Reform Party of California Commentary
Economic reality and political reality
Context
Somewhere along the line, someone said that compound interest is the most powerful force in the universe.[1] That is an exaggeration, but it makes a point. Money subject to compounded interest increases exponentially over time.[2] That is good if you are saving money, can get a relatively good rate of return and have time. Since it is the flip side of lending money, a similar exponential growth phenomenon can apply to servicing debt obligations over time. There is evidence that until 2008 exponential U.S. debt increases were fueling U.S. economic activity over the last 38 years or so.[3] Relevant questions are whether our current economic situation is sustainable or not, and if not, how do we attain sustainability.
As usual, the situation is complicated. There are different ways to see economic issues and policy options. Ideologies give differing weights to various factors, with weight accorded to factors that fit the ideology. Facts are light and ideology is heavy. Liberals often argue one way and conservatives generally argue the opposite.[4] Partisan arguments are sometimes accompanied by little or nothing. Sometimes there is some data and substance, but that is usually accompanied by a lack of context and a lot of self-serving spin. The situation is usually very hard to judge. Opinion guided by ideology usually does little to shed light on what really works for any given set of circumstances. What works is what best serves the pubic interest[5], but that needs to be divined through the dense fog of the two party system.
The reality of two-party politics has to be factored into consideration of economic policy. As argued before, relations between the two parties in congress are poisonous and prospects for anything other than gridlock are not good.[6] What, if anything, will change that is unclear. Generally speaking, there are only few neutral voices that consistently try to pierce the dense fog of self-serving two-party political rhetoric. The situation is complicated and tainted by special interest demands backed by money and political self-interest.[7] That two-party context undermines the arguments that both the left and right make. Credible arguments and context have to come from elsewhere.
A key question to keep in mind is whether the two parties are being honest with the American public about our economic situation and prospects for change. Are they focused on other concerns such as blaming each other for the situation we are in or are they communicating honestly?[8] There is evidence that neither of the two parties alone will be candid. The rhetoric and posturing suggests that at the very best, the two parties might talk straight to the public if, and only if, they can figure a way to equally share voter's anger once they understand the true nature of the situation we are in.[9] Neither party is willing to fall on the sword of candid honesty about what has to come if the situation is to change in any meaningful way.
It would appear that the two parties cannot come to grips with what it is we are facing, much less have the courage to tell the public exactly what will probably happen to entitlement benefits, economic growth and our standard of living. Despite their apparent ignorance and shared culpability, they confidently blame each other and believe that the situation will get fixed if their own policies are put in place. From where the Reform Party of California (RPCA) sits, there are goods reason to believe that if either democratic or republican policy goals were fully implemented that the public interest would not be best served. The same is true if there were to be compromises between the left and the right on tax and spending issues. Both sides suffer from the same flaws the RPCA has repeatedly criticized, i.e., blind faith in ideology, corruption by special interest money and self-interest.[11]
And, as the RPCA and others have pointed out, there is roughly $70-$85 trillion in unfunded liabilities that come due and payable over the next 30 years or so.[12] That is mostly for projected entitlement program spending and other obligations such as employee pensions. The current rhetoric and finger pointing simply ignores this issue and focuses on the on the books debt, which is about $12-$17 trillion depending on how you count it. To arrive at the lower $12 trillion figure, some analysts ignore the roughly $4.8 trillion the U.S. owes itself, e.g., via debt (special bonds) issued to the Social Security trust fund.[13] Either that $4.8 trillion somehow gets paid back over time, or benefits will need to be cut.
Ryan's plan would reduce health care spending for the poor, and reduce spending for education, infrastructure, research, public-safety, and/or low-income programs. Military spending and Social Security would remain largely intact. Ryan's plan claims that it will reduce deficits by $4.4 trillion over 10 years compared to what president Obama proposed in February 2012. Among other things, Ryan's plan would (i) restrain government growth by repealing the "Health Care Law", i.e., Obamacare, (ii) repair "a broken Medicaid system", (iii) save Medicare and (iv) make the corporate tax code more competitive.
Liberals criticize Ryan's plan as pushing the burden and pain of reduced spending onto the middle and lower classes while benefiting wealthy individuals and entities. As mentioned above, there are no clear statements of exactly what effects Mr. Ryan's plan would have on ordinary people. The impact on Medicare of Ryan's plan to give people vouchers to buy insurance is unknown, but it is reasonable to guess that costs to individuals would go up. That would happen if voucher increases do not keep pace with insurance increases. A criticism of vouchers is that it negates traditional health care guarantees that Medicare provided in the past. Ryan's plan would repeal the Affordable Care Act ( the ACA or Obamacare) and reduce Medicaid spending with money going to states in block grants.
