Path to Prosperity?

            A couple weeks ago, the GOP rolled out its 2012 budget proposal, Paul Ryan’s “Path to Prosperity,” which did a huge favor for the Democratic Party and the increasingly diminishing number of Americans to whom facts and logic are things to be admired, not sneered at and twisted.  It put in plain black and white what the Republicans have advocated in oblique ways for 30 years—the party’s desire to see this country become a plutocracy where big money, whether corporate or individual, rules the day.

            Specifically, the GOP proposes to reduce the budget deficit dramatically by cutting 4.3 trillion dollars in spending over the next ten years.  Never mind that the actual budget deficit reduction would be more on the order of 1 billion dollars when you factor in the 4.2 trillion dollars in tax cuts—well over 90% of which would go to wealthy individuals and corporations—over the same period.

            The kicker is that fully 2/3 of the spending cuts come from programs aimed at ordinary Americans.  Those programs range from education to assistance for the poor to infrastructure renewal to job training to regulatory agencies to health care.  Among the things not cut are defense spending or corporate welfare—though, to be fair, the Ryan budget does cut ethanol subsidies.

            Not surprisingly, since virtually every Republican in Congress signed Grover Norquist’s pledge to never raise taxes, obvious deficit reduction opportunities like income taxes on the wealthy, estate taxes, capital gains taxes and corporate taxes are not anywhere to be found in the Path to Prosperity.

            Nowhere however is the disparity between the sacrifice Ryan’s budget demands from the less fortunate and what it demands from the most fortunate more apparent than in the area of health care.  The Path to Prosperity takes dead aim at health care programs for Americans at both ends of the spectrum—children and senior citizens.

            Let’s look at the senior citizen aspect first.  Here the target is Medicare.  Amazingly, to me at least, when Ryan first presented his budget proposal, even normally left-leaning media like the Washington Post and the New York Times hailed it as a “courageous” action that finally put one of the bigger elephants in the room on the table.  I can only assume that the editorial boards of both papers reacted to the fact that the words “Medicare” and “overhaul” appeared in the same sentence, wrote their headlines on that basis, then actually read  what the overhaul would comprise.

            Beginning in 2022, Medicare under Ryan’s plan would stop being an entitlement paying defined benefits.  Instead, seniors would be given what the Path to Prosperity calls “premium support” with which they could purchase private insurance.  The Congressional Budget Office has already released figures showing that a 2022 retiree would face at least $6,400 more in out of pocket payments to acquire private insurance comparable to what Medicare presently offers.

            Who benefits from this proposal?  Clearly, the federal government will be paying way less for senior citizen medical care then it does now, so the federal budget enjoys a benefit.  Clearly also the medical insurance industry will benefit enormously.  2022 will be right near the peak of “baby boomer” retirement, so millions of people will be needing the coverage they now receive from Medicare. 

            Who won’t benefit however is just as clear.  Seniors in the middle and lower income brackets, who frequently have a difficult time handling what Medicare doesn’t pay now, will have the insurance industry’s hand even further in their pockets.  And while the Republican mantra is that insurance companies will be competing so hard for the new business that the cost of insurance will be held down, a reality check would perhaps be in order.  Keep in mind that the Path to Prosperity also calls for a total repeal of the Affordable Care Act—what Tea Partiers like to call Obamacare.

            That means that insurance companies would again be able to refuse coverage, or require grossly inflated premiums, co-payments or deductibles, for “pre-existing” conditions.  Find me a 65 year old who doesn’t have something a health insurer can call a pre-existing condition.  Repealing AFA would also mean insurance companies would again be allowed to raise premiums on anyone who has the temerity to get sick and file a claim.  And, if the claim gets too big, insurance companies would again be free to simply drop you.

            So, would insurance companies compete for all this new business?  Sure, but in the gentlemanly way they do now.  They would all set their premiums at a comfortable profit level for themselves—one which wouldn’t differ more than a dollar or two per month no matter what company you looked at.  They would then all find the same reasons to require your particular insurance policy to be more expensive than the base price. They would continue to pay less or require greater co-payments if you came down with appendicitis while on vacation and had to use an “out-of-network” emergency room to keep from dying.  They would continue, in other words, doing all the things they do now to maximize their bottom line.

