent of the 75-year shortfall. While high earners and their employers would pay considerably more, these top earners would also receive much higher benefits. [NASI.org, October 2009, emphasis original]
REP. ERIC CANTOR: The Medicaid reductions [in Rep. Paul Ryan's budget proposal] are off the baseline, and so what we're saying is allow states to have the flexibility to deal with their populations, their indigent populations and their health care needs, the way they know how to deal with them....We believe that if you put in place the mechanisms that allow for personal choice as far as Medicare is concerned, as well as the programs in Medicaid, that we can actually get to a better result, and do what most Americans are learning how to do, which is to do more with less.
Ryan Budget Cuts $750 Billion From Medicaid. From a USA Today story on Rep. Ryan's budget proposal: "Medicaid, the federal-state program covering more than 50 million low-income Americans, would be turned over to the states and cut by $750 billion over 10 years, forcing lesser benefits or higher co-payments." [USA Today, 4/6/11]
Ryan Budget Turns Medicaid Over To States Via Federal Block Grants. From a USA Today story on Rep. Ryan's budget proposal: "It would turn Medicaid into a block grant to the states. That's the same approach used for welfare in the 1990s, when Republicans worked with President Clinton to change it from a program based on cash aid to one that demanded work. The federal food stamps program would be transformed the same way." [USA Today, 4/6/11]
Medicaid Block Grants Would Cap Federal Funding. From CBPP:
Under proposals to convert Medicaid to a block grant or otherwise cap federal funding, the federal government would no longer pay a fixed percentage of states' Medicaid costs. Instead, it would provide each state with a fixed dollar amount, with states responsible for all remaining Medicaid costs. Block-grant proposals vary on how this fixed amount would be determined, but typically a national Medicaid spending allotment would be set each year and a formula would determine each state's share of that allotment...These national or state allotments would be adjusted annually in order to reflect factors like growth in population, economic growth, or inflation; based on past block grant proposals, such adjustments likely would be only partial adjustments. [Center on Budget and Policy Priorities, 2/23/11, emphasis added]
Block Grant Financing Would Mean Restricting Medicaid Enrollment, Eligibility And Benefits. From CBPP:
As a state's block-grant amount became increasingly inadequate over time, states would likely make up for the shortfall, at least in part, by exercising the greater flexibility they would be given to restrict enrollment, eligibility, and benefits. These cuts would likely become deepest at times when individuals and families most need Medicaid, such as during a recession.
Such cuts could be devastating for tens of millions of low-income Medicaid beneficiaries. For example, states might be given flexibility to cap Medicaid enrollment, leaving uninsured a substantial number of people whose low incomes would otherwise qualify them for Medicaid. Many current beneficiaries could also be made ineligible and end up uninsured, as states narrow coverage. [Center on Budget and Policy Priorities, 1/6/11, emphasis added]
Block Grant Financing Would Also Lead To Reducing Provider Rates. From CBPP:
States facing inadequate block grant funding would also likely have to further scale back provider rates. These rate reductions likely would apply not only to hospitals, nursing homes, physicians, and pharmacies in Medicaid fee-for-service but also to managed care plans that currently serve low-income children and their parents. That, in turn, could cause some providers and plans to withdraw from Medicaid, threatening beneficiaries' access to needed care, particularly in communities - such as rural areas - that already are underserved. It also would place greater pressure on providers such as community health care centers and safety-net hospitals, which rely on Medicaid funding but which would face increased patient needs because of increases in the numbers of uninsured individuals if Medicaid enrollment were capped and eligibility restricted under a block grant. [Center on Budget and Policy Priorities, 2/23/11]
SEN. JEFF SESSIONS: You could have a two-year budget for example instead of one, I think that would help. We can put statutory caps on spending. We can have a balanced budget constitutional amendment, that failed by one vote about a decade ago. So I think there are a number of serious things of that nature that we must confront.
