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A Progressive Response To The Paul Ryan Path To Working Class Oblivion

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I was anxiously awaiting Rep. Paul Ryan's budget plan "The Path to Prosperity" a couple of months ago. Many other people were doing the same. Ryan is the Republican House Budget Committee Chairman and he had a reputation for being a responsible budget cutter. I expected extremely sharp cuts in most programs but not a draconian social re-engineering of our entire social safety net. Medicare and  Medicaid  as we know them are completely eviscerated by Ryan's plan and are turned into voucher programs. He would also repeal the new Healthcare Reform program just passed in 2010. He claims he will drastically cut corporate welfare by ending bailouts and dismantling Fannie Mae and Freddie Mac

Curiously Ryan refuses to touch tax breaks that benefit immensely profitable corporations such as oil companies. Many programs are eliminated or slashed that have the broad support of the Democratic party while leaving intact programs that are favorites of the GOP. These programs represent a negligible percentage of the budget and thus are simply partisan political cuts. The middle and lower classes have been effectively stripped of most of the social programs that they rely on in his budget plan. To add insult to injury, he included tax cuts for the wealthy and added tax breaks and incentives for Corporate America while making those social safety net cuts. 

I agree with Rep. Ryan that we urgently need to close this massive budget deficit. It threatens to destroy our country's creditworthiness and will saddle our children and grandchildren with crushing debt. Unfortunately Rep. Ryan has proposed a plan that is a cruel insult to the working class of the United States. If implemented it will drop millions into poverty and leave millions more extremely vulnerable. We can do better than this and I have my own plan to start significantly cutting the budget deficit without endangering the welfare of the vast majority of our citizens. I will address only the three largest parts of the federal budget because they are the only areas that will yield significant savings or revenue to address this massive deficit. These areas are Defense and Homeland Security, social entitlements, and the tax code. These components will yield the savings and revenue that will put the United States on the road to fiscal solvency without sacrificing the working class of our country.

The United States military complex has been growing exponentially since the end of World War II. President Dwight Eisehhower warned the nation about the dangers of this phenomenon at the end of his second term. This rapid growth continued on unchecked whether there was a war being conducted or not. The Cold War was the usual reason given for this growth until the Soviet Union fell apart in the 1980's. Yet this growth continued through the 1990's without a war to justify it. 

Then the 9/11 attacks occurred in 2001 sending military and homeland security spending soaring. Combine this with the subsequent Afghanistan and Iraq Wars and defense spending went through the roof. Military spending for 2012 is scheduled to total 680 billion dollars. Total defense spending including the Homeland Security departments will total 881 billion. The spending for the Afghanistan and Iraq Wars will be 118 billion. 

These runaway expenditures must be cut sharply. Serious cuts may be achieved through a continuation of Secretary Gates' proposals for sharp reductions in redundant weapons systems and military bases. I also believe there should be sharp reductions in troop levels in Europe and Asia. Nuclear weapons expenses should also drop as a result of the new nuclear arms treaty with Russia. I believe we can achieve 80 billion dollars worth of savings annually by way of these cuts. By 2015 the U.S. war commitments in Afghanistan and Iraq should be down dramatically leaving only advisory and support troops. Expenses should be down to a total of 30 billion dollars per year at a maximum. That will save us 90 billion dollars annually. This makes my final estimate of defense savings for military, defense, and homeland security 170 billion dollars a year. It will take a lot of political muscle and tenacity to navigate this plan through Congress, the military brass, and the defense contractor lobbies. If done correctly it will strengthen our economic security without lessening our national defense.

Now let us turn to the area where Paul Ryan was the most controversial and cruel. This would be entitlements spending. The four main programs involved here are Social Security, Medicare, Medicaid, and the new Healthcare Reform plan. Let's start with Social Security. I constantly hear that this program is broken. Nonsense! Demographics caused by the retirement of the Baby Boomers will be causing a shortfall in this program for a few decades. The fix is a simple one and long overdue. There is an income threshold where social security deductions can be withheld from employee paychecks but no higher. Currently this income level is $106,800. 

Social Security has not undergone a major change in its structure since 1983. I believe now is the time for a change especially with so many Baby Boomers retiring. The retirement benefits eligibility age has already been pushed higher a couple of times. I think it is now time to raise that income threshold to $120,000. My estimate is that this change will generate an additional 50 billion dollars a year into the Social Security fund.   Let us then turn to what is probably the thorniest entitlements program. That would be Medicare. A large amount of savings in the Medicare program has already been included in the Healthcare Reform bill which will start in during the year 2014. I believe another 20 billion dollars annually in waste and fraud can be extracted out of this system. 

Unfortunately these cuts are not enough. Medicare spending is expected to total 468 billion dollars in 2012. Only 57% of this total is now financed through Medicare withholding taxes. The government withholds 1.45% of an employee's wages per check for Medicare as well as taxing his or her employer the same amount. These rates have been in effect since 1987. This was many years before the retirement of the Baby Boomers was due to transpire. 

The time has come to accommodate this major demographic shift. I propose that this rate be raised to 1.75%. This change would raise approximately another 56 billion dollars annually bringing the percentage of Medicare spending covered by Medicare withholding taxes up to 70%. The balance of Medicare funding comes from general revenues. Medicaid is fully funded by general revenues in the budget. The estimated 2012 expenditures for Medicaid are 269 billion dollars. I believe that 20 billion dollars of waste and fraud could easily be found in this massive yet essential program for the poor. 