            And since there is nothing in the Path to Prosperity to put the brakes on medical cost increases (in fact, there are a couple of things that take the brakes off), nor anything to protect consumers from predatory insurance industry practices, it is safe to assume that out of pocket expenditure for seniors will creep up a bit every year.

            At the other end of the spectrum, the Path to Prosperity would withdraw federal funding for the S-Chip program which provides children from low income families with access to basic medical care.  It would also cut back or eliminate programs that provide pre- and post-natal care for low income women, and most importantly, substantially reduce federal support of state Medicaid programs—which are primarily responsible for what minimal level of health care children and teens from low income families receive.

            When you focus on medical care, there are some really stark differences between the Path to Prosperity and what President Obama proposed in his budget speech.  Both plans trumpet large savings over time in medical care costs to the federal budget.  Interestingly, though hardly surprisingly (see my first paragraph), Ryan proposes using those savings exclusively to reduce the budget deficit.  In fact, those savings are the single biggest item in his proposal.  Granted, there is some vague language about using part of the savings to make Medicare more solvent, but since Ryan is basically calling for the shutting down of Medicare, its solvency becomes something of a moot question.

            The Democrats, on the other hand, propose using most of the savings the Affordable Care Act realizes from Medicare reform to pay for the cost of extending insurance to the 30-odd million people, most of them low income—who don’t have it.

            The President’s proposal also calls for the federal government to provide subsidies to assist seniors in dealing with the “doughnut hole” in Medicare Part D coverage.  The Path to Prosperity ignores that substantial hardship many seniors now face.

            Finally, the President’s speech advocated authorizing Medicare to negotiate directly with drug companies over the price of prescription medicine.  The Veterans’ Administration currently has that authority, and currently pays nearly 40% less for prescription drugs than Medicare is forced to pay.  Enabling Medicare to save 40% on what it pays for drugs would seem an obvious place for budget deficit hawks like Ryan to look for savings, but, strangely, he chose to ignore that one.  Perhaps the fact that Medicare’s savings would come out of Big Pharma’s profits had something to do with it.

            I’ve alluded several times in recent blogs to my growing sense that an ever enlarging segment of the American population is no longer capable of looking at the facts of Republican and Democratic positions on issues that clearly affect them, and determining which set of facts are most beneficial to themselves.   If you are in that top 5 or even top 10 percent of incomes, perhaps what happens to Medicare or S-Chip doesn’t matter.  If you’re anywhere lower on the income scale, what happens to those programs, and what happens with medical costs generally, should very much concern you. 

           

            And the facts with respect to medical coverage are, as one sign holder at a Ryan town hall in Wisconsin put it, that the Path to Prosperity is more like a Road to Ruin.

            

on ryan and rand

            In my last blog,  I wrote a speech for President Obama that was essentially designed to draw lines in the budgetary sand that could  establish Democrat controlled parameters for future budget debates.  Last Wednesday, the President ignored my speech and gave his own. Though the cheekiness of that offends me a bit, and though his speech neglected to draw several very important lines in the sand, it did at least establish a moderate (I wouldn’t go so far as to call it liberal) position to stand in stark contrast to the John Galt vision of America that Representative Paul Ryan introduced a bit earlier and the Republicans passed in the House shortly after the President’s speech.

            If the John Galt reference doesn’t resonate for you, he is the character at the center of Ayn Rand’s novel, Atlas Shrugged, who is essentially calling on America’s financial and corporate elite to go on strike—to withdraw their services and let the nation of moochers and laggards who have been living off what the genius of their betters produces fend for themselves. 

            The novel, which took Rand 12 years to complete, was published in 1957 to generally tepid reviews, but soon developed a cult following and is today held in much the same esteem by die-hard conservatives as the Bible.  Its premise is that great minds drive business, business drives the world, and anyone or anything that stands in the way of unfettered pursuit of profit is reactionary and needs to be eliminated.

            Not surprisingly, Rep. Ryan is an Ayn Rand acolyte who credits her books (The Fountainhead is her other major work, drumming the same beat as Atlas Shrugged) for getting him interested in entering politics.  He also reportedly requires his staff to read Atlas Shrugged.