A Balanced Budget Amendment Would "Make Economic Recessions Worse" By Forcing Spending Cuts During Downturns. According to former Reagan domestic policy advisor Bruce Bartlett: "A BBA would force the federal government to make economic recessions worse. Since federal revenues fall and spending rises automatically in economic downturns, it would force spending cuts and tax increases at precisely the point when the economy is reeling, potentially turning a modest downturn into a depression." [Fiscal Times, 8/27/10]
A Balanced Budget Amendment Would Not Allow The United States To Respond To "Shocks." According to Economist Charles L. Schultze:
The combination of market adjustments and appropriate Federal Reserve policy can ensure that the absence of budget deficits, and indeed running a budget surplus of moderate size, will be consistent in the long run with the maintenance of high employment. In the short run, however, even the best run monetary policy cannot be expected to offset perfectly the aggregate demand consequences of substantial demand shocks. In particular, the mean lags of the effects of monetary policy changes on aggregate demand are long, and both the lag profile and the magnitude of those effects are variable and uncertain. Given the inherent difficulties in forecasting the appearance of shocks and in pinning down the time profile and magnitude of responses to monetary policy, the monetary authorities will be neither willing nor able to provide full offsets.
By prohibiting even temporary budget deficits, the constitutional amendment, if enforced, would lead to a situation in which the automatic stabilizing features of the federal budget would be replaced by a procyclical pattern in which any initial falloff in aggregate demand would be reinforced by immediate federal spending cuts (or, less likely, given the structure of the amendment, tax increases). [National Tax Journal, "The Balanced Budget Amendment: Needed? Effective? Efficient?", September 1995]
Supermajority Vote To Increase Taxes Makes It Harder To Balance Budget. In an op-ed in US News and World Report, former Rep. Boehner staffer Scott Galupo wrote: "The amendment's additional requirement of a supermajority vote - two-thirds of both the House and Senate - to increase taxes gives the game away: If you're serious about balancing the budget, why would you make it much harder for Congress to balance the budget?" [US News and World Report, 8/10/10, emphasis added]
A Balanced Budget Amendment Would Be Self-Defeating, Causing A Loss Of "Congressional Authority." According to the CBO:
The adoption and implementation of a balanced budget rule or an expenditure limitation would result in loss of Congressional authority in two ways. First, these proposals, by their very nature, seek to reduce Congressional flexibility in budget-making. As previously stated, many critics of the present budget process see flexibility, particularly in determining fiscal policy, as the cause of many of America's economic problems. Others see fiscal policy as a central function of government, whatever are the imperfections in implementing it.
Second, a stringent budget rule would, in all probability, shift the responsibility for economic policy from the Congress to the Federal Reserve, the courts, and/or the President, or all three. As discussed in Chapter V, under a balanced budget rule, fiscal policy would largely be removed as a tool of discretionary economic policy, with increasing reliance placed on monetary policy. As such, Congressional authority over economic policy would decline while that of the Federal Reserve would increase. Under these circumstances, the Congress might choose to exert greater control over the Federal Reserve." [CBO, September 1982]
Law Could Put Congressional Budgetary Power In Hands Of Court. According to a CBO report on a Balanced Budget Amendment from 1982: "The courts would gain budgetary power because they might be asked eventually to enforce the prohibition against a possibly reluctant Congress. Several proposals, for example, include provisions stating who can sue whom in what court to enforce the proposed act." [Congressional Budget Office, September 1982]
For much more on the impacts of a balanced budget amendment to the Constitution, read our full fact check.
SEN. JEFF SESSIONS: The people out there who are unhappy with the way this Congress has spent our country into virtual deficit oblivion and put us in a recession, and they're demanding a change.
