Wintery Knight

…integrating Christian faith and knowledge in the public square

Paul Ryan’s Path to Prosperity plan balances the budget without raising taxes

Americans for Tax Reform explains what’s in it.

Excerpt:

The main details are:

Revenue neutrality.  The budget calls for the House Ways and Means Committee to produce a tax reform package with a tax revenue target of between 18 and 19 percent of GDP.  This is in line with historical revenue figures.  By contrast, big government budgets like “Gang of Six,” “Simpson-Bowles,” and the Obama budget call for a long-range revenue target of over 20 percent of GDP.  The Ryan budget is a no tax hikes budget.

Six personal rates down to two.  The Ryan budget replaces the current six-rate personal income tax structure (10, 15, 25, 28, 33, and 35 percent) with a two-rate system of 10 and 25 percent.  This will result in a lower tax rate on the majority of small business profits, from 33 or 35 percent down to 25 percent.

Repeals Obamacare tax hikes.  The Ryan budget eliminates the entire Obamacare law.  This includes repealing the 20 new or higher taxes which have taken or are about to take effect from that law.

Eliminate the AMT.  The Ryan budget eliminates the AMT, instead favoring a simpler system with lower rates and a broad tax base.

Lower rates on businesses.  As said above, the Ryan budget lowers the tax rate on the majority of small business profits to 25 percent.  It also lowers the federal income tax rate on larger corporate employers from 35 percent (the highest in the developed world) to 25 percent (closer to the developed nation average).  While this makes American companies more competitive, it would still leave us with a higher corporate income tax rate than the developed nation average, Canada, and the United Kingdom.  In order to make us truly internationally-competitive, the federal rate must fall to 20 percent or less.

No more picking winners and losers in the tax code.  In order to target revenues at 18-19 percent of GDP with tax rates no higher than 25 percent, the Ways and Means Committee will have to curtail or eliminate most tax exclusions, adjustments, deductions, and credits.  That means that all consumed income will be taxed once and only once.  No longer will the tax code favor one type of economic behavior over another.

Moves tax code from “worldwide taxation” to “territoriality.”  The Ways and Means Committee is directed to shift our tax code from one which seeks to tax income earned all over the world to one which only seeks to tax income earned in America.  This is known as “territoriality,” and it’s already been adopted by and large by our trading competitors.  By retaining a worldwide tax regime, we’re exposing our own countries to double taxation–once when they pay the foreign nation’s income tax, and again when they try to bring the money home.

This is what the budget does: (Debt as % of GDP)

Paul Ryan's 2013: The Path to Prosperity

Paul Ryan's 2013: The Path to Prosperity

Doug Ross has three nice charts explaining the details.

Is Barack Obama going to do anything about the debt?

According to CBS News, Obama has exploded our national debt, so there is no reason to trust anything he says about reducing the debt.

Excerpt:

The National Debt has now increased more during President Obama’s three years and two months in office than it did during 8 years of the George W. Bush presidency.

The Debt rose $4.899 trillion during the two terms of the Bush presidency. It has now gone up $4.939 trillion since President Obama took office.

The latest posting from the Bureau of Public Debt at the Treasury Department shows the National Debt now stands at $15.566 trillion. It was $10.626 trillion on President Bush’s last day in office, which coincided with President Obama’s first day.

The National Debt also now exceeds 100% of the nation’s Gross Domestic Product, the total value of goods and services.

Mr. Obama has been quick to blame his predecessor for the soaring Debt, saying Mr. Bush paid for two wars and a Medicare prescription drug program with borrowed funds.

The federal budget sent to Congress last month by Mr. Obama, projects the National Debt will continue to rise as far as the eye can see. The budget shows the Debt hitting $16.3 trillion in 2012, $17.5 trillion in 2013 and $25.9 trillion in 2022.

[...]His latest budget projects a $1.3 trillion deficit this year declining to $901 billion in 2012, and then annual deficits in the range of $500 billion to $700 billion in the 10 years to come.

