April 5, 2011
Column #1,545a
“Debt & Deficits Are
Like a Cancer”
By Mike McManus
WASHINGTON - We saw something
rare this week in the nation’s capital: a proposal to cut $4.4 trillion from
the deficit over the next decade, compared to the President’s budget. And
it was not a proposal by retired politicians or academics, but by Rep. Paul
Ryan, Chairman of the House Budget Committee.
For the past few weeks, we have
heard about the Republican House’s proposal to cut $61 billion from the
current 2011 budget. It would zero funding for Planned Parenthood,
America’s largest abortion provider. Public Broadcasting would suffer a
similar whack.
However, as Rep. Ryan said, “This
morning the new House Republican majority will introduce a budget that moves
the debate from billions in spending cuts to trillions. America is facing a
defining moment. The threat posed by our monumental debt will damage our
country in profound ways, unless we act.”
He is right. Erskine Bowles,
former White House Chief of Staff under President Clinton, who negotiated
the first balanced budget in a generation, and served as Co-Chair of
President Obama’s Fiscal Commission, made some grim comments recently:
“This debt and these deficits we
are incurring are like a cancer, and they will truly destroy this country
from within unless we have the common sense to do something about it. Just
stop and think what happens if (Asia) stops buying our debt. What happens
to interest rates? And what happens to the U.S. economy? The markets will
absolutely devastate us. The problem is real. The solutions are painful,
and we have to act.”
Paul Ryan deserves commendation
as the first political leader to put hard proposals on the table to reduce
today’s $1.4 trillion deficit to $400 billion by 2017, with tough spending
cuts:
·
Block grant Medicaid, giving
the states a fixed amount, rather than an open-ended sum.
·
Repeal Obamacare spending and
new taxes
·
Reform Medicare, so that when
those under 55 retire, they will get a subsidy to buy private health care
insurance, which gives incentives to hold down spending.
·
Cut farm subsidies, food stamps
and the size of the federal bureaucracy by attrition
·
Consolidate all job training
programs
“This is a bold budget,
and Congressman Ryan should be congratulated for putting forward structural
budget reforms to address our unsustainable debt path,” said Maya MacGuineas,
President of the Committee for a Responsible Federal Budget.
By contrast, President
Obama ignored his own Fiscal Commission’s proposals, which were far more
balanced than Ryan’s. That failure is an ominous sign. It signaled he will
not lead, on an issue where leadership is crucial. And he’s likely to
demagogue Republicans, for “ending Medicare,” throwing granny into the snow,
and “cutting health care to the poor.”
What’s wrong with
Ryan’s proposals?
First, while Ryan proposes
closing some of the “tax expenditures,” such as mortgage interest
deductions, he would use all of the savings to lower tax rates, rather than
using some of it to reduce the deficit. For example, if just 20% of the
major deductions were used to reduce the deficit, it would fall by $428
billion in just the year 2025.
Second, he proposes no changes in
the age at which Social Security and Medicare are given to Americans, even
though Americans are living four years longer now than in 1980. Nor does he
propose any significant cuts in Defense spending beyond modest ones in
Obama’s budget. A 15% cut would save $132 billion in 2025. Do we really
need 1,000 bases around the world? Why do we have nearly 100,000 troops in
Japan and Germany, for example?
Finally, Ryan makes no proposals
to raise taxes on upper income people. An extra 5% tax on those earning
over $! Million would raise $34 billion, and raising the tax rate on capital
gains from its very low 15% to 20% raises $20 billion.
There is a much greater
likelihood of passing legislation to pare the deficit if all categories of
spending are on the table, plus the raising of revenues. Two thirds of the
Senate favors this more balanced approach. However, even if the Ryan bill
were passed in the House, and a more balanced version emerged from the
Senate, what will Obama do? Will he propose a serious alternative?
I hope so, but he
appears inclined to do nothing, to increase his odds of being
re-elected.
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