The Collapse Of The Housing Bubble Triggered A Banking Crisis That Lead To A Massive Recession. From Slate: "The only near consensus is on the question of what triggered the not-quite-a-depression. In 2007, the housing bubble burst, leading to a high rate of defaults on subprime mortgages. Exposure to bad mortgages doomed Bear Stearns in March 2008, then led to a banking crisis that fall. A global recession became inevitable once the government decided not to rescue Lehman Bros. from default in September 2008. Lehman's was the biggest bankruptcy in history, and it led promptly to a powerful economic contraction. Somewhere around here, agreement ends." [Slate, 1/9/10]
Complex Accounting Tricks By Wall Street Firms Contributed To The Magnitude Of The Recession. From Slate: "A bit farther down on the list are various contributing factors, which didn't fundamentally cause the crisis but either enabled it or made it worse than it otherwise might have been. These include: global savings imbalances, which put upward pressure on U.S. asset prices and downward pressure on interest rates during the bubble years; conflicts of interest and massive misjudgments on the part of credit rating agencies Moody's and Standard and Poor's about the risks of mortgage-backed securities; the lack of transparency about the risks borne by banks, which used off-balance-sheet entities known as SIVs to hide what they were doing; excessive reliance on mathematical models like the VAR and the dread Gaussian copula function, which led to the underpricing of unpredictable forms of risk; a flawed model of executive compensation and implicit too-big-to-fail guarantees that encouraged traders and executives at financial firms to take on excessive risk; and the non-confidence-inspiring quality of former Treasury Secretary Hank Paulson's initial responses to the crisis." [Slate, 1/9/10, emphasis added]
Bipartisan Financial Crisis Inquiry Commission Found The Financial Crisis Was Avoidable, Caused By Recklessness On Wall Street. From the Huffington Post: "In a report released today, the Financial Crisis Inquiry Commission found that 'reckless' Wall Street firms, an abundance of cheap credit and 'weak' federal regulators caused the crisis. 'This financial crisis could have been avoided. Let us be clear,' chairman Phil Angelides said at the Washington press conference marking the official release of the report. 'The record is replete with evidence of failures. None of what happened was an act of God.' Former California treasurer Angelides confirmed that the bipartisan panel appointed by Congress to investigate the financial crisis concluded that several financial industry figures appear to have broken the law and has referred multiple cases to state or federal authorities for potential prosecution. The report also revealed that Goldman Sachs collected $2.9 billion from the American International Group as payout on a speculative trade it placed for the benefit of its own account, receiving the bulk of those funds after AIG received an enormous taxpayer rescue, according to the FCIC." [Huffington Post, 1/27/11]
Subprime Mortgage Data Do Not Support Claim That Government Actions Triggered Crisis. Barry Ritholtz, who wrote the book Bailout Nation about the housing bubble and ensuing financial crisis, reports:
Federal Reserve Board data show that:
-More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions.
-Private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year.
-Only one of the top 25 subprime lenders in 2006 was directly subject to the housing law that's being lambasted by conservative critics. [The Big Picture, 12/16/10]
All Four Republican Commissioners Of The Financial Crisis Inquiry Commission Voted To BAN Words Like "Wall Street" And "Shadow Banking" From The Report On The Financial Crisis. As the Huffington Post reported: "During a private commission meeting last week, all four Republicans voted in favor of banning the phrases 'Wall Street' and 'shadow banking' and the words 'interconnection" and 'deregulation' from the panel's final report, according to a person familiar with the matter and confirmed by Brooksley E. Born, one of the six commissioners who voted against the proposal." [Huffington Post, 12/15/10]
SEN. CHARLES SHUMER: Our [budget] is shared sacrifice across the board, and yours is just aimed at middle-class people.
SEN. JEFF SESSIONS: I deny that, that it's aimed only at middle-class people. [Face the Nation, 4/10/11]
REP. PAUL RYAN: With respect to the safety net, our goal is to repair the safety net, make it more sustainable. Safety net spending grows every year under this budget. [Meet the Press, 4/10/11]
Debt Commission Chairmen: Ryan's Budget Cuts To "Safety Net Programs" Would "Disproportionately" Affect "Disadvantaged Populations." In a statement calling Rep. Ryan's budget proposal "a positive step," the leaders of the president's National Commission on Fiscal Responsibility and Reform — former Sen. Alan Simpson and former White House Chief of Staff Erskine Bowles — wrote: "The plan largely exempts defense spending from reductions and would not apply any of the savings from eliminating or reducing tax expenditures as part of tax reform to deficit reduction. As a result, the Chairman's plan relies on much larger reductions in domestic discretionary spending than does the Commission proposal, while also calling for savings in some safety net programs - cuts which would place a disproportionately adverse effect on certain disadvantaged populations." [Simpson-Bowles Statement, 4/5/11 via The Hill]
CBPP: Two-Thirds Of Ryan's Spending Cuts Would Come From Programs Targeted At Low-Income Americans. According to the Center on Budget and Policy Priorities: "House Budget Committee Chairman Paul Ryan's budget plan would get about two-thirds of its more than $4 trillion in budget cuts over 10 years from programs that serve people of limited means, which violates basic principles of fairness and stands a core principle of President Obama's fiscal commission on its head. The plan of Erskine Bowles and Alan Simpson, who co-chaired President Obama's National Commission on Fiscal Responsibility and Reform, established, as a basic principle, that deficit reduction should not increase poverty or inequality or hurt the disadvantaged. The Ryan plan, which the chairman unveiled in a news conference, speech, and Wall Street Journal op-ed today, charts a different course, turning its biggest cannons on these people." [CBPP.org, 4/5/11, emphasis added]
Ryan Budget Cuts $2.9 Trillion From Medicaid, Low-Income Housing Support, Food Stamps, And Pell Grants For Low-Income Students. According to the Center on Budget and Policy Priorities:
Cuts in low-income programs appear likely to account for at least $2.9 trillion - or about two-thirds - of this amount. The $2.9 trillion includes the following three categories of cuts:
- $2.17 trillion in reductions from Medicaid and related health care. The plan shows Medicaid cuts of $771 billion, plus savings of $1.4 trillion from repealing the health reform law's Medicaid expansion and its subsidies to help low- and moderate-income people purchase health insurance.