One analysis estimated that repeal of the ACA could reduce enrollment by 17 million and reduced Medicaid spending could cause up to about 14 million poor people to lose health care coverage.[15] Another analysis of a the earlier Ryan budget plan estimated that about 8-10 million low income people would lose access to food stamps.[16] The current plan presumably would have similar effects on access to food stamps. That analysis included this: "Last year (the 2011 proposal), Ryan called for extraordinary cuts in programs that serve as a lifeline for our nation’s poorest and most vulnerable citizens, with at least 62 percent of its budget cuts over ten years coming from programs serving people of limited means. That approach violated a core principle of the Simpson-Bowles fiscal commission - that deficit reduction should not increase poverty or hardship - as well as basic principles of fairness."[16]
The reality of two-party politics has to be factored into consideration of economic policy. As argued before, relations between the two parties in congress are poisonous and prospects for anything other than gridlock are not good.[6] What, if anything, will change that is unclear. Generally speaking, there are only few neutral voices that consistently try to pierce the dense fog of self-serving two-party political rhetoric. The situation is complicated and tainted by special interest demands backed by money and political self-interest.[7] That two-party context undermines the arguments that both the left and right make. Credible arguments and context have to come from elsewhere.
A key question to keep in mind is whether the two parties are being honest with the American public about our economic situation and prospects for change. Are they focused on other concerns such as blaming each other for the situation we are in or are they communicating honestly?[8] There is evidence that neither of the two parties alone will be candid. The rhetoric and posturing suggests that at the very best, the two parties might talk straight to the public if, and only if, they can figure a way to equally share voter's anger once they understand the true nature of the situation we are in.[9] Neither party is willing to fall on the sword of candid honesty about what has to come if the situation is to change in any meaningful way.
Economic reality
Credible people argue that to bring deficit spending under control, federal tax revenue needs to increase and and entitlement spending needs to decrease. For example, expert analysis says that to avoid going deeper into debt based on tax increases alone, the treasury would need to collect over $8 trillion in taxes annually, but that is not even remotely possible.[10] Part of the problem is an apparent inability of policy makers to face reality: "Neither the public nor policy makers will be able to fully understand
and deal with these issues unless the government publishes financial
statements that present the government's largest financial liabilities
in accordance with well-established norms in the private sector."[10] That sentiment reflects the well-known tactic of politicians who routinely use accounting tricks to disguise reality from the public. It is a popular political tactic that has been around for decades or longer.It would appear that the two parties cannot come to grips with what it is we are facing, much less have the courage to tell the public exactly what will probably happen to entitlement benefits, economic growth and our standard of living. Despite their apparent ignorance and shared culpability, they confidently blame each other and believe that the situation will get fixed if their own policies are put in place. From where the Reform Party of California (RPCA) sits, there are goods reason to believe that if either democratic or republican policy goals were fully implemented that the public interest would not be best served. The same is true if there were to be compromises between the left and the right on tax and spending issues. Both sides suffer from the same flaws the RPCA has repeatedly criticized, i.e., blind faith in ideology, corruption by special interest money and self-interest.[11]
And, as the RPCA and others have pointed out, there is roughly $70-$85 trillion in unfunded liabilities that come due and payable over the next 30 years or so.[12] That is mostly for projected entitlement program spending and other obligations such as employee pensions. The current rhetoric and finger pointing simply ignores this issue and focuses on the on the books debt, which is about $12-$17 trillion depending on how you count it. To arrive at the lower $12 trillion figure, some analysts ignore the roughly $4.8 trillion the U.S. owes itself, e.g., via debt (special bonds) issued to the Social Security trust fund.[13] Either that $4.8 trillion somehow gets paid back over time, or benefits will need to be cut.
A republican plan
In March of 2012, House budget committee chairman Paul Ryan (R-WI) released his "Path to Prosperity", which was a budget resolution for fiscal year 2013. It was very similar to a plan he released the year before in 2011. Ryan's 2012 budget proposal was a plan to reduce federal deficits and balance the budget in 10 years.[14] Unfortunately, the plan speaks in generalities. When it comes to what changes in spending means for individuals, there is little or no detail in Ryan's proposal. That makes it easy to criticize it as an attack on the middle and lower classes, which is how liberals tend to characterize it.Ryan's plan would reduce health care spending for the poor, and reduce spending for education, infrastructure, research, public-safety, and/or low-income programs. Military spending and Social Security would remain largely intact. Ryan's plan claims that it will reduce deficits by $4.4 trillion over 10 years compared to what president Obama proposed in February 2012. Among other things, Ryan's plan would (i) restrain government growth by repealing the "Health Care Law", i.e., Obamacare, (ii) repair "a broken Medicaid system", (iii) save Medicare and (iv) make the corporate tax code more competitive.