If Mr. Obama wins re-election, and his budget projections prove accurate, the National Debt will top $20 trillion in 2016, the final year of his second term. That would mean the Debt increased by 87 percent, or $9.34 trillion, during his two terms.

Some of Bush’s debt total can be explained by considering that Nancy Pelosi and Harry Reid raised the debt by $5 trillion dollars over 4 years when they took control of the House and Senate in January of 2007. But they’re Democrats, and that’s what Democrats do.

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Obama’s new budget adds $8 trillion to the debt over the next 10 years

Obama 2013 Budget Debt Projection

Obama 2013 Budget Debt Projection

What does the liberal Associated Press think?

Excerpt:

Taking a pass on reining in government growth, President Obama unveiled a record $3.8 trillion election-year budget plan Monday, calling for stimulus-style spending on roads and schools and tax hikes on the wealthy to help pay the costs. The ideas landed with a thud on Capitol Hill.

Though the Pentagon and a number of Cabinet agencies would get squeezed, Obama would leave the spiraling growth of health care programs for the elderly and the poor largely unchecked. The plan claims $4 trillion in deficit savings over the coming decade, but most of it would be through tax increases Republicans oppose, lower war costs already in motion and budget cuts enacted last year in a debt pact with GOP lawmakers.

[...]By the administration’s reckoning, the deficit would drop to $901 billion next year – still requiring the government to borrow 24 cents of every dollar it spends – and would settle in the $600 billion-plus range by 2015.The deficit for the current budget year, which ends Sept. 30, would hit $1.3 trillion, a near record and the fourth straight year of trillion-plus red ink.

Obama’s budget blueprint reprises a long roster of prior proposals: raising taxes on couples making more than $250,000 a year; eliminating numerous tax breaks for oil and gas companies and approving a series of smaller tax and fee proposals. Similar proposals failed even when the Democrats controlled Congress.

The Pentagon would cut purchases of Navy ships and F-35 Joint Strike Fighters – and trim 100,000 troops from its rolls over coming years – while NASA would scrap two missions to Mars.

But there are spending increases, too: The Obama plan seeks $476 billion for transportation projects including roads, bridges and a much-criticized high-speed rail initiative.

The Heritage Foundation has more.

Excerpt:

Spending in the President’s budget rises inexorably from today’s $3.8 trillion to $5.8 trillion in 2022. Throughout the decade, outlays hold stubbornly above 22 percent of gross domestic product (GDP), more than twice the New Deal’s share of the economy in its peak years. In constant dollars, outlays are more than three times the peak of World War II.

In 2012, his budget results deliver a fourth consecutive annual deficit exceeding $1 trillion and then make it worse with another round of not-so-shovel-ready construction projects and government “investments” totaling $178 billion. Among these are the typical road, bridge, and school construction, but then they go alarmingly beyond the usual “infrastructure” arguments to fund teachers’ pay.

Obama’s future deficit reduction comes mainly from Budget Control Act cuts already in place, $848 billion in discredited phantom “savings” from the wind-down of operations in Iraq and Afghanistan, taking credit for reductions in 2011 appropriations, and roughly $1.8 trillion in unnecessary tax increases on those earning above $250,000 and the oil and gas industry.

Yet even with the hefty tax increases and illusory savings, the President’s deficits over the next decade never fall below $575 billion (in 2018) and climb back to $704 billion (in 2022)—but again only assuming the tax increases and mystical savings cited above.

Debt held by the public in the President’s budget rises from 74.2 percent of GDP today to an economically hazardous 76.5 percent of GDP in 2022. These are historically high debt levels: the post–World War II average is just 43 percent. Moreover, the President’s debt estimates are low because of the unreal nature of much of his proposed deficit reduction.

