On the Ryan plan

Charles Krauthhammer defends Paul Ryan’s budget plan, which Democrats are decrying in apocalyptic terms for the way it slashes the budget, even though that will not be enough to balance the budget until 2040!  That’s how bad our deficit is!

The conventional line of attack on Ryan’s plan is already taking shape: It cuts poverty programs and “privatizes” Medicare in order to cut taxes for the rich.

Major demagoguery on all three counts.

(1) The reforms of the poverty programs are meant to change an incentive structure that today perversely encourages states to inflate the number of dependents (because the states then get more “free” federal matching money) and also encourages individuals to stay on the dole. The 1996 welfare reform was similarly designed to reverse that entitlement’s powerful incentives to dependency. Ryan’s idea is to extend the same logic of rewarding work to the non-cash parts of the poverty program — from food stamps to public housing.

When you hear this being denounced as throwing the poor in the snow, remember that these same charges were hurled with equal fury in 1996. President Clinton’s own assistant health and human services secretary, Peter Edelman, resigned in protest, predicting that abolishing welfare would throw a million children into poverty. On the contrary. Within five years child poverty had declined by more than 2.5 million — one of the reasons the 1996 welfare reform is considered one of the social policy successes of our time.

(2) Critics are describing Ryan’s Medicare reform as privatization, a deliberately loaded term designed to instantly discredit the idea. Yet the idea is essentially to apply to all of Medicare the system under which Medicare Part D has been such a success: a guaranteed insurance subsidy. Thus instead of paying the health provider directly (fee-for-service), Medicare would give seniors about $15,000 of “premium support,” letting the recipient choose among a menu of approved health insurance plans.

Call this privatization if you like, but then would you call the Part D prescription benefit “privatized”? If so, there’s a lot to be said for it. Part D is both popular and successful. It actually beat its cost projections — a near miraculous exception to just about every health-care program known to man.

Under Ryan’s plan, everyone 55 and over is unaffected. Younger workers get the insurance subsidy starting in 2022. By eventually ending the current fee-for-service system that drives up demand and therefore prices, this reform is far more likely to ensure the survival of Medicare than the current near-insolvent system.

(3) The final charge — cutting taxes for the rich — is the most scurrilous. That would be the same as calling the Ronald Reagan-Bill Bradley 1986 tax reform “cutting taxes for the rich.” In fact, it was designed for revenue neutrality. It cut rates — and for everyone— by eliminating loopholes, including corrupt exemptions and economically counterproductive tax expenditures, to yield what is generally considered by left and right an extraordinarily successful piece of economic legislation.

Ryan’s plan is classic tax reform — which even Obama says the country needs: It broadens the tax base by eliminating loopholes that, in turn, provide the revenue for reducing rates. Tax reform is one of those rare public policies that produce social fairness and economic efficiency at the same time. For both corporate and individual taxes, Ryan’s plan performs the desperately needed task of cleaning out the myriad of accumulated cutouts and loopholes that have choked the tax code since 1986.

Ryan’s overall plan tilts at every windmill imaginable, including corporate welfare and agricultural subsidies. The only thing left out is Social Security. Which proves only that Ryan is not completely suicidal.

But the blueprint is brave and profoundly forward-looking. It seeks nothing less than to adapt the currently unsustainable welfare state to the demographic realities of the 21st century. Will it survive the inevitable barrage of mindless, election-driven, 30-second attack ads (see above)? Alternate question: Does Obama have half of Ryan’s courage?

via After Ryan’s leap, a rush of deficit demagoguery – The Washington Post.

Who won in the budget showdown?

The Republicans, according to this analysis, got the better of the budget negotiations:

HR1 was originally to seek spending cuts of $32 billion until Tea Party conservatives insisted on more than $ 60 billion. House Speaker John Boehner won more cuts than he originally sought and got the Senate to agree to votes to defund the health care reform law and groups like the nation’s largest abortion provider Planned Parenthood – once votes Senate Majority leader Harry Reid said he’d never allow to come to the floor.Back on February 3, Reid called $32 billion in cuts “extreme” and “draconian.”

At a news conference New York Sen. Chuck Schumer, D-N.Y., agreed, “I happen to think some of their cuts are extreme and go overboard. But every week they keep upping the ante and proposing extreme cuts.”

Over the next decade the cuts are expected to save hundreds of billions of dollars.

The deal mandates a host of studies and audits of Obama administration policies. It also blocks additional funds for the IRS sought by the Obama administration and bans federal funding of abortion in Washington, D.C.

The history of offers on this bill goes something like this. Democrats first offered no cuts, then $4 billion, then $6.5 billion, then $33 billion, then settled at $38.5 billion.

Boehner made numerous adjustments to his offer in recent days too, but started at $32 billion, then with a Tea Party push went to $62 billion, then dropped to $40 billion, then $38.5 billion.

Democrats claimed they met Republicans halfway after the $10 billion in cuts that already passed this year were approved. They settled late Friday night at three and a half times more.

Boehner came in $8.5 billion higher than the halfway point between his high offer of $61 billion in cuts and the Democrats opening bid of zero cuts.

via Who Won the Shutdown Showdown? It Wasn’t Even Close – FoxNews.com.