Liberals criticize Ryan's plan as pushing the burden and pain of reduced spending onto the middle and lower classes while benefiting wealthy individuals and entities. As mentioned above, there are no clear statements of exactly what effects Mr. Ryan's plan would have on ordinary people. The impact on Medicare of Ryan's plan to give people vouchers to buy insurance is unknown, but it is reasonable to guess that costs to individuals would go up. That would happen if voucher increases do not keep pace with insurance increases. A criticism of vouchers is that it negates traditional health care guarantees that Medicare provided in the past. Ryan's plan would repeal the Affordable Care Act ( the ACA or Obamacare) and reduce Medicaid spending with money going to states in block grants.
One analysis estimated that repeal of the ACA could reduce enrollment by 17 million and reduced Medicaid spending could cause up to about 14 million poor people to lose health care coverage.[15] Another analysis of a the earlier Ryan budget plan estimated that about 8-10 million low income people would lose access to food stamps.[16] The current plan presumably would have similar effects on access to food stamps. That analysis included this: "Last year (the 2011 proposal), Ryan called for extraordinary cuts in programs that serve as a lifeline for our nation’s poorest and most vulnerable citizens, with at least 62 percent of its budget cuts over ten years coming from programs serving people of limited means. That approach violated a core principle of the Simpson-Bowles fiscal commission - that deficit reduction should not increase poverty or hardship - as well as basic principles of fairness."[16]
The political reality
It is fair to say that Ryan's plan rejects universal health care coverage. Instead, it proposes significant federal health care spending reductions and decreases spending for other major safety net programs. In view of its failure to be clear about its effects, the Ryan plan is fairly characterized as mostly smoke and mirrors coming from a conservative ideologue focused on pushing an ideological agenda while, by being silent, hiding real projected impacts on ordinary Americans, especially the poor and middle classes.
While the Ryan plan probably would improve the federal government's fiscal health over time, one should ask if (i) this way of doing it best serves the public interest and (ii) whether most Americans want to do it that way. The fact that Ryan's plan leaves so much unspoken argues that Mr. Ryan himself is not confident that the American public would accept his proposals if they were honestly and clearly explained. As far as the RPCA is concerned, if you cannot be honest and clear with the American people about the effects of your own major policy proposals on domestic spending programs, you are very likely not best serving the public interest. Instead, you are very likely hiding policy implications that you do not want the public to be generally aware of.
Both parties now in power got us into this situation and they will not be honest about our circumstances, prospects or policy options. Neither side is willing to accept blame.[6] Our problems, including this one, are fully bipartisan. That is something the RPCA has argued repeatedly. Working within the two-party system to fix things amounts to doing the same thing over and over in a desperate plea for change. That cannot and will not happen within the two-party system. Change has to come from the outside, which is something that president Obama himself clearly acknowledges.[18] The best, maybe only, way to facilitate that change is to walk away from the two parties and the broken system they built.
While the Ryan plan probably would improve the federal government's fiscal health over time, one should ask if (i) this way of doing it best serves the public interest and (ii) whether most Americans want to do it that way. The fact that Ryan's plan leaves so much unspoken argues that Mr. Ryan himself is not confident that the American public would accept his proposals if they were honestly and clearly explained. As far as the RPCA is concerned, if you cannot be honest and clear with the American people about the effects of your own major policy proposals on domestic spending programs, you are very likely not best serving the public interest. Instead, you are very likely hiding policy implications that you do not want the public to be generally aware of.
Conclusion
Mr. Ryan's, budget plan is a smoke and mirrors political game that is routine in two-party politics. The point of the sleight of hand is to avoid blame for what Mr. Ryan and the Tea Party folks apparently want to do. However, actions like this are probably a major factor behind the loss of trust by many Americans in congress (not necessarily the federal government).[17] Like it or not, the political reality is probably this: Our situation probably is not sustainable. We are in a deep hole fiscally and it may take real pain for over a generation to get out of the mess. The coming disputes will be ideologically-grounded and center on whether our situation is sustainable, and if not, how to get us out of it.Both parties now in power got us into this situation and they will not be honest about our circumstances, prospects or policy options. Neither side is willing to accept blame.[6] Our problems, including this one, are fully bipartisan. That is something the RPCA has argued repeatedly. Working within the two-party system to fix things amounts to doing the same thing over and over in a desperate plea for change. That cannot and will not happen within the two-party system. Change has to come from the outside, which is something that president Obama himself clearly acknowledges.[18] The best, maybe only, way to facilitate that change is to walk away from the two parties and the broken system they built.