Regarding the most critical fiscal challenge of the day—the need to restructure Medicare, Medicaid, and Social Security—the President has once again taken a pass. By the middle of this century, these three programs and Obamacare will consume about 18 percent of GDP, soaking up all the historical average of federal tax revenue. The notion of “protecting” them through benign neglect only ensures their collapse, and the longer Congress and the President wait to address the problem, the more wrenching will be the consequences. But the President merely reruns previous ideas, such as more cuts to medical providers, ignoring the need for fundamental reform.

For other entitlements, the President repeats a range of mere chipping-around-the-edges proposals from last year’s budget, many of which are really tax or fee increases, not spending reductions.

In short, the President’s budget is the same worn-out collection of higher spending and higher taxes he has offered three times before—with the same inevitable result of more spending, higher taxes, and still more government debt.

Here’s a Republican reaction from Senator Bob Corker:

The libertarian Reason magazine has more budget charts.

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Budget guru Paul Ryan discusses the economy at the Heritage Foundation

My favorite GOP ideas-man speaking at my favorite think tank. Here’s the full transcript courtesy of National Review.

Excerpt:

The Treasury Department’s latest study on income mobility in America found that during the ten-year period starting in 1996, roughly half of the taxpayers who started in the bottom 20 percent had moved up to a higher income group by 2005.Meanwhile, half of all taxpayers ended up in a different income group at the end of ten years. Many moved up, and some moved down, but economic growth resulted in rising incomes for most people over this period.

Another recent survey of over 500 successful entrepreneurs found that 93 percent came from middle-class or lower-class backgrounds. The majority were the first in their families to launch a business.

Their stories are the American story: Millions of immigrants fled from the closed societies of the Old World to the security of equal rights in this land of upward mobility.

Telling Americans they are stuck in their current station in life, that they are victims of circumstances beyond their control, and that government’s role is to help them cope with it – well, that’s not who we are. That’s not what we do.

Our Founding Fathers rejected this mentality. In societies marked by class structure, an elite class made up of rich and powerful patrons supplies the needs of a large client underclass that toils, but cannot own. The unfairness of closed societies is the kindling for class warfare, where the interests of “capital” and “labor” are perpetually in conflict. What one class wins, the other loses.

The legacy of this tradition can still be seen in Europe today: Top-heavy welfare states have replaced the traditional aristocracies, and masses of the long-term unemployed are locked into the new lower class.

The United States was destined to break out of this bleak history. Our future would not be staked on traditional class structures, but on civic solidarity. Gone would be the struggle of class against class.

Instead, Americans would work, compete, and co-operate in an open market, climb the ladder of opportunity, and keep the fruits of their efforts.

Self-government and the rule of law would secure our equal, God-given rights. Our political and economic systems – rooted in freedom and responsibility – would reward, and thus cultivate, traditional virtues.

Given that the President’s policies have moved us closer to the European model, I suppose we shouldn’t be surprised that his class-based rhetoric has followed suit.

We shouldn’t be surprised… but we have every right to be disappointed. Instead of appealing to the hope and optimism that were hallmarks of his first campaign, he has launched his second campaign by preying on the emotions of fear, envy, and resentment.

This has the potential to be just as damaging as his misguided policies. Sowing social unrest and class resentment makes America weaker, not stronger. Pitting one group against another only distracts us from the true sources of inequity in this country – corporate welfare that enriches the powerful, and empty promises that betray the powerless.

Ironically, equality of outcome is a form of inequality – one that is based on political influence and bureaucratic favoritism.

That’s the real class warfare that threatens us: A class of bureaucrats and connected crony capitalists trying to rise above the rest of us, call the shots, rig the rules, and preserve their place atop society. And their gains will come at the expense of working Americans, entrepreneurs, and that small businesswoman who has the gall to take on the corporate chieftain.

It’s disappointing that this President’s actions have exacerbated this form of class warfare in so many ways:

While the EPA is busy punishing commercially competitive sources of energy, a class of bureaucrats at the Department of Energy has been acting like the world’s worst venture capital fund, spending recklessly on politically favored alternatives. While the unemployment rate remains stuck above 9 percent, a class of bureaucrats at the National Labor Relations Board is threatening hundreds of jobs by suing an American employer for politically motivated reasons. And while millions of Americans are left wondering whether their employers will drop their health insurance because of the new health care law, a class of bureaucrats at HHS has handed out over 1,400 waivers to those firms and unions with the political connections to lobby for them.