            A few numbers are perhaps a good way to start looking at Ryan’s budget proposal.  When originally introduced, it claimed over 5 trillion dollars in cuts.  Once the most glaringly incorrect numbers were pointed out, the savings claim was reduced to 4.3 trillion dollars. 

            On the revenue side, Ryan proposes cuts to individual and corporate tax rates from 35% to 25%, elimination of estate tax, near elimination of capital gains tax and the closing of unspecified deduction loopholes.  Ryan didn’t do this math in his speech unveiling the proposal, but the Congressional Budget Office did, and the total comes to 4.2 trillion dollars. 

           

            So, the Ryan (Republican) budget would lower federal expenditures by 4.3 trillion dollars (though much of this is illusory, consisting of  “cutting” funds allocated years ago but never spent—including over 400 million dollars one agency had already volunteered to give back), but it would also lower federal revenues by 4.2 trillion dollars.  The net effect on the budget deficit?  About a billion dollars, or barely one percent of the federal budget.

            It’s also worth noting that the tax rate on individuals that Ryan wants to cut is the one that the wealthiest 5% of Americans exist in.  If you earn, say, 50,000 dollars/year, cutting the tax rate from 35% to 25% will give you a whopping one percent reduction in your taxes.  If you’re making 200,000 dollars/year, the savings is 10%.

            But, Ryan’s defenders are quick to point out, cutting taxes on corporations and the wealthy will actually produce more tax revenue than the current tax structure because more jobs will be created and the economy will grow. 

            Please!

            That is the same “voodoo economics” that Reagan and his minions trumpeted in 1981 when they hammered through a giant cut for the wealthy.  The economy promptly went into a swoon and 4 years later Reagan raised taxes. 

            We went through the same idiocy again under Bush I.  Taxes were cut at the start of his administration, and even though he challenged us to read his lips, they had to be raised again to prevent a recession.

            Never one to be bothered by history, Bush II put the cuts we presently have in effect and a trillion dollar budget surplus quickly became a multi-trillion dollar budget deficit.

            That surplus was achieved in part because President Clinton and the Democrats passed a tax increase that Republicans loudly decried as poisonous to economic growth—only to watch the economy reach heights not seen before or since.

            Was it Einstein who said insanity could be defined as doing the same thing over and over and expecting a different result?  By that standard, the last 30 years worth of Republicans should be institutionalized.

            But the Randian nature of Ryan’s budget isn’t just in the windfall it directs to the wealthy and to corporations.  In both Atlas Shrugged and The Fountainhead, Rand makes it clear that the working class is a necessary evil.  Someone has to stand on the factory assembly line or behind a retail counter or keep records at the DMV, but those people should be grateful for the opportunity to do those menial things, opportunities that are created by the elite, and when they are no longer capable of standing for eight hours a day, they should hobble off somewhere and disappear.  For her, there were those intelligent and resourceful enough to rise to the top, and there were drones.  And drones were more or less equivalent to domestic livestock—their job was to serve their purpose and then die.

            In Rand’s world, what sucks society down, keeps the wealthy and successful from making it all it could be, are misguided efforts to provide for drones, to establish what we have come to call a “social safety net.”  In her world, factory workers and retail associates and file clerks don’t need an education, have no right to housing or food or medical care beyond subsistence level.  She wouldn’t have said, “Let them eat cake,” because, well, they don’t really need cake.  Flat bread is sufficient.

            As her acolyte, Ryan proposes in his budget to repeal the Affordable Care Act (that constitutes a big chunk of his supposed “savings”) and replace it with—nothing.  He does, however, have some recommendations about medical care for seniors and the poor.  For seniors, he suggests dismantling Medicare and replacing it with a $15,000 annual grant with which they could purchase private insurance.  Ryan must have nearly broken his arm patting himself on the back when he came up with that one, because it not only substantially reduces government spending on health care, it provides a huge subsidy for the insurance industry.  Two birds with one stone!

            For the poor, who are mostly covered by Medicaid, he proposes a similar block grant to states which they would be free to administer any way they wanted. 