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Separate commentaries on democratic budget plans and on the proposals from the Simpson-Bowles commission will follow this commentary.
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Footnotes:
1. Link: http://quoteinvestigator.com/2011/10/31/compound-interest/.2. Link: http://mathcentral.uregina.ca/beyond/articles/CompoundInterest/Money.html.
3. Link:http://www.todayszaman.com/news-266015-power-of-compound-interest-as-applied-to-the-current-debt-crisis.html.
4. For example, the endless minimum wage disputes with the never-changing arguments or logic: http://ivn.us/2013/08/14/why-we-should-raise-the-national-minimum-wage/?utm_source=house&utm_medium=email&utm_campaign=newsletter-min-2013-08-29; http://ivn.us/2013/08/15/why-we-should-not-raise-the-national-minimum-wage/?utm_source=house&utm_medium=email&utm_campaign=newsletter-min-2013-08-29.
5. Link: http://reformparty.org/reform-party-of-california-essays-6-what-is-the-public-interest-and-how-is-it-best-served/.
6. Link: http://reformparty.org/reform-party-of-california-commentary-colloquies-in-venom/.
7. The adverse influence of ideology, special interest money and political self-interest have been argued before: http://reformparty.org/reform-party-of-california-essays-what-is-the-proper-size-and-scope-in-government/; http://reformparty.org/reform-party-of-california-essays-politics-and-special-interest-money/; http://reformparty.org/reform-party-of-california-essays-self-interest-vs-public-interest/.
8. Link: http://www.factcheck.org/2013/03/the-sequester-blame-game/; http://www.cbsnews.com/8301-505123_162-57506201/national-debt-passes-$16-trillion-should-you-worry/; http://www.cbpp.org/cms/?fa=view&id=3490; http://www.globalpost.com/dispatch/news/regions/americas/united-states/110727/blaming-obama-the-debt-crisis; http://www.bloomberg.com/news/2011-07-26/republican-leaders-voted-for-drivers-of-u-s-debt-they-now-blame-on-obama.html.
9. Link: http://www.examiner.com/article/shared-responsibility-and-shared-sacrifice-more-than-political-buzzwords.
10. Link: http://online.wsj.com/article/SB10001424127887323353204578127374039087636.html.
11. Links: http://reformparty.org/reform-party-of-california-essays-politics-and-special-interest-money/; http://reformparty.org/reform-party-of-california-essays-self-interest-vs-public-interest/; http://reformparty.org/reform-party-of-california-essays-what-is-the-proper-size-and-scope-in-government/.
12. Links: http://reformparty.org/reform-party-of-california-essays-politics-and-special-interest-money/; http://qz.com/111454/the-us-government-has-about-70-trillion-in-off-balance-sheet-liabilities/.
13. According to the trustees 2012 report (http://www.ssa.gov/pressoffice/pr/trustee12-pr.html), the Social Security trust fund (http://en.wikipedia.org/wiki/Social_Security_Trust_Fund) was owed $2.7 trillion at the end of 2011.
14. A link to the 99 page plan for FY 2013 is here:http://budget.house.gov/uploadedfiles/pathtoprosperity2013.pdf . Comments by the plans' author, House budget committee chairman Paul Ryan's (R-WI, a Tea Party conservative) here: http://online.wsj.com/article/SB10001424052748703806304576242612172357504.html. Some media commentary on the plan are here: http://www.reuters.com/article/2013/03/12/us-usa-fiscal-ryan-idUSBRE92B02E20130312; http://www.usnews.com/opinion/articles/2013/03/12/right-and-left-slams-paul-ryans-path-to-prosperity-budget. Paul Ryan's financial backers and media comments on his politics: http://www.opensecrets.org/politicians/summary.php?cid=N00004357; http://news.yahoo.com/tea-party-gets-man-ryan-vice-president-073903869.html. Paul Ryan's comments on his own politics: http://www.ontheissues.org/House/Paul_Ryan.htm/.
