Bronze-level articlePath to Prosperity

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The "Path to Prosperity" is the Newspeak title of the Republican House majority's long-term budget proposal, starting with FY 2012.[1] It is supposed to be an audacious, SeriousTM solution to the United States' budget deficit that boldly confronts unpleasant truths and pays no heed to sacred cows. Measured, yet sometimes painful sacrifices will be demanded from each and every member of society, so the country as a whole may prosper again.

All of this will be achieved by combining a few tried-and tested methods of economic management with groundbreaking new research produced by America's finest nonpartisan think tanks. If you made it this far, you've earned yourself a five minute laughing break before reading on.

Contents

[edit] The plan

The Republican budget proposal was introduced by wannabe policy wonk Paul Ryan in April 2011. It was initially greeted with rave reviews on the part of the punditocracy, apparently before people got around to actually reading and making sense of the document.[2] The cornerstones of Ryan's plan are as follows:

  • Enact new tax cuts, making even today's all-time lows look desirable. While this is par for the course for Republican policy proposals, it's a somewhat unorthodox solution for... closing a budget deficit. The only concrete proposal for tax reductions concerns the highest bracket: the top individual tax rate is to drop from 35% to 25%.[3] This would amount to reducing tax revenue by about 4.2 trillion over a ten year period, making the plan's stated primary goal substantially harder to achieve.[4][5] Contrast this to the OECD average, which is around 41.5%.[6]
  • Reduce federal spending relative to overall GDP. Spending that is not related to health care and Social Security expenditures is supposed to drop from a current (2010) level of 12% to 6% in 2022, and only a paltry 3.5% in 2050. Total federal spending is supposed to drop from 22.5% to 14%. The plan does not offer any specifics on how to realize these drastic spending cuts.[7] Again, this would largely be considered a joke if proposed in other corners of the Western world.[8]
  • Abolish Medicare in its current form. The new tax cuts are supposed to be enacted immediately, but the biggest cutback to federal health-related expenses is supposed to come a few years down the road to sweeten the deal. For everyone below the age of 55, Medicare entitlements would be replaced with vouchers to buy private insurance. These vouchers would only cover a fixed sum reflecting today's health care costs, steadily adjusted for overall consumer price inflation.[9] However, since these costs are subjected to extreme inflation and have recently risen at annual double-digit rates, the vouchers would be completely inadequate to cover actual health care costs down the road. In effect, it would rob seniors of affordable health insurance in order to finance tax cuts for high income earners.
  • Sit back and reap the benefits of an unprecedented economic boom! Since even the draconic health care cuts outlined above would not suffice to finance new tax cuts and close the deficit gap, a little bit of supply-side magic is needed. Ryan's plan rests on completely unrealistic economic assumptions: unemployment is supposed to drop below 4% by 2015(!), something that was achieved for the last time in 2000, after seven years of substantial economic growth, and even then it lasted only for a short time before the dot-com bubble burst.[10] Unemployment would then gradually slide below the 3% threshold by 2020, indicating that Ryan's plan would also abolish unpleasant things like economic crises, recessions or downturns in the business cycle. Such levels have historically only been achieved in wartime or directly afterwards - times when government spending is extremely high and creates a huge demand. However, remember that all of this is supposed to follow drastic spending cuts and necessary massive layoffs of government employees.

In short, this plan is not a serious policy proposal, but rather an exercise in wishful thinking and/or outright fraud. The measures it proposes have failed in the past - like the attempts to boost overall tax revenue through tax cuts - or are impossible to implement because they'd trigger massive opposition.

In the short term, the GOP would be able to obtain its number one priority in the form of yet more tax cuts for the rich; in the long term, others would have to take care of a deficit that would only grow even faster when the revenue side of the equation is reduced once more. The Ryan plan is strongly reminiscent of the old Republican tactic of "starving the beast": it purposefully empties the government's purse by slashing taxes in the present, and would leave future generations an unappealing choice between bankruptcy and eliminating popular social programs. Republicans and supply-siders may often profess grave concerns about the level of national debt, but when they were in charge, they were among the worst offenders in increasing it, as happened under the Reagan, George H. W. Bush and George W. Bush administrations.[11] The Ryan plan is simply an attempt to sell the same failed policies under a new label.

[edit] Reactions

While the so-called "liberal media" initially heaped praise on their newest darling, the plan has been met with incredulity and derision on the part of experts. It is clearly not designed to seriously address the deficit, but would mostly result in a huge wealth redistribution from the poor to the wealthy. In a rare flash of unscripted honesty, even Newt Gingrich called the plan "radical" and "right-wing social engineering."[12] It could also turn out to be politically suicidal, as the public seems to have realized what this proposal would do to Medicare, which is a quite popular program.[13] In a special Congressional election held a month after the Republican majority approved the plan, a Republican-leaning seat in New York was lost to a Democratic challenger who focused her campaign on the proposed changes to Medicare.[14]

[edit] See also

[edit] External links

[edit] Footnotes

  1. House Budget Committee: FY 2012 Budget
  2. For example, compare this gushing editorial by Slate's Jacob Weisberg with his more sober assessment from just two weeks later.
  3. Path to Prosperity, p. 50
  4. Center on Budget and Policy Priorities: Ryan Budget Plan Produces Far Less Real Deficit Cutting than Reported
  5. Factcheck.org: Ryan's budget spin
  6. http://www.oecd.org/ctp/48193734.pdf
  7. Paul Krugman: Paul Ryan’s Multiple Unicorns
  8. http://www.oecd.org/unitedstates/47876687.pdf
  9. Kaiser Family Foundation: Proposed Changes to Medicare in the "Path to Prosperity" (PDF)
  10. Paul Krugman: Ryan the Ridiculous
  11. Reagan managed to increase the level of federal debt as a share of GDP from 32.5% to 53.1%, Bush 43 managed to drive it up from 56.4% to 83.4%. See here for details (Excel spreadsheet).
  12. Politico: Newt Gingrich's rough roll-out
  13. FiveThirtyEight: The Ryan Budget Tipping Point
  14. New York Times: Democrat Wins G.O.P. Seat; Rebuke Seen to Medicare Plan
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