            How Ryan came up with $15,000 as the appropriate figure for the Medicare grant is uncertain, but let’s think about that for a second.  Roughly 60% of Americans currently have some level of health insurance through their place of employment.  They don’t need Medicare (or its replacement) until they retire.  And while some folks can retire as young as 55, most of us have to work into our early to mid-60’s before that becomes possible.  If I had been forced to find a private insurance policy when I retired, I would have had to list arthritis, high blood pleasure, degenerative disk disease and hypoglycemia as existing conditions.  I would also have had to note a bout with ocular cancer 12 years ago. 

            Now keep in mind that Ryan’s budget repeals the Affordable Care Act, so, as they could prior to its passage, insurance companies would be able to deny coverage or jack up premiums and co-pays for pre-existing conditions.  It’s hardly beyond the realm of possibility that I would not be able to find insurance coverage at all under Ryan’s plan, or that, if I did, the premium along with co-pays and deductibles would be well in excess of $15,000.  And I’m more than relatively healthy for my age!  But then, I’m a drone.  I should be happy for whatever bone is tossed me.

            Ah, say Ryan’s supporters, you neglect the fact that insurance companies would be competing for your business, which would surely hold costs down.  Again, please!  Insurance companies before the Affordable Care Act were hardly knocking down the door trying to get seniors enrolled in their plans.  Seniors are not good insurance risks.  Weren’t then, aren’t now.  What incentive would insurance companies have to compete on the price level for customers they know will be filing claims—and filing them sooner rather than later.

            As for block grants to states, that is nothing more than an additional incentive for states to keep people off Medicaid rolls.  And they do a very effective job of that now.  It is also wonderfully disingenuous of Ryan and his Republican allies.  First of all, his budget proposal doesn’t say how much each state will get, or how that figure will be arrived at.  Since he’s listing that as a way of reducing the federal deficit, however, it stands to reason that he envisions the block grant being substantially less than the federal government sends to states now.  It’s cowardly not to say up front how much less.

            Second, if the federal contribution is less, states have one of three options, none of them good.  They can simply find ways to exclude people from Medicaid, they can make large cuts in other areas of their budgets in order to pay for Medicaid, or they can raise their own taxes and apply the increase to Medicaid.  The consistent thing about all three options is that they hurt people, particularly poor people.  But then, they’re drones.

           There are many other Randian elements to Ryan's budget, but dealing with them all would turn this into a book.  Suffice it to say that, measured by an standard, Ryan's budget extracts fully 2/3 of its 4.3 trillion in cuts from programs that primarily serve the middle and lower classes.  The drones.

            What worries me at the moment is that the speech Obama gave and the budget plan he unveiled, while clearly more humane (that is, less Randian) than Ryan’s, is at best a moderate, perhaps slightly left leaning proposal.  If it becomes the left pole to the Ryan budget’s right pole in the coming budget debates, the center starts off way to the right. 

            Ayn Rand is probably chuckling in hell right now, but we drones have cause for concern.

            

a speech i'd like to hear

            Unless you’ve been in a cave  deep beneath the earth for the past two weeks, you know we very nearly had a federal government shutdown.  Media attention to that problem focused mainly on the political fight involved.  How much would the Democrats agree to?  Does the Tea Party run the GOP? Does Harry Reid actually exist?  Will John Boehner cry all the way to political nirvana?

            What generally got ignored was what a government shutdown would have meant to folks who didn’t suck at the public teat on capitol hill.  That list would include, but not be limited to, the following:  Social Security checks would not have gone out; Medicare claims would not have been processed; the federal component of Medicaid (roughly 70% of it) would have shut down; the incomes of at least 800,000 federal employees would have been put on hold—with, incidentally, no guarantee they would have been made up once the shutdown ended; military personnel would (depending on which source you believe) either receive no pay, or receive pay for the first week of a shutdown and then no pay (this would include those members of the military currently being shot at in Iraq and Afghanistan); all the federal regulatory agencies would stop regulating (though with some, like the Securities and Exchange Commission, you might not have been able to tell the difference); air traffic controllers and most postal workers would have stayed on the job, but without pay and without a guarantee that their pay would be made up—I’d work hard under those circumstances, wouldn’t you?; the federal court system would have closed up shop (my God, Barry Bonds might go free); some FBI agents would remain on the job, but their labs and administrative offices would have closed . . .