15. Link: http://kaiserfamilyfoundation.files.wordpress.com/2013/01/8185-02.pdf; see page 2 of the analysis.
16. Link: http://www.offthechartsblog.org/dont-forget-ryans-budget-of-last-year/.
17. Link: http://www.people-press.org/2013/01/31/majority-says-the-federal-government-threatens-their-personal-rights/.
18. Link: http://firstread.nbcnews.com/_news/2013/07/24/19656670-obama-agenda-change-comes-only-from-the-outside?lite; Mr. Obama's reference to change needing to come from the outside was intended to mean that average Americans would need to put pressure on both parties to do something or another. The RPCA believes that pressuring the two parties will not work. The pressure has to come literally from outside the whole status quo system. If you try to work form within the system, it will silently devour and kill your proposals. Special interests are never going to back down from defending their interests and no one should expect anything else. That is not a criticism of special interests. It is just a reflection of the reality that most (but not all) special interests are there to serve themselves first and foremost - it is a matter of human nature. That is why the RPCA consciously elevates service to the public interest over service to special interests (http://reformparty.org/reform-party-of-california-essays-6-what-is-the-public-interest-and-how-is-it-best-served/). If you stay within the two-party system, it will continue to function exactly as it was designed to function, i.e., to provide service to special interests, including both political parties, before service to the public interest. The choice is clear - status quo or change. You can stay with the two-party system and watch the failure continue to unfold over time or you can break away. Breaking away supports efforts to fix our problems without the rigid constraints the broken system imposes.
Unused content
From FN 13: Although off point, it is worth mention that according to the trustees 2012 report, trust fund administration costs were $6.4 billion in 2011. That amounted to 0.9 percent of total expenditures. On its face, that sounds like a very efficient operation. It isn't clear of this includes all Social Security operational costs, but one can wonder what costs the private sector would demand if it were to provide the same services the Social Security trustees provide. The trustees report lack the context needed to evaluate this point. That is standard for two-party politics. Isolated facts are routinely tossed out with no context and there is no way for average citizens to know what it means unless they go out and find the context themselves. That takes a great deal of time. Very few people have the either time or interest to do that. The full 252 page 2012 report is here: http://www.socialsecurity.gov/OACT/TR/2012/tr2012.pdf, with some more context at page 10.
x. Link: http://budget.house.gov/uploadedfiles/pathtoprosperityfy2012.pdf; see pages 5 and 57. Ryan's 2011 plan presents itself as a choice between unleashed American prosperity and the democratic plan of debt and stagnation. The plan says that it "tackles the existential threat posed by rapidly growing government and debt, applying the nation's timeless principles to this generation's greatest challenge" and that it "ensures that the next generation inherits a stronger, more prosperous America."[15] When put that way, who could oppose it?
16. When it comes to "the nation's timeless principles", the report (http://budget.house.gov/uploadedfiles/pathtoprosperityfy2012.pdf) at page 4 says that such principles are "free enterprise and economic liberty; limited government and spending restraint; traditional family and community values; and a strong national defense
Mr. Ryan presented a similar path to progress for the 2012 fiscal year. That document relied on "the nation's timeless principles", the report (http://budget.house.gov/uploadedfiles/pathtoprosperityfy2012.pdf) at page 4 says that such principles are "liberty, limited government, and equality under the rule of law". How liberty and equality under the rule of law applies to these budget issues is not clear. One person might see Obamacare as an infringement of liberty, e.g., the evil individual mandate, and another might see it as vindicating liberty, e.g., letting the kids stay on the parent's insurance. These things are mostly in the mind of the beholder, which often sees through the lens of ideology. A search of the U.S. Constitution and Bill of Rights fails to reveal the phrase "limited government" and anything that says that government has to be limited other than to say that powers the central government does not have are reserved to the states or the people (http://www.archives.gov/exhibits/charters/constitution_transcript.html; http://www.archives.gov/exhibits/charters/bill_of_rights_transcript.html; the Bill of Rights 10th Amendment says this:"The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people."). The 10th amendment is the best constitutional argument there is for small government but it is hopelessly vague on that point, e.g., it does not expressly say how big or powerful the central government must be. It doesn't even say how big or powerful it preferably should be. In other words, you can read into the 10th amendment just about anything you want. As the RPCA has argued before, the constitution is silent on any details about big vs. little government and debates about the size and scope of government are mostly ideological (http://reformparty.org/reform-party-of-california-essays-what-is-the-proper-size-and-scope-in-government/). Those ideological debates are not grounded in what the constitution clearly requires or even prefers. The Founding Fathers were bitterly divided on essentially everything, including, e.g., (i) whether the central government should be strong, weak or in between, (ii) whether the central government should be big, medium or small and (iii) whether the president, congress or the courts should be the final decider of what is constitutional and what isn't. It is impossible to objectively know with any precision what "the nation's timeless principles" really are. Those sacred principles reside subjectively in the mind of the person invoking them, not the Constitution or Bill of Rights. Mr. Ryan's resort to timeless principles is garden variety blind faith in conservative ideology disconnected from reality and nothing more. It carries very little persuasive weight.
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