August 2012

Comparing the Ryan Plan to...the Ryan Plan

There has been much discussion over the "Ryan Plan" since the House Budget Chairman was selected by Governor Romney to be his running-mate. However, there is not just one Ryan plan, but multiple iterations of the Congressman's proposals. They have evolved over time on specifics, although the overall approach has remained clear.

In 2008 Ryan put forward his Roadmap for America's Future, in 2010 it was Roadmap 2.0, in 2011 it was the Path to Prosperity, and again in 2012 it was the Path to Prosperity. You can see our reactions to each one here, here, here, and here.

To give a better overview of all of these plans, what is contained in them, and how they evolved, we've put together the following comparison table.

 

 

Update: CRFB Senior Policy Director Marc Goldwein discusses the Ryan proposals on The Brian Lehrer Show.

For Its 77th Birthday, Let’s Give Social Security Another 77 years

Seventy seven years ago today, the Social Security Act was signed into law. Over the life of the program, it has provided generations of Americans support and security once they reach retirement or if they are disabled. Unfortunately, no matter how you look at it, Social Security is now in dire need of reform. Every year, the Social Security Trustees warn us that changes need to be implemented as soon as possible in order to keep the program solvent. This year’s estimates were more gloomy than ever – the program faces an actuarial imbalance of 0.96 percent of GDP (2.67 percent of payroll) over 75 years and a deficit of 1.54 percent of GDP (4.5 percent of payroll) in the 75th year. By 2033 -- or just 21 more years -- the Social Security trust funds will be exhausted, at which point recipients will see an immediate and across-the-board 25 percent cut in benefits.

 

 

While 2033 may seem far enough away to work out a viable solution, the Social Security Disability Insurance (DI) program faces insolvency in just four years. That means that by 2016, disability benefits will have to be cut by more than 20 percent if we don't make changes in advance. In an op-ed earlier this year, CRFB’s Senior Policy Director Marc Goldwein put forth several short-term solutions to fix the broken DI program and urged lawmakers to take advantage of this fast-approaching deadline to reform Social Security as a whole.

 

In order to preserve Social Security for future generations of Americans, lawmakers will either need to enact reforms that raise taxes, reduce initial benefits (through further increases in the retirement ages or by some other means), and/or slow the growth of benefits. The sooner they act the better because beneficiaries need time to adjust to changes. We have discussed various ideas on ways to reform Social Security before, and hope this year’s anniversary serves as another reminder to take the necessary steps towards reform. By addressing this issue head on now, lawmakers can implement changes in a bipartisan and thoughtful way to protect those who depend on the program the most. 

Let’s give Social Security a real reason to celebrate this year, and make reforming the program a priority before it’s too late.

Washington Post Editorial: The dangerous myths at the heart of political parties’ fiscal policies

Today, the Washington Post editorial board offers an insightful commentary on the current fiscal debate playing out between both political parties, as represented by the Obama and Romney campaigns. The article argues that Republicans are not acknowledging the amount of revenue needed to fund levels of government that they believe to be necessary, while also noting that Democrats are not acknowledging what is needed to set Social Security and Medicare on firm financial footing.

When focusing on Mitt Romney and Paul Ryan, they state:

The Romney-Ryan approach fails to acknowledge the level of revenue required to sustain even the smaller government the candidates envision. The population is aging, and even with entitlement reform, health-care costs will continue to grow. The world remains a dangerous place, which is why Mr. Romney says defense spending should consume 4 percent of gross domestic product. Yet the Congressional Budget Office has found Mr. Ryan’s plan would whittle spending on everything but Social Security, health programs and interest on the debt to less than that. The country cannot afford to continue all the Bush tax cuts, at a cost of some $5 trillion over the next decade, let alone pile on trillions more from Mr. Romney’s cuts.

And for the Democrats, they state:

The fundamental Democratic myth is that the country’s fiscal problems can be solved by focusing on, and asking for sacrifice from, only a tiny, vilified slice of the population: the wealthy. The central promise of President Obama’s 2008 campaign, reaffirmed in 2012, was that he would not raise taxes on the middle-class, defined as households earning less than $250,000 annually. At the same time, Democrats want voters to believe that Social Security and Medicare can be fixed, to the extend they need fixing, barely touching ever-rising benefits.

