The GOP's alternative budget

April Fools?

- Spending. Our budget gives priority to national defense and veterans' health care. We freeze all other discretionary spending for five years, allowing it to grow modestly after that. We also place all spending under a statutory spending cap backed up by tough budget enforcement.

Yglesias comments:

If, superficially, this seems like a warmed-over version of the McCain campaign economic agenda that the voters rejected just a few months ago, you need to pay more attention—McCain was just calling for a one-year freeze on discretionary spending after which reductions in government outlays would be achieved by magic. Ryan, by contrast, is proposing a five-year freeze.

Basically, you can imagine a school that today is serving a certain number of children and has a certain budget. Well, over the course of five years the population will grow and the number of kids in that school will also increase. But the school won’t get any additional money. Instead, because there’s inflation, the school will actually be getting less money even as it needs to teach more children. And so on across the board for federal programs. If you think that there’s literally nothing in the entire federal budget that’s useful, this may strike you as an appealing idea.

It's totally unserious.  Cutting spending during a recession caused by a crisis of demand (not supply)  is crazy anti-stimulus, and after the recession plenty of programs the public considers valuable will need more money.  If we want to cut spending post-recession it basically needs to be done by ending unhelpful programs, not underfunding across the board.  But that's not as pretty sounding as a "spending freeze" (which is really an increasingly large cut due to inflation).  And when you propose cutting specific programs their interest groups lash out at you, so polticians are often unwilling to single them out unless they think the name sounds silly enough (recently mentioned in GOP speeches: mice control, bear DNA research, volcano monitoring)

Except for the magnitude of revenue, I liked theses tax ideas:

- Tax Reform. Our budget does not raise taxes, and makes permanent the 2001 and 2003 tax laws. In fact, we cut taxes and reform the tax system. Individuals can choose to pay their federal taxes under the existing code, or move to a highly simplified system that fits on a post card, with few deductions and two rates. Specifically, couples pay 10% on their first $100,000 in income (singles on $50,000) and 25% above that. Capital gains and dividends are taxed at 15%, and the death tax is repealed. The proposal includes generous standard and personal exemptions such that a family of four earning $39,000 would not pay tax on that amount. In an effort to revive peoples' lost savings, and to create an incentive for risk-taking and investment, the budget repeals the capital gains tax through 2010 for all taxpayers.

The 10%-25%-15% figures are distributed well relative to each other -- flatter and better for the economy than anything Democrats will do for us -- but the total revenue is simply too low unless Republicans find a realistic way to cut spending that is not an across the board freeze.  So you'd have to increase all those rates between 5-10% for this to work  (15-30-20 or similar)

Yglesias continues:

Meanwhile, the op-ed is a bit unclear on this point, but it appears to include a proposal to scrap Medicare in favor of a system of vouchers. The idea here is to “solve” the problem of health care cost inflation driving higher Medicare costs by replacing a guarantee of health care with a guarantee of a lump sum of money that would not grow as rapidly as the cost in health care. Basically, we would “solve” the problem of paying for senior citizens’ health care by just . . . not paying for senior citizens’ health care. Demonstrating a lack of commitment to the underlying principle, Ryan promises not to actually afflict anyone currently over the age of 55 with this policy. The hope is that everyone born since 1954 is too short-sighted to actually care about what fate awaits them upon retirement, while the guarantee of continued actual Medicare for those born before 1954 is supposed to immunize Ryan from their wrath.

Hmm. Well speaking as someone born well after 1954, I would love to gradually phase out Medicare in a similar fashion. I don't think it demonstrates a lack of commitment to an underlying principle, I think it is the principle: get rid of Medicare, lower taxes, and let people manage their own health insurance.  Medicare only appears to be cost effective because it underpays for proceedures, which in turn increases healthcare costs for everyone who's not on Medicare. That's part of why we have a healthcare problem in this country -- it's not because the government isn't covering enough people, it's because it's underpaying market rates for the coverage of some.  But once you provide some people with "free" healthcare and conceal its real costs, that group loves and will never give it up.  So this plan is a politically infeasible promise that I don't think they'll ever be able to deliver upon.

Finally the "glimpse of our future" chart is just laughable. Projecting up to 2015 involves plenty of guesswork, but going out to 2080? For all practical purposes these numbers were just made up by Republican staffers, with worst-case assumptions made for the Democratic proposals and best-case for the Republican ones. April Fools, indeed.

Conor Clarke:

As near as I can tell, Paul Ryan and his staff just took the CBO projections that ended in 2019 and drew a random line, extending upward at about a 45 degree angle, until 2080. There's no real attempt to make it look scientific.

publius:

There’s a lot more that must and will be said about the GOP’s April Fool’s Day budget. But there’s one hilarious tidbit that needs mentioning.

As we already knew (because it was the one specific detail in the last “budget”), the plan has a massive tax cut for the wealthy – lowering the highest marginal rate to 25%.  Higher-earning taxpayers can, however, voluntarily opt to pay the old higher rate.

Here’s the kicker – the GOP’s deficit assumptions assume that everyone will opt for the older higher rates.  Take it away Steve Benen:

The hilarious angle to this is that the House Republicans run enormous budget deficits while assuming the top earners would voluntarily pay the higher rate.

Ryan Grim adds:

A Republican budget committee aid said that the revenues assumed in the GOP budget are based on the current tax structure that resulted from those cuts.

In other words, Republicans are assuming that given the choice between a higher rate and a lower rate, Americans will choose the higher rate.

Sigh. Crazy stuff.

Firstly Republicans need to show us a realistic plan to cut spending, and secondly they need to commission a real CBO report on their alternative budget. It won't look anything like this ridiculously misleading chart their staffers produced.