Shutdown averted

Republicans and Democrats made a deal at the last minute that will keep the government running:

Republicans and Democrats on Capitol Hill have reached an agreement that would avert a federal government shutdown, yielding more spending cuts for Republicans while giving Democrats a key win on an issue related to abortion rights, Senate Majority Leader Harry Reid’s office announced Friday night.

The deal to fund the federal government for the next five months will include $39 billion in spending cuts and will drop language related to Planned Parenthood. Lawmakers still need to approve a short-term stopgap funding bill before midnight, when the federal government will run out of money and cease operations.

The stopgap bill will allow lawmakers time to craft the longer-term, complicated budget for the rest of 2011.

via Congressional leaders review draft budget agreement that would avert shutdown – The Washington Post.

A perspective on the shutdown

Former Bush official Peter Wehner offers reasons why Republicans should not let the government shut down:

On the matter of a possible government shutdown, this needs to be said: The impasse is the product of a striking failure of governance by President Obama and his party.

Republicans are winning the fiscal debate. A government shutdown could cause a backlash.The reason we’re debating the 2011 budget several months into the fiscal year is because for the first time in almost four decades, Congress failed last year to propose a budget. Despite Democratic control of both houses and the executive branch, Congress failed to meet one of its most basic obligations. That said, those Republicans who are eager for a showdown and a shutdown of the federal government are making a serious strategic mistake.

First, the cuts and concessions Republicans have already secured will return domestic discretionary spending to pre-Obama levels. This is a fairly remarkable achievement, and conservatives would be silly to ignore it.

Second, President Obama, in matching spending cuts that Republicans asked for earlier this year, has positioned himself fairly well in terms of blaming the Republicans for a shutdown, if it happens.

Third, the difference between the two sides is less than $10 billion in a $3.5 trillion budget. This isn’t a difference over which it is worth shutting down the federal government.

Fourth, Paul Ryan, chairman of the House Budget Committee, submitted a budget for fiscal year 2012 earlier this week that saves more than $4 trillion over the next decade. It’s a political and intellectual document of enormous significance, easily the most comprehensive and impressive governing blueprint in generations. The Ryan plan is where Republicans should focus their energy and attention.

via Not Worth the Showdown – Room for Debate – NYTimes.com.

Shall we shut down the government? Again?

As of this moment, Republicans and Democrats in Congress are at an impasse over the 2011 budget.   Budget hawks in the Republican party have insisted on cutting President Obama’s spending plan.  Democrats have agreed to some $30 billion in cuts, but that is not enough for a key segment of Republicans.  If a budget doesn’t pass, the government shuts down on Friday.  (Well, “essential services” won’t, but still. . . .)

You may recall another time when Republicans scored a big Congressional victory over an unpopular Democratic president.  They demanded that the budget be cut and stood firm and uncompromising on that principle.  The government shut down.  Whereupon the public reacted against the Republicans, President Clinton’s popularity shot up, and he won re-election.

Is this a repeat of history?  Are the Republicans over-reaching, again? Will this mean the re-election of Barack Obama?  Is there anything different this time?

And here is a deeper question:  Will the American public tolerate a tough, trimmed down budget?  With so many Americans beholden in some way on federal money–getting social security, medicare, farm subsidies, business subsidies, government contracts, job-creating pork, federal programs, college loans, etc., etc.–even though they express worry about the deficit in the abstract, will they turn against any Republican or conservative who threatens to defund popular programs?

 

Government shutdown: Potential furloughs for 800k federal workers, disruption of D.C. services – The Washington Post.

Problems with the food supply

Just in case you need something else to worry about, global food prices are skyrocketing (here not so much–yet), due to increased demand and shorter supplies:

Since last summer, several events — floods in Australia, blistering drought in Russia, the threat of a poor winter wheat crop in China — have compounded concerns about the food supply and pushed world prices to the highest levels measured since the U.N. Food and Agricultural Organization began calculating its index in 1990.

For decades, the world was often swimming in surplus food because farmers were so productive. But rising demand has caught up, and reserves have become so tight that global food markets are vulnerable to even minor shocks. Many analysts say that higher, more volatile prices may be here to stay.

The new dynamic reflects in part the rising demand for meat in developing countries such as China, which has almost single-handedly driven up prices for the soybeans it imports for animal meal, as well as the increasing use of corn for ethanol. Today, at least a third of the U.S. crop goes for making fuel. In addition, there is spreading concern that climate change may make weather less settled and more disruptive to growers.

“For the last 60 years, the simple story was agricultural productivity — great productivity gains, unabated,” said Joseph Glauber, chief economist at the U.S. Department of Agriculture. “But in the last five years, prices have lifted, and you see this real strong demand.”

Since last summer, the market price for corn to be delivered in May nearly doubled from $3.67 to $7.23 as of late last month, according to data compiled by Dan O’Brien, an agricultural economist at Kansas State University.

Grain reserves have dwindled. The latest USDA estimates, released Thursday, show U.S. reserves of corn and soybeans at historic lows, less than 5 percent of projected demand for the coming year. Typical reserves have been three or more times that amount, a chief reason why it does not take much to send prices skyrocketing.

via Higher food prices may be here to stay – The Washington Post.


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