Overall, they conclude that "debt threatens the nation's prosperity and global standing." They are right. We need to pass a debt reduction plan and this election represents an opportunity to have an honest and open debate about what needs to happen. We need the candidates to debate the debt and present their own specific plans for how they would put debt on a downward path as a share of the economy. We have to fix out debt because solving it gets harder the longer we wait. 

With Announcement of Debate Moderators Comes a Renewed Call to Debate the Debt!

Today, the non-partisan Commission on Presidential Debates announced the moderators for the 2012 presidential and vice presidential debates. Over the past several weeks and months, CRFB and the Fix the Debt Campaign have been pushing the Debate the Debt initiative to encourage the candidates to debate their ideas to fix our nation’s mounting debt.

Now that these moderators have been selected, we urge them to ask the candidates how they plan to substantively address the national debt and make it a central part of at least one of the debates. Candidates should share with voters how they put in place at least $4 trillion in savings over the next decade to truly stabilize the national debt as a share of the economy and then put it on a downward path.

The importance of this effort is underscored by the substantial support it has generated in a short period of time. Over 18,000 concerned citizens have joined the cause by adding their names to the Debate the Debt petition.  You can add your name to this effort by signing up at www.DebateTheDebt.org.

Here is the schedule and list of moderators for this fall’s presidential and vice presidential debates:

First Presidential Debate
Moderator: Jim Lehrer, Executive Editor of the PBS NewsHour Wednesday
October 3, University of Denver, Denver, CO

Vice Presidential Debate
Moderator: Martha Raddatz, Senior Foreign Affairs Correspondent, ABC News
October 11, Centre College, Danville, KY

Second Presidential Debate (town meeting)
Moderator: Candy Crowley, Chief Political Correspondent, CNN and Anchor, CNN's State of the Union
October 16, Hofstra University, Hempstead, NY

Third Presidential Debate
Moderator: Bob Schieffer, Chief Washington Correspondent, CBS News and Moderator, Face the Nation Monday
October 22, Lynn University, Boca Raton, FL

 

Former Senator Gregg and Caterpillar CEO Oberhelman Call on Washington to Fix the Debt

On Friday, we heard from two allies in the fight to put our nation’s fiscal house in order and fix the debt. In a C-SPAN interview, former Senator and Campaign to Fix the Debt Co-chair Judd Gregg (R-NH) shared his thoughts about the current economic climate and how a bipartisan solution on the debt from lawmakers in Washington could help set the economy on a stronger path in the near-term and long-term. He also took note of the serious consequences of inaction, but pointed to Simpson-Bowles as a bipartisan solution that should be revisited in the conversations around the debate this fall.

“What’s retarding our efforts economically is this overhang and fear about our long term fiscal policy and the effect it’ll have on the value of the dollar, ability to borrow, our children’s future, and reduction in standard of living. You fix that and put in place a legitimate deficit reduction plan like Simpson-Bowles, a commission I had the good fortune to serve on, and I think you’ll see real economic expansion.”

With the fiscal cliff approaching at year’s end, Gregg also highlighted the issue of uncertainty that he said many business owners and entrepreneurs are feeling about the future.

“One thing that’s holding this economy back is the uncertainty the business community and especially entrepreneurs feel about the future and that uncertainty is driven in large part by the fact that we’re running up these massive deficits and debt at the federal level.”

Senator Gregg:

 

 

 

In another interview on Friday, Doug Oberhelman, CEO of Caterpillar Inc., echoed Senator Gregg’s assessment about uncertainty in the market. He said the growing debt is starting to hold his company back, but that it is holding back their customer base of local contractors even more.  “For the contractor base and customers in this country, it’s worrisome. It has a chill in the air.” said Oberhelman. 

Oberhelman, who announced he has joined the Campaign to Fix the Debt, is not the first CEO to throw his support behind this effort. And we will likely continue to hear from more business leaders who are facing similar concerns if action is not taken to put out debt on a smart, downward path.  To make your voice heard, sign the Fix the Debt Petition today.

Caterpillar CEO Doug Oberhelman:

 

 

Romney Names Paul Ryan as His Running Mate

Governor Romney, on Saturday, announced that he was selecting House Budget Committee Chairman Paul Ryan (R-WI) as his running mate.