Much skepticism has been leveled at the new Healthcare Reform plan both during its creation and subsequently after its passage. Many predict it will cause the budget deficit to skyrocket. This is why Rep. Ryan wants to repeal this hard fought for new program. I totally disagree with his premises and his conclusions. My belief is that it was a carefully crafted plan and was designed to be budget neutral. I also believe it will remain so as long as its critics are unsuccessful in their attempts to have it significantly altered. Finally there are also several other mandatory programs that are estimated to cost American taxpayers a total of 598 billion dollars in 2012. I believe we can also find savings in these various programs of 60 billion dollars in fraud and waste without much problem. All told I have come up with 206 billion dollars in savings and tax rate hikes in our various entitlement programs that can be applied to the budget deficit.

The final aspect of the federal budget that I would like to address is the United States Income Tax Code. My budget deficit solution in this area comes in two parts. The first is very simple. Allow the Bush tax cuts to expire at the end of 2012. The expiration of these tax cuts would yield the Treasury an extra 325 billion dollars annually. These cuts were foolishly passed in 2001 due to the large budget surpluses the U.S. was running after years of deficits. My belief is that these surpluses should have been applied to retiring much of the debt that we had incurred during previous years. The economy was humming along and did not need the stimulus that these tax cuts would provide. President George W. Bush promised these cuts in an effort to get himself elected during the 2000 Presidential election. I guess this should put to rest the myth of Republican economic common sense. We went back into a budget deficit almost immediately. 

Then the terror attack of 9/11 took place and all bets were off. The subsequent spending for homeland and national defense swelled the deficit even further. Then we entered into the Afghanistan and Iraq wars and our national budget deficit hit levels never imagined before. Yet President Bush never asked the American people for any sacrifice to fight this " War on Terror " that he had declared. I propose we now eliminate these Bush tax cuts to help balance the budget and return us closer to the fiscal sanity of the 1990's. Finally I would like to address some corporate tax breaks and some individual deductions. 

The two industries that I would like to focus my proposals for ending corporate welfare tax breaks on are oil and farming. These sectors are flourishing and are generating immense profits. It is hard to justify continuing their tax breaks in this dismal budget environment. The oil industry gets 21 billion dollars a year in tax breaks while they earn much more than that quarterly. These subsidies are almost one hundred years old and are clearly no longer necessary. The industry is now completely mature. Besides, we are attempting to transition to alternative renewable energy sources. 

The farm subsidies are an anachronism from the Great Depression era when a huge amount of small farmers were going bankrupt. American farming is now dominated by massive corporate farms which are commanding record profits. It is difficult to argue that they have a real need for the 20 billion dollars a year in subsidies that they currently receive. I would also propose the elimination of the 3 billion dollar ethanol subsidy. Ethanol utilizes almost as much energy to create it than the energy it replaces. Therefore I consider this subsidy to be a total waste of money. I would also eliminate the state and local income tax deduction which costs the U.S. Treasury 50 billion dollars a year. This deduction always seems to be on the chopping block only to be saved at the last minute. I believe the time has come to finally strip this deduction out of our tax code. The deficit is too massive to allow it to continue. 

I would also place some restrictions on the home mortgage interest deduction. This deduction was abused in recent years helping to fuel the housing bubble. It helped finance many second homes, summer homes, and home equity loans. My restrictions would only allow this deduction for primary homes worth 1 million dollars or less. All other mortgages and home equity loans would now be ineligible for this deduction. The restrictions on this deduction will save the U.S. taxpayer approximately 25 billion dollars a year. All told my changes to the Federal Income Tax Code will generate an additional 444 billion dollars a year and cut the budget deficit by over 40%.

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I am a 54 year old financial services professional. I graduated from Wagner College in 1980 with a Bachelor of Science in Economics and Business Administration with a minor in Sociology. My interests beyond economics lie in politics, literature, (more...)
 

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The Republicans are threatening to push the United... by Howard Schneider on Friday, Jul 1, 2011 at 7:56:53 AM
eliminate the cap on social security taxes. Assess... by Rob Kall on Friday, Jul 1, 2011 at 7:57:42 AM
I agree with you Rob but I do not think this is an... by Howard Schneider on Friday, Jul 1, 2011 at 9:16:25 AM
Your grasp and study of the issues, as well as pos... by Jillian Barclay on Friday, Jul 1, 2011 at 10:31:56 AM
I want Paul Ryan's Path to Prosperity to remain ar... by Howard Schneider on Friday, Jul 1, 2011 at 1:15:10 PM
The time has come to repeal all income taxes in Am... by Paul from Potomac on Friday, Jul 1, 2011 at 11:01:52 AM
You have an interesting proposal Paul but I d... by Howard Schneider on Friday, Jul 1, 2011 at 4:45:06 PM
I disagree...you can't really duck mandatory deduc... by macdon1 on Saturday, Jul 2, 2011 at 1:39:44 PM
We need the income tax to collect not only income ... by Howard Schneider on Saturday, Jul 2, 2011 at 4:30:32 PM
Informative, enjoyable and appropriate. Valid poin... by Dan Cooper on Saturday, Jul 2, 2011 at 9:32:33 PM
Thank you Dan. i thought we needed some common sen... by Howard Schneider on Saturday, Jul 2, 2011 at 9:44:13 PM
Howard:We should also be making sure that individu... by Bruce Slivnick on Thursday, Jul 7, 2011 at 1:34:14 PM
You are right Bruce. I am all for better enforceme... by Howard Schneider on Thursday, Jul 7, 2011 at 2:55:24 PM