                       

            You get the picture.  Our politicians in Washington were playing chicken with the very fabric of American society, or, maybe a better metaphor, with the ligaments, tendons and other connective tissue that hold the American skeleton together.  And why?  In the case of the Democrats, it was because they had no choice.  By even the most conservative estimates, the cuts the House Tea Partiers wanted would have cost the economy a million jobs and absolutely short-circuited the fitful recovery we seem to be making from the Great Recession.

            In the case of the Republicans, it appears to have involved a combination of hubris, cynicism and opportunism.  The hubris was evident in the chest-thumping the Tea Partiers were doing about the fact that they COULD shut the government down.  The cynicism was manifest in comment like Boehner’s “So be it” response to a reporter who pointed out that House budget cuts would eliminate 650,000 federal jobs.  The opportunism was clear in the House insistence on including social policy “riders” that had nothing to do with money in a budget bill.

            That the Republicans are easily identified as the bad guys in this struggle does not absolve the Democrats.  What the budget debate showed clearly (if it wasn’t clear enough already) is that the Democratic Party leadership, including the President, has a very difficult time finding a principle it can’t run away from.  How else to explain two weeks of debate over a budget proposal  that contained 30-odd billion dollars in cuts but not one penny in tax increases for the wealthy or for corporations, during which the unfairness and unacceptability of that formula was never even brought up? 

            How else to explain a fight over whether the cuts should be 32 billion, 33 billion, 38 billion or 40 billion, but no fight over the fact that 2/3 of those cuts (whatever the dollar amount) were going to come from programs that affected almost exclusively the middle and lower classes?

            Here is the problem as I see it.  On every important issue since Obama became President, the Democrats have stuck their collective heads in the sand and allowed the Republicans to define the parameters within which debate would occur, then cautiously pulled their heads out of the sand and attempted to debate within those parameters.

            And the Republicans have gotten progressively better at defining parameters in their favor.  During the TARP debate, they tried to define the debate as being a budget deficit issue, but the country (and world) was in obvious enough economic peril that even red state mouth breathers couldn’t get too much behind that one.

            The GOP stepped up its game considerably on health care reform, tossing out death panels, socialism and government intrusion into the precious doctor/patient relationship as the brackets within which the debate would be held.  The result was no public option, no single payer plan, and most important to Republicans, no machinery to control pharmaceutical costs.

            When financial sector reform came to the front, the Republicans immediately stipulated that any rule limiting Wall Street’s ability to reward its denizens with obscene bonuses would cause its most talented players to leave the street, that reimposing Glass-Steagall would cost Wall Street billions, as would any sort of meaningful regulation of the derivatives markets.  And, what do you know, none of those issues were really part of the ensuing debate.

           

            In the present instance, the Republicans started thumping the deficit reduction drum last November when the Democratic congress was trying to pass a 2011 budget that would have spared us the recent showdown, and once again, the Democrats responded by in effect saying, “oh yeah, the deficit’s a problem”—thereby acquiescing to the notion that the debate should be about how deeply to cut the deficit, not whether now was the best time to do that.

            I’m occasionally given to flights of fancy, so indulge me please in this one.  I would love to see Obama commandeer prime time television and give a speech that went something like this:

            Good Evening.

            As all of you know, we recently engaged with the other party over  a bill to provide 201l funding for the federal government.  An agreement was eventually reached and what would have been a catastrophic event—the shutting down of government—was avoided.

            If you will recall, the budget I proposed for 2011 last year contained about 10 billion dollars in cuts.  The Republicans immediately castigated me for being too cautious, even though caution about reducing government spending in the midst of a very fragile recovery was the advice of just about literally every economist in the world who was not employed by the Republican party.  Speaker Boehner subsequently proposed an additional 23 billion in cuts—a total of 33 billion.  Reluctantly, I agreed to that figure.