- $350 billion in cuts in mandatory programs serving low-income Americans (other than Medicaid). The budget documents that Chairman Ryan issued today show that he is proposing $715 billion in cuts in mandatory programs other than Medicare, Medicaid, and Social Security, but do not specify how much will be cut from various programs (although they imply that cuts in the food stamp program will be large). In this analysis, we make the conservative assumption that savings from low-income mandatory programs (other than Medicaid) would be proportionate to their share of spending in this category. Thus, we derive the $350 billion figure from the fact that about half of mandatory spending other than for Medicare, Medicaid, and Social Security goes for programs for low- and moderate-income individuals and families. This likely substantially understates the cuts that the plan would make in low-income programs. The Ryan documents show that $380 billion in cuts would come from programs in the income security portion of the budget (function 600), and the overwhelming bulk of the mandatory spending in that category goes for low-income programs. The documents also show $126 billion in mandatory cuts in the education, training, employment, and social services portion of the budget (function 500), which, based on the discussion in those documents, would likely come mainly from cuts in the mandatory portion of the Pell Grant program for low-income students.
- $400 billion in cuts in low-income discretionary programs. The Ryan budget documents show that he is proposing $1.6 trillion in cuts in non-security discretionary programs, but again do not provide details about the size of cuts to specific programs. (The documents do identify some major low-income program areas, including Pell Grants and low-income housing, as prime targets for cuts.) Here, too, we make the conservative assumption that low-income programs in this category would bear a proportionate share of the cuts. Thus, we derive the $400 billion figure from the fact that about a quarter of non-security discretionary spending goes for programs for low- and moderate-income individuals and families. [CBPP.org, 4/5/11, emphasis original]
CBPP: Ryan Budget's Food Stamps Block Grant Proposal Would "Eliminate" Program's "Ability To Respond To Rising Need ... During Recessions." According to the Center on Budget and Policy Priorities: "Chairman Ryan's proposal to convert SNAP [Supplemental Nutrition Assistance Program, formerly called food stamps] into a block grant beginning in 2015 would seriously damage the program and cause harm to the millions of low-income Americans who rely on it. Although the chairman's proposal does not include details on how deeply the block grant would cut the program, a capped funding structure of the kind he proposes would largely eliminate SNAP's ability to respond to rising need, such as during recessions. In such times, states would be forced to cut benefits to some households or create waiting lists for needy families." [CBPP.org, 4/5/11]
Rep. Ryan's Proposal Would Make The Bush Tax Cuts Permanent. In his preliminary analysis, Ezra Klein of the Washington Post wrote that Rep. Ryan's plan "[p]revents the Bush tax cuts from expiring in 2013. So the revenue-neutral tax reform locks in today's rates, which is to say it makes the Bush cuts permanent." [Washington Post, 4/5/11]
Rep. Ryan's Proposal Reduces Top Income Tax Rate From 35 Percent To 25 Percent. According to page six of Rep. Ryan's budget proposal, the plan "[s]implifies the broken tax code, lowering rates and clearing out the burdensome tangle of loopholes that distort economic activity; brings the top rate from 35 to 25 percent to promote growth and job creation." [Rep. Ryan Budget Proposal, 4/5/11, emphasis added]
For more on why cutting taxes for the wealthy will not speed the economic recovery, click here.
