Mitt Romney’s bullet-point, detail-free, policy-free economic “plan” contains a section on cutting the deficit. What is Romney’s approach, and what is the effect on our economy and our lives?
The Deficit “Crisis”
Any discussion of the deficit “crisis” should start with this:
1) January 26, 2000, Clinton to Propose Early Debt Payoff,
President Clinton said Tuesday that the budget he will send Congress on Feb. 7 will propose paying off the entire $3.6-trillion national debt by 2013–two years earlier than had been expected even a few months ago.
2) 2001 Alan Greenspan said we needed to pass the Bush tax cuts because we were paying off the debt too quickly.
3) Bush said it was “incredibly positive news” when the budget turned from surplus to deficit because budget deficits meant there would be pressure to cut entitlements. Bush wanted to continue the “strategic deficits” plan to “starve the beast” that was launched in the Reagan years.
We were paying off the debt, and then something changed, and now the deficits are enormous. A discussion of the borrowing ought to perhaps, maybe, possibly, understandably, reasonably begin with a look at the causes of the borrowing: tax cuts for the wealthy, huge increases in military spending, and the effects of the financial collapse and jobs emergency. Does Romney’s? (Hint: it does the opposite.)
Romney’s Deficit Plan
Mitt Romney’s Plan For A Stronger Middle Class is a short collection of bullet points, divided into 5 sections. On Cenk’s show the other day, he was describing the plan, how it is just a few bullet points with no details, but underneath the bullet points it says “Click here for a bigger copy.” So he clicked it and instead of more information, specifics and details it’s the same few bullet points, just BIGGER. (By the way if you aren’t watching Cenk’s show, you’re missing out, it is really good. If you have Cable or satellite TV, see if you get Current TV where you live by going here, entering your zip code at the top…)
Here is the deficit section of Mitt Romney’s Plan For A Stronger Middle Class,
• Immediately reduce non-security discretionary spending by five percent
• Cap federal spending below twenty percent of the economy
• Give states responsibility for programs that they can implement more effectively
• Consolidate agencies and align compensation of federal workers with their private-sector counterparts
Reduce “non-security” means don’t cut military, homeland security and similar spending. In fact, Romney has proposed to increase military spending.
Romney does not specify what to cut to reach the 5% figure. But he does elsewhere say he would accomplish this by passing the House budget proposal — “the Ryan plan” — which eliminates Medicare and cuts the “safety net.”
Cap federal spending below twenty percent of the economy — he means federal spending which by the way includes his military spending increases — is about picking some arbitrary number regardless of the need for government to do certain things.
By tying spending to GDP this is a plan to cut government exactly when it is needed most — when GDP falls. If GDP falls dramatically as it did after the financial crisis, “safety net,” infrastructure investment and other programs would have to fall dramatically at the very time they are needed to help We, the People and the economy!
Give states responsibility for programs that they can implement more effectively: means getting programs off of the federal budget and letting states decide if they want to do them. Note that President Obama recently approved changes in “welfare” that opened up flexibility to the states, and the Romney campaign said the President was “gutting” welfare.
Consolidate agencies and align compensation of federal workers with their private-sector counterparts: means drive down pay and get rid of pensions and other benefits that government workers receive, because Wall Street (and private-equity firms like Romney’s) have been able to drive down pay and eliminate pensions and benefit in the private sector,
Deficit Reduction After He Proposes Cutting Taxes?
Romney’s “Championing Small Business” section of this same plan dramatically cuts taxes on the wealthy. It cuts tax rates another 20% on top of the Bush tax cuts (paid for by raising taxes, fees and costs on 98% of us). It cuts corporate taxes by a third. It eliminates corporate taxes on foreign earnings, encouraging corporations to move profit centers out of the country. It eliminates taxes on income received from having wealthy parents (“death tax”). It eliminates the alternative minimum tax that keeps the rich from using loopholes to avoid all taxes.
So it is important to note that Romney’s promise to reduce deficits follows on the heels of his promise to dramatically increase deficits.
Shifting, Not Cutting
When government eliminates a program the need for the program doesn’t go away. Either the need is left unaddressed — a cost to those with the need — or the cost of addressing that need is shifted from government onto individuals, on their own. This means that the cost to our larger economy is increased, but bearer of that cost is shifted.
One example of this cost-shifting is what happens if Medicare is cut or eliminated, as Republicans have proposed (and passed in the House.) The need for health care for seniors doesn’t go away, but without Medicare the cost is shifted onto the seniors and their families, on their own — as is the burden of locating and choosing coverage and care. And this means that the cost of that care increases. By shifting Medicare costs from government we are actually increasing medical costs in the larger economy, not eliminating those costs. (One study,”Cost of Medicare Equivalent Insurance Skyrockets under Ryan Plan,” says cutting Medicare increases the actual cost sevenfold. This is because the government can negotiate bulk discounts, etc. that we cannot get on our own, and because seniors, on their own without our government handing this will be taken advantage of, especially when they are sick.)
Cutting government is not just shifting these costs onto each of us, the loss of government’s bargaining power means that in the larger economy these costs are magnified, which hurts the economy. They are just shifted from taxpayers onto and at the expense of the larger economy. But why distinguish between taxpayers and the rest of the economy?
Cutting Government Means Cutting What WE Get From The System
In our system those who do the best from the economy pay more taxes back. Those taxes are then used to invest in education, science, health, infrastructure, security, courts and the rest of the things that set the stage for the economy to continue and grow. These are the things that are the soil in which businesses thrive, and some of the gains are then put back into that system through taxes. Those becoming wealthy today are doing so out of the soil that We, the People nurtured yesterday.
Prosperity is what grows out of that soil that nurtures our businesses. It was our mutual contribution as citizens in our democracy that nurtured that soil, and in a democracy we are supposed to see a mutual benefit from that prosperity. WE educated and got educated. WE worked and provided jobs. WE built roads and bridges. WE built the system that creates such great wealth that people can have private jets and many houses. We, the People, in order to form a more perfect union, establish justice, insure domestic tranquility, provide for the common defense, promote the general welfare, and secure the blessings of liberty to ourselves and our posterity, did ordain and establish this Constitution for the United States of America.
Since taxes come out of the benefits of our mutual prosperity — in other words the wealthy pay more taxes because they get more from the economy — and government is what We, the People get out of it, then cutting government means that a lesser share of that prosperity goes to We, the People, and an even greater share of that prosperity goes to to top few. In other words, those gaining wealth already get the benefits of society’s gains, and then if we cut government they pay less back in taxes for those things that get cut. In other, other words, those things that We, the People do for each other through our government, like Medicare, education, parks, etc., are reduced, so We, the People are getting less back from our system, while those already benefitting from that system by becoming wealthy are paying less back into the system. That is what cutting government means.
This is the Romney plan for cutting deficits — We get less so a wealthy few can have even more.
“These words were written for the Kohms as well!”