Chairman Ryan has been a leader on the issue of debt reduction, tax reform, and entitlement reform for years; and we are hopefully that his addition to the ticket will help ensure that fixing the national debt will be a central issue in this campaign. This election needs to be about both sides presenting their best ideas to bring the debt under control, but also showing a willingness to compromise after the election on a bipartisan plan to replace the fiscal cliff with a credible, intelligent, gradual, and comprehensive plan to put the debt on a sustainable path.

As our readers continue to learn more about Congressman Ryan, we have compiled many of the past blogs, papers, and press releases which we've written about the Chairman and his plans. 

FY 2013 Budget Resolution - The Path to Prosperity
Click here for a full listing of CRFB's
FY 2013 Budget Resolution Blog Series.


FY 2012 Budget Resolution -
The Path to Prosperity
Click here for a full listing of CRFB's 
FY 2012 Budget Blog Series


Ryan Roadmap 2.0
Click here for a full listing of CRFB's FY 2011 Budget Blog Series


Ryan Roadmap


Other Analyses

 

CRFB's Marc Goldwein Discusses the Federal Budget

Earlier today, the New America Foundation held the event "Red Ink: Inside the High-Stakes Politics of the Federal Budget", focusing on Wall Street Journal economics editor David Wessel's book of the same name. The event also included CRFB senior policy director Marc Goldwein and was moderated by New America fellow Noam Scheiber.

The conversation touched on a number of topics in the budget. Of course, some of the discussion focused on the fiscal cliff. Both Goldwein and Wessel felt that going over the cliff would be extremely damaging to the economy, and that the cliff would do harm well before it would hit. As for the propsects of a fiscal plan, neither were overly optimistic that something would get done before the end of the year, but they both spoke about the possibility of agreeing to an overall framework of debt reduction to be filled in early next year. Goldwein also pointed out that many of the policies that would likely be in the discussion have already been written into legislative language; thus, lawmakers could move quickly if they made an agreement.

On health care, both noted how more needs to be done on controlling health care costs. Wessel opined that down the road there could be bipartisan support for a premium support model for Medicare down the road, given that the new health care law will be creating exchanges for the under-65 population, and it's not inconceivable to see how such a proposal could gain ground for the over-65 population.

On taxes, both agreed about the need for tax reform to raise revenue, although both acknowledged that politically the task would be difficult. Goldwein did say, though, that his time on the Fiscal Commission showed that starting with a tax code with no tax expenditures and forcing lawmakers to raise rates to pay for ones that they add back in is a very helpful framework to go about it. See Goldwein and Paul Weinstein's paper "Less is More: The Modified Zero Plan" for a more detailed discussion of that approach.

Overall, the event was a very interesting whirlwind tour of various issues facing the federal budget. A full video of the event has been embedded below.   

Sign the Fix the Debt Petition!

The Campaign to Fix the Debt has launched a new and comprehensive petition demanding that Congressional leaders and the president work together to (you guessed it) fix the debt. The petition has six core tenants:

  • The time to act is now to replace the fiscal cliff with more gradual cuts.
  • America's debt is unsustainable and will threaten the economy.
  • A solution must address all parts of the budget, with the Simpson-Bowles plan as a starting point.
  • A solution must be phased in to protect the recovery, improve economic performance, and protect the most vulnerable.
  • Leaders must find common ground by putting aside their rigid ideologies. Any solution will have to be bipartisan.
  • Leaders must put the national interest ahead of special interests and require shared sacrifice.

You can view and sign the petition here. Also, the page provides links where you can learn more about the federal budget and opportunities to get more involved.

Tax Exemption Fails to Make the Medal Stand

Not surprisingly, the policy world has been less than kind to a proposal to exempt Olympic winnings from taxation. After the proposal gained the support the chair of the Ways and Means Committee Dave Camp (R-MI) and President Obama, we satirically speculated the possible reasoning behind the exemption, namely to push those fourth place finishers onto the medal stand with some tax motivation.

Naturally, this idea got some push back. Luckily, one of those pushing back and refusing to pander--perhaps deserving a tax-exempt Olympic medal for it--is in Congress, Sen. Tom Coburn (R-OK). Josh Barro of Bloomberg reported yesterday of an email from Sen. Coburn's spokesman John Hart. It read:

If tax code gymnastics was an Olympic sport this idea might get a medal.  Like the carve outs for NASCAR, rum makers and electric motorcycles, tax earmarks are a tax increase for everyone who doesn't receive the benefit. I'm not sure taxpayers want to pay higher rates to help beleaguered Olympic medalists who have to manage endorsement offers.