Rep. Ryan's Proposal Relies On "Shifting More Of The [Tax] Burden To Working And Middle-Class Americans." According to Jay Bookman of the Atlanta Journal-Constitution: "Among other things, [Ryan] proposes to reduce the number of tax brackets from the current six, which would make the income tax flatter and less progressive. He also intends to lower the top tax bracket on individuals and corporations from the current 35 percent to 25 percent. Inevitably, such changes would have the effect of lowering taxes on corporations and the wealthy, while shifting more of the burden to working and middle-class Americans. When combined with the payroll tax, which Ryan concedes is a surtax on earned income below $106,000, a large number of working class and middle-class Americans would probably end up paying a significantly higher percentage of their income in federal taxes than their wealthier counterparts." [Atlanta Journal-Constitution, 4/6/11, emphasis added]
Rep. Ryan's Plan "Makes A Middle-Class Tax Hike Unavoidable." From the Center for American Progress:
Rep. Ryan's budget simply doesn't describe exactly how his tax plan would work, instead resorting to broad bullet points that conveniently skip over important details. [...] Which brackets are going to be consolidated? What will the new rate structure be? Which tax expenditures will be eliminated? Which will be limited and how? Rep. Ryan doesn't tell us. There is no plan here.
That's probably on purpose since any detailed description of his ideas for tax "reform" would reveal a massive tax hike for the middle class. For Rep. Ryan to cut the top rate by nearly one-third and still keep tax revenue the same as it would have been under President's Bush [sic] tax-cut regime means he's going to have to raise taxes somewhere else. And though he pointedly refuses to tell us where those tax hikes will come from, we can make an educated guess.
For one thing, the basic math makes a middle-class tax hike unavoidable. The rate cut at the top, of course, benefits only those in the top brackets (the richest 2 percent of Americans), but to pay for this, Rep. Ryan says he will "broaden the tax base." Broadening the tax base means removing some tax expenditures that currently benefit both the middle class and the rich-though remember that the rich are getting a huge rate cut. [Center for American Progress, 4/5/11]
REP. PAUL RYAN: Our plan pays off the debt. [...] This plan using CBO numbers gets the debt paid off so our children— you and I are the same age with the same age of children— we want to give our children a debt-free nation. That's what this plan does.
CBO Says That Ryan Proposal Would Increase Debt Over 10-Year Window. As reported by Talking Points Memo: "In addition to acknowledging that seniors, disabled and elderly people would be hit with much higher out-of-pocket health care costs, the CBO finds that by the end of the 10-year budget window, public debt will actually be higher than it would be if the GOP just did nothing. Under the so-called 'extended baseline scenario' -- a.k.a. projections based on current law -- debt held by the public will grow to 67 percent of GDP by 2022. Under the GOP plan, public debt would reach 70 percent of GDP in the same window. In other words, the spending cuts Republicans would realize in the first 10 years would be outpaced by deficit increasing tax-cuts, which Ryan also proposes. After that, debt projections under the plan improve decade-by-decade relative to current law. That's because 2022 would mark the beginning of the Medicare privatization plan. That's when, CBO finds, 'most elderly people would pay more for their health care than they would pay under the current Medicare system.'" [Talking Points Memo, 4/5/11, emphasis added]
CBO: Rep. Ryan Instructed Us To Use The Revenue Projections Underlying Our Deficit Estimates But Did Not Specify How Those Revenues Would Be Achieved. "The path for revenues as a percentage of GDP was specified by Chairman Ryan's staff. The path rises steadily from about 15 percent of GDP in 2010 to 19 percent in 2028 and remains at that level thereafter. There were no specifications of particular revenue provisions that would generate that path." [CBO.gov, 4/5/11, emphasis added]
National Journal: "Ryan's Projections Seem To Rely On Overly Optimistic Economic Projections." From the National Journal: "Ryan's projections seem to rely on overly optimistic economic projections culled from a conservative think-tank that's made similar projection mistakes before. He's also 'snuck in' an extension of the 2001/2003 tax cuts that will, as Slate's Jacob Weisberg put it, leave '$400 billion in annual deficits as far as the eye can see.'" [National Journal, 4/6/11]
Economics Experts Call Projections "Essentially Worthless," "Half-Baked," And "The Rosiest Scenario [Ryan] Could Get." As reported by Talking Points Memo: "The numbers stand in stark contrast to analysis from the independent Congressional Budget Office, the gold standard used by both parties to determine the costs of legislation, which shows an increase in the deficit's share of the economy in the plan's first decade thanks to its massive tax cuts and then much tougher financial burdens for seniors in future decades as their health care benefits dwindle. 'CBO is what they use on the budget side -- as a matter of procedure, any numbers from the Heritage Foundation or anybody else are essentially worthless,' Bruce Bartlett, a former Treasury official under President George H.W. Bush, said in an interview. 'You can assert whatever you want to assert, but you can always find some half-baked tax think tank that will make up any number you feel like.' 'The idea he'd go to Heritage for that kind of support indicates he didn't like what the CBO was going to tell him,' Stan Collender, a former budget aide for both the House and Senate, told TPM. 'This is the same guy who said his budget has no gimmicks in it turning to the rosiest scenario he could get.'" [Talking Points Memo, 4/6/11, emphasis added]
REP. PAUL RYAN: But we also— our tax reform plan goes in the same direction, which is get rid of all those special interest loopholes so you can lower tax rates. It's the higher income earners who use those special interest loopholes. Get rid of the loopholes, lower the rates, make our economy more competitive.