            Under considerable pressure from the Tea Party backed members of his caucus, Speaker Boehner, a couple weeks ago, upped the cuts to 40 billion.  In addition, again acceding to his Tea Party wing, he folded a variety of social policy riders that had nothing to do with money into the negotiation.  That launched the two week scurry to reach some sort of agreement.  In the end, the Republicans got nearly all the money cuts they sought, but were forced to exclude the riders.

            Even before that agreement was reached, Speaker Boehner was making public pronouncements about the debate over this year’s budget being simply the first of three opportunities his party would have to assert its will over the direction of this country.  It is perhaps a little incongruous that the self-described leader of “one half of one third” of the government would see that minority as sufficient to dictate what the economic and social future of the nation should be, but let that go for now.

            So our friends in the Republican party and the people of the United States can be clear that they will not dictate the terms of either debate--as they have so successfully done in the past, here are the parameters my administration will set.

            First, we have already agreed to what I described earlier as the “largest single year spending deduction” in our nation’s history.  In a couple weeks, as required by law, Congress will need to vote on raising the debt limit so the nation’s financial obligations can be met.  Let us be clear about one thing.  Raising the limit on the amount of debt the country can carry has nothing intrinsically to do with budget deficits.  So, we will brook no debate over further mandated spending cuts in the 201l budget.  Congress will pass a clean bill raising the debt limit, or it will not.  If the Republicans want to ruin the country’s international credit standing by forcing default on our debts because we will not cut anything further from a budget that has already been reduced 38 billion dollars, let it be on their heads.

            Nor will we agree to any policy revisions of the sort proposed in the recent debate.  Regulatory agencies will  continue regulating and social service organizations will  continue their social services.  There will be no negotiation in that area.

            Formulating the 2012 budget will commence in earnest in the Fall, and the positions I will advocate relative to it will be, to some degree, determined by the state of the economy at that point.  Assuming that the economy then will be much like it is now, in a slow and somewhat fragile recovery mode, the budgetary model I will be following will be closely aligned with the advice of the world’s best economists. 

           

            Specifically, the focus will be on economic stimulus generally and job creation specifically.  Budget deficit reduction will be a secondary priority and one that, for the most part, will be delayed until economic recovery is capable of tolerating it.  We have tangible evidence of what happens when cutting a budget deficit becomes the paramount objective by observing what has happened in England.  Prime Minister Cameron and his Conservative Party bought entirely into the “austerity is the answer” formula and made draconian cuts in education, social welfare programs, medical care—all the same targets as the Republicans have aimed at here.  Just as importantly, the British government ignored the negative impact all those cuts would have on employment.

            The result has been that England’s economy has plunged deeper into recession than it was in 2009.  Significantly, the results of the Conservative Party’s policies in England are precisely what the world’s economists predicted they would be—and what they are predicting they would be here were we to follow Republican policies.

            Let it then be understood that the budget debate this fall will not be over how much we will cut.  It will be over how much we will spend to keep the economy moving, and how much we will increase revenues to make that possible.  The word “tax,” at least when it comes from a Democrat’s mouth, will not be a dirty word.  And our attention will be trained primarily on the segments of our population that presently aren’t contributing a fair share to tax revenue.  Those would include individuals in the wealthiest 5% and the larger corporations. 

            I do not mean to suggest that spending cuts are entirely off the table.  What is off the table is any further cuts in infrastructure funding, education, scientific research, and social welfare programs.  We will be open to cuts in corporate subsidies and the defense budget.  We will also be open to beginning a dialogue on how Medicare can be restructured to begin reining in escalating medical costs, as well as a dialogue on how the fiscal independence of Social Security can be guaranteed.  Our interest in Medicaid will be restricted mostly to how the federal government can better assist the states in funding it.

            It would be appropriate to characterize what I’ve just described as our lines in the sand.  If it wasn’t before, it became clear during the recent showdown that preserving ideology is more important to at least a significant element of the Republican party than effectively governing the country.  There are important fiscal issues to be dealt with over the next 8 months.  Republican ideology will not be what sets the parameters of the debates over those issues.

            We’ll never hear that speech, nor, I fear, anything  remotely like it.  That’s a shame because absent that speech, or something very like it, political discourse in this country, and our political direction, will continue to be driven by a party whose leadership would turn us into a plutocracy and whose base would return us to the Wild West.