Howard Gleckman of Tax Policy Center was no kinder to it, labeling the proposal a "Stupid Tax Trick." Other proposals that have garnered that label from TPC include a state-levelproposal to allow a deduction for the cost of "burying" a deceased person in space and one that would allow pet-care expenses to be deductible.

I suspect much of the support for this silly idea is based on the mostly-outdated myth of the self-sacrificing amateur athlete who gives up all in the Olympic spirit. Chariots of Fire and all that.

But the dons who run the Olympics have let professionals compete for more than 40 years. As a result, many of those who would benefit from this tax cut are as far from amateurs as one could imagine.  LeBron James, for instance, made $57 million last year in salary and endorsements. Kobe Bryant made $52 million. Michael Phelps made $10 million. Does BronBron really need an $8,700 tax cut? Seriously?

Perhaps a US loss in the men's basketball semifinals against Argentina would convince him otherwise.

Matt Yglesias of Slate was a bit more measured in his criticism, noting that while the exemption itself would cost very little, it would cast a terrible light on our tax code and the prospects for reform.

The underlying issue is that taxes aren’t supposed to be a cosmic judgment on the underlying worthiness of people’s activities. The earnings of a great artist and a reality TV show producer are taxed the same. That can seem a bit perverse at times, but having Congress try to assess which professions are important and which are bad would be much worse. The goal of the tax code should be to try to raise an adequate amount of money in a way that’s economically efficient and meets social equality goals. That tends to mean as broad a tax base as possible—few deductions or exemptions, in other words—to make it possible to raise revenue with relatively low tax rates. Exceptions should generally be justified in terms of broad benefits to society. We have tax breaks for corporate research and development based on the idea that innovation helps the whole economy and not just the most innovative companies. Indeed, even in this age of massive polarization, the desirability, in principle, of a tax code with fewer deductions is a rare point of bipartisan consensus.

Let's disqualify this exemption from making the tax code.

Through Ten Months, the Deficit is $975 Billion

CBO's Monthly Budget Review for July lays out how the first ten months of this fiscal year compared to last year. The FY 2012 deficit so far totals $975 billion, $125 billion lower than the $1.1 trillion at this point last year. The lower deficit is the result of revenue being $114 billion higher and spending actually being $11 billion lower.

On the spending side, the Budget Control Act and war drawdown have decreased spending on both defense and non-defense discretionary spending relative to last year. Unemployment benefits are down by one-fifth due to a lower unemployment rate, people exhausting their maximum weeks of benefits, and lower maximum weeks allowed following the payroll tax cut extension. In addition, the wind down of increased Medicaid matching to the states has reduced program spending by 11 percent. Despite an increase in debt over the past year, interest payments are down slightly due to lower interest rates.

The most eye-popping aspect of the revenue side is a 30 percent increase in corporate revenue. However, this does not necessarily reflect a jump in profits but rather a timing shift from the availability of full expensing of equipment last year. Because companies were able to write off these investments immediately last year, they essentially deferred tax liability to future years by passing up deductions they would have been able to take in the years beyond 2011, resulting in lower revenue last year and higher revenue this year. Other parts of the tax code, such as income and payroll taxes, have increased modestly due to rising incomes.

FY 2012 Deficits Compared to Last Year (billions)
  July 2011 July 2012 FY 2011 Through July FY 2012 Through July
Outlays $288 $254 $2,993 $2,982
Revenue $159 $183 $1,893 $2,007
Deficit -$129 -$71 -$1,100 -$975

Source: CBO

Overall, this year's deficit appears to be on track for the $1.17 trillion mark that CBO projected in March. We will see in two weeks if they still project that when they release their August baseline.