Rep. Ryan's Proposal Locks In $40 Billion In Tax Giveaways To Big Oil Companies. From the Center for American Progress:
House Budget Committee Chair Paul Ryan's (R-WI) proposed FY 2012 budget resolution is a backward-looking plan that would benefit big oil companies at the expense of middle-class Americans. It retains $40 billion in Big Oil tax loopholes while completely eliminating investments in the clean energy technologies of the future that are essential for long-term economic growth. [...]
Ryan's plan would continue "welfare" for big oil companies. Ryan was asked several times in a recent interview whether his plan would "eliminate tax breaks for Big Oil," but he refused to answer. Evading an uncomfortable question was his acknowledgment that his budget hatchet leaves Big Oil tax breaks untouched. This is consistent with his recent vote to keep Big Oil tax loopholes as part of the FY 2011 spending bill, while cutting education, medical research, and clean-tech investments.
In addition to receiving $40 billion of unnecessary tax breaks, Big Oil does not pay its fair share of royalties for oil and gas produced from publicly owned waters. The Government Accountability Office estimates that a loophole in a 1990s oil-and-gas law could deprive the treasury of $53 billion in lost royalties. In February, the House Republicans overwhelmingly voted against recovering these royalties. Although Ryan's budget claims that it "stops spending money the government doesn't have," it does nothing to recoup these forgone funds. This is another gift for Big Oil, paid for by middle-class taxpayers who must suffer the consequences of other steep spending cuts. [Center for American Progress, 4/6/11, emphasis added]
Rep. Ryan's Budget Reduces Corporate Tax Rate To 25 Percent. As reported by the Huffington Post: "Ryan believes tough choices have to be made now rather than under duress in the midst of a crisis. But he was roundly criticized from the left Tuesday for not raising taxes; he would lower the top income and corporate rates from 35 to 25 percent." [Huffington Post, 4/6/11]
REP. PAUL RYAN: And, for future generations, what we are proposing is a personalized Medicare, a Medicare system that works exactly like the health care I have as a member of Congress and federal employees have.
Value Of Federal Benefits Adjusts According To Health Care Market But Ryan Plan For Medicare Uses Fixed Voucher Amounts. From Wonk Room: "It's the same rhetoric that Democrats used to sell the health care exchanges that are part of the Affordable Care Act, but in Ryan's case the comparison doesn't hold up. Ryan is constraining the rate of growth in Medicare by offering seniors a defined contribution, regardless of the rate of growth in health care costs. The federal government's contribution in the FEHBP program, by contrast, reflects actual increases in premium levels. As the Office of Personnel Management describes it, the FEHBP formula 'is known as the 'Fair Share' formula because it will maintain a consistent level of Government contributions, as a percentage of total program costs, regardless of which health plan enrollees elect.' The difference is that Ryan's proposal provides seniors with a set amount of money that, in order to reach the kind of savings he's advertising, would have to depreciates every successive year — even as health care costs increase." [Wonk Room, 4/5/11, emphasis added]
REP. PAUL RYAN: So what are we doing? We're preserving and protecting it. No change occurs to Medicare for anybody who's on Medicare or 10 years away from retiring. [...] We want to have comprehensive Medicare plans available to future seniors that they can pick from and have these plans compete against each other for their benefit. It works with federal employees, it works with the prescription drug benefit, and more to the point, it saves Medicare.
