To the surprise of nobody, White House Press Secretary Jay Carney has announced that President Obama cannot and will not support the budget set forth by Rep. Paul Ryan earlier today. To underscore how much they dislike it, White House released a scathing statement on the proposal:
The House budget once again fails the test of balance, fairness, and shared responsibility. It would shower the wealthiest few Americans with an average tax cut of at least $150,000, while preserving taxpayer giveaways to oil companies and breaks for Wall Street hedge fund managers. What’s worse is that all of these tax breaks would be paid for by undermining Medicare and the very things we need to grow our economy and the middle class – things like education, basic research, and new sources of energy. And instead of strengthening Medicare, the House budget would end Medicare as we know it, turning the guarantee of retirement security into a voucher that will shift higher and higher costs to seniors over time.
The House economic plan draws on the same wrong-headed theory that led to the worst recession of our lifetimes and contributed to the erosion of middle-class security over the last decade. And the President believes we cannot return to a failed theory that didn’t lead to the growth of jobs, incomes, or the economy. That’s why he put forward a balanced approach that reduces the deficit by over $4 trillion. It’s an approach that asks the wealthiest to pay their fair share, makes tough cuts to programs we can’t afford, and strengthens Medicare with reforms that would reduce overpayments to drug companies, improve the quality of care, and protect Medicare’s commitment to America’s seniors.
Every last one of these claims was predictable. Several were so predictable, in fact, that I pre-butted them in this morning's primer on Ryan's budget. Nevertheless, let's address them one-by-one, just for kicks (and because we're going to be responding to the same tired refrains for the next few months):
(1) Ryan's budget "fails the test of fairness, balance, and shared responsibility." First of all, Senate Democrats' plan fails the test of existing. Second, Ryan's tax reforms are based on a simplification concept endorsed by Obama's own fiscal commission, which the president chose to ignore. Ryan's proposed top marginal income tax rate of 25 percent is viewed as "fair" by more than 6 in 10 Americans. Under Ryan's plan, the wealthy would see a slew of tax deductions, loopholes, and goodies reduced or eliminated in exhange for lower, flatter, predictable rates. They would also receive less government assistance on entitlement programs (the Medicare plan would prioritize lower income and less healthy future seniors). There's your "shared sacrifice," in addition to the fact that the top ten percent of wage earners already pay ~70 percent of all income taxes in this country, while the bottom 49.5 percent contribute zero in that category. Oh, and "the rich" include millions of small businesses, 80 percent of which file taxes as individuals. Raising taxes on "the rich" raises taxes on small businesses -- a horrible idea at any time, but especially in a weak economy with high unemployment. Finally, the White House's criticism of Ryan's budget for failing a "balance" test particularly rich, considering that Ryan's budget balances and Obama's never does.
(2) Altogether, now: Basic arithmetic "ends Medicare as we know it" within 12 years, according to its own trustees. It contains nearly $40 Trillion in unfunded future promises. Medicare as we know it is going down no matter what. The choice is whether to save it on our own terms, or just let it burn and leave future seniors to twist in the wind. Ryan's plan protects current and soon-to-be seniors (everyone born before 1958) from any changes, but does make changes for younger workers. If younger workers don't like those changes, they'd better prefer heavy austerity rationing, far less access to doctors (as they increasingly accept new Medicare patients due to horrid government reimbursement rates), or just no Medicare at all. That's the alternative to the Ryan/Wyden bipartisan vision, not some sunny utopia where the current fee-for-service model can meet everyone's needs forever. That's anti-reality and anti-math.
(3) Funny, I didn't realize serious attempts at reforming the key drivers of our unsustainable debt is what "led to" the current downturn. news to me. I could have sworn it was the housing crisis, which was fueled by subprime mortgages, which the federal government forced banks to hand out like candy. Republicans objected, Democrats cried racism, allowing these risky loans to be bundled and sold as financial instruments, thus infecting our Wall Street institutions and broader economy. Ryan's plan ends bailouts to and winds down two of the worst culprits in the meltdown: Fannie and Freddie. This argument from the White House is unusually lazy, stupid and dishonest -- even by their standards.
(4) President Obama's "balanced approach" raises taxes on families and small businesses by nearly $2 trillion over ten years, yet still adds $11 Trillion to the gross debt over that time horizon. Under Obama's plan, our grand total of national debt at the end of 2022 would be roughly $26 Trillion. Keep in mind that gross US debt hit 100 percent of GDP last summer. The CBO says Obama's budget adds over $3 Trillion in annual deficits compared to the Ryan plan. It intentionally fails to deal with entitlements and, I repeat, it never balances. On the looming debt crisis, Obama's Treasury Secretary described his boss' "balanced" approach accurately:
Treasury Secretary Timothy Geithner, speaking on behalf of the Obama White House, to Rep. Paul Ryan: "You are right to say we're not coming before you today to say 'we have a definitive solution to that long term problem.' What we do know is, we don't like yours."
According to Team Obama, this is what a responsible, balanced approach looks like (for reference, Ryan's plan is in green, Obama's, appropriately, is in red):
UPDATE II - One much-hyped "vital" element of Obama's "balanced" approach is the so-called "Buffett Rule." If implemented, that tax increase would fetch...wait for it...$31 Billion over eleven years. The Buffett Rule's entire decade-plus-worth of revenues would only cut this year's deficit by two percent. It's a class warfare gimmick, not a solution.