Insights About Legislating from Rep. Chaka Fattah

Yesterday, Rep. Chaka Fattah (D-PA) sent a letter to his House colleagues urging them to adopt Simpson-Bowles as a way to stave off the fiscal cliff. Although it was not his preferred solution -- his is to replace the income tax with a one percent tax on all transactions -- Fattah recognized that the plan represents the "only solution before Congress that has bipartisan support in both chambers of Congress and addresses the fiscal and policy goals that were debated prior to the budget sequester agreement." As he wrote in the letter:

The Simpson-Bowles proposal is the only solution before Congress that has bipartisan support in both chambers of Congress and addresses the fiscal and policy goals that were debated prior to the budget sequester agreement. The proposal will achieve nearly $4 trillion in deficit reduction through 2020 by implementing comprehensive tax reform measures that will broaden the tax base, simplify the tax code, lowering tax rates, and sharply reducing tax expenditures. In addition, the proposal will create new budget enforcement mechanisms that will scrutinize both security and non-security spending, cut or eliminate low-priority programs, and streamline government operations.

Although my proposal, H.R. 1125, the Debt Free America Act, will eliminate the national debt within a decade while creating the framework for fundamental tax reform, which includes the elimination of the personal income tax, I recognize that Congressional inaction is no longer tenable nor can Congress afford to begin discussions to achieve viable fiscal sustainability anew. Accordingly, I supported the recommendations that were generated from President Obama's National Commission on Fiscal Responsibility and Reform. In addition, I spoke in favor the Simpson-Bowles recommendations on the House Floor, as well as voting for Rep. Jim Cooper's amendment to the budget resolution that adopted the Simpson-Bowles proposal.

Fattah's letter provides a good lesson in governing. We of course applaud lawmakers for developing their own solutions to fix the debt. We need policymakers who have the courage and conviction to develop and advocate for solutions; many of their ideas represent important pieces of the debate and help push toward a final plan. Yet ultimately, no politician or person is going to get everything he or she wants. In a recent interview, Fiscal Commission co-chair Al Simpson made this point:

You don’t compromise yourself; you compromise an issue. There’s a hell of a lot of difference between compromising an issue and compromising yourself, and if they don’t understand that distinction, they shouldn’t really be in politics...

Anything in life is a compromise. Marriage, it’s a compromise. Raising children is a compromise. Why would you leave it out of legislating our government? It’s absurd. It doesn’t make any sense. There isn’t a person alive that doesn’t compromise every day on something without losing their identity or becoming a chicken, or a coward, or a bully.

Bravo to Rep. Fattah for realizing that a bipartisan plan is way better than doing nothing, even if it not his favorite plan.

The Facts of the Federal Budget

On Friday, join CRFB senior policy director Marc Goldwein as he discusses Wall Street Journal writer David Wessel's newest book Red Ink: Inside the High-Stakes Politics of the Federal Budget. Goldwein and Wessel will participate in a lively chat along with Noam Scheiber, a New America Foundation Schwartz Fellow and senior editor of The New Republic.

The book is a great introduction to the federal budget and our current fiscal situation, complete with a brief history of fiscal policy, profiles of notable players in the budget world, and stories that illustrate many of the problems in the federal budget with solutions to help us become more fiscally responsible. Wessel makes the case for fiscal responsibility with facts, not his own opinion and it is a refreshing read for anyone interested in fiscal policy.

Here are a few of the many fiscal facts in Wessel's book:

  • Nearly two-thirds of annual federal spending is on autopilot and doesn’t require an annual vote by Congress.
  • The U.S. defense budget is greater than the combined defense budgets of the next seventeen largest spenders.
  • Firing every federal government employee wouldn’t save enough to even cut the deficit in half.
  • About $1 of every $4 the federal government spends goes to health care today, and that share is rising inexorably.
  • The $700 billion bank bailout didn’t cost taxpayers nearly as much as initially feared. (It is $32 billion by the latest estimate).
  • The share of income most American families pay in federal taxes has been falling for more than thirty years. Today, Americans pay less of their income in taxes than the citizens of nearly every other developed county.
  • The federal government gives up almost as much money from tax loopholes, deductions, credits, and all other tax breaks as it collects in individual and corporate income tax.
  • For every dollar the U.S. government spent in 2011, it borrowed 36 cents, much of it from China where the income per person is about one-sixth of that in the United States.
  • Today’s budget deficit is not an economic problem—tomorrow’s is.

The event should be an interesting talk with three people well versed in the current and future state of the budget. For those on Twitter, be sure to use the handle #delveinto12 and join the conversation. We will be tweeting as well at @BudgetHawks. We hope to see you there.

You can RSVP for the event here.