CBO: Ryan's Budget Would Provide "A Typical 65-Year-Old ... $8,000 In 2022" To Buy Health Insurance. According to the Congressional Budget Office's analysis of Rep. Ryan's budget: "After assessing the total costs that would be incurred for a typical 65-year-old, CBO estimated the government's share and the beneficiary's share of those costs under the proposal and under CBO's long-term scenarios. The proposal would set the premium support payment for a typical 65-year-old at $8,000 in 2022, approximately equal to government spending on the average 65-year-old beneficiary in Medicare under the extended-baseline scenario in that year." [CBO.gov, 4/5/11]
CBO: By 2030, Medicare Beneficiaries Would Be Paying 68 Percent Of Their Health Care Costs Under Ryan's Plan — Or A Much Lower Share If Medicare Remains Intact. According to the Congressional Budget Office's analysis of Rep. Ryan's budget: "When expressed as a percentage of the benchmark, the beneficiary's share in 2030 would be 68 percent under the [Ryan] proposal, 25 percent under the extended-baseline scenario, and 30 percent under the alternative fiscal scenario. To summarize, a typical beneficiary would spend more for health care under the proposal than under CBO's long-term scenarios for several reasons. First, private plans would cost more than traditional Medicare because of the net effect of differences in payment rates for providers, administrative costs, and utilization of health care services, as described above. Second, the government's contribution would grow more slowly than health care costs, leaving more for beneficiaries to pay. Paying more for health care would be particularly challenging for elderly people with less savings and lower income." [CBO.gov, 4/5/11, emphasis added]
CEPR: Ryan's Budget Would Force Seniors To Spend Much Of Their Income On Health Insurance. According to Center for Economic Policy Research co-director Dean Baker:
Representative Ryan would replace the current Medicare program with a voucher for people who turn age 65 in 2022 and later. This voucher would be worth $8,000 in for someone turning age 65 in that year. It would rise in step with with the consumer price index and also as people age. (Health care expenses are higher for people age 75 than age 65.)
According to the CBO analysis the benefit would cover 32 percent of the cost of a health insurance package equivalent to the current Medicare benefit. This means that the beneficiary would pay 68 percent of the cost of this package. Using the CBO assumption of 2.5 percent annual inflation, the voucher would have grown to $9,750 by 2030. This means that a Medicare type plan for someone age 65 would be $30,460 under Representative Ryan's plan, leaving seniors with a bill of $20,700. (This does not count various out of pocket medical expenditures not covered by Medicare.)
According to the Social Security trustees, the benefit for a medium wage earner who first starts collecting benefits at age 65 in 2030 would be $32,200. (This adjusts the benefit projected by the Social Security trustees [$19,652 in 2010 dollars] for the 2.5 percent annual inflation rate assumed by CBO.) For close to 70 percent of seniors, Social Security is more than half of their retirement income. Most seniors will get a benefit that is less than the medium earners benefit described here since their average earnings are less than that of a medium earner and they start collecting Social Security benefits before age 65. [CEPR.org, 4/6/11, emphasis added, all parentheses original, internal citations removed for clarity]
REP. MIKE PENCE: Well, look, in February of this year, the Pence amendment passed on a bipartisan basis by 240 votes. It denied federal funding to Planned Parenthood of America. I've never advocated to reduce funding to Title X. They tried to make this about women's health. It wasn't about that.
The Republican Spending Plan Proposed In February "Would Cut All $327 Million From Title X." As reported by the Wall Street Journal: "Among the programs that would be eliminated entirely under the new Republican spending plan announced today is Title X, a which provides family planning for low-income Americans. The GOP plan would cut all $327 million from Title X." [Wall Street Journal, 2/9/11]
Pence Sponsored Amendment To Prohibit All Federal Funding From Going To Planned Parenthood. Amendment No. 11 to H.R. 1, which was offered by Rep. Pence, reads: "None of the funds made available by this Act may be made available for any purpose to Planned Parenthood Federation of America, Inc. or any...affiliates of Planned Parenthood Federation of America, Inc." [Pence Amendment to H.R. 1, 2/14/11 via Congressional Record]
Copyright © 2010 Media Matters Action Network. All rights reserved.