These actions starkly highlight the difference between the two parties that lies at the heart of the matter: Whether we are a nation that still believes in equality of opportunity, or whether we are moving away from that, and towards an insistence on equality of outcome.

If you believe in the former, you follow the American Idea that justice is done when we level the playing field at the starting line, and rewards are proportionate to merit and effort.

If you believe in the latter kind of equality, you think most differences in wealth and rewards are matters of luck or exploitation, and that few really deserve what they have.

That’s the moral basis of class warfare – a false morality that confuses fairness with redistribution, and promotes class envy instead of social mobility.

When you think of talented Republicans who will one day be President, you think of people like Paul Ryan, Marco Rubio, Bobby Jindal, Ted Cruz and Josh Mandel. It’s to take a look at these guys before they become famous. Paul Ryan is the best we have on the budget – he is universally respected. And, he is also 100% pro-life and 100% solid on foreign policy. You don’t have to pick and choose with Paul Ryan – you get everything. All of the above.

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John Boehner stands up for spending cuts and job creation

Obama went on television last night to argue for more wasteful spending and higher taxes on job creators. I guess he thinks that 1.65 trillion dollar deficits and a 9.2% unemployment rate is acceptable for working families, as long as he isn’t personally affected by it.

The Wall Street Journal did not like Obama’s speech at all.

Excerpt:

The Obama Presidency has been unprecedented in many ways, and last night we saw another startling illustration: A President using a national TV address from the White House to call out his political opposition as unreasonable and radical and blame them as the sole reason for the “stalemate” over spending and the national debt.

We’ve watched dozens of these speeches over the years, and this was more like a DNC fund-raiser than an Oval Office address. Though President Obama referred to the need to compromise, his idea of compromise was to call on the public to overwhelm Republicans with demands to raise taxes. He demeaned the GOP for protecting, in his poll-tested language, “millionaires and billionaires,” for favoring “corporate jet owners and oil companies” over seniors on Medicare, and “hedge fund managers” over “their secretaries.” While he invoked Ronald Reagan, the Gipper would never have used such rhetoric about his opposition on an issue of national moment.

[...]Apart from shifting blame for any debt default, the speech was also an attempt to inoculate Mr. Obama in case the U.S. loses its AAA credit rating. He cleverly, if dishonestly, elided the credit-rating issue with the debt-ceiling debate. But he knows that Standard & Poor’s has said that it may cut the U.S. rating even if Congress moves on the debt ceiling. Mr. Obama wants to avoid any accountability for the spending blowout of the last three years that has raised the national debt held by the public—the kind we have to pay back—from 40% in 2008 to 72% next year, and rising. This will be the real cause of any downgrade.

Speaker John Boehner made clear in his speech that the GOP doesn’t want a default but wants more genuine cuts in spending. Mr. Obama is betting his rhetoric will cause the public to turn against the GOP, but we wonder if voters will be persuaded by a man whose concept of leadership is the politics of blame.

Thankfully, John Boehner isn’t going to let Obama get away with wrecking the economy any more.

Here’s Boehner’s response:

The transcript is here.

Obama’s Monday night speech was insulting, deceptive, vindictive and divisive. He doesn’t know how to solve a problem by getting people who are opposed to him to buy into a compromise plan. Instead, he just goes in front of cameras and insults the people he has to work with. That is not the right way to get people to work together. Imagine if a manager in a private company called a press conference to excoriate some people on a different team in that company. Is that any way to get people working together to solve a problem? To point fingers at your co-workers and poison the well? It’s juvenile. Where is his plan? How is he solving the problem?

The only people I see solving the problem are intelligent people like Paul Ryan, John Campbell, Tom Price, Tom McClintock, Mike Simpson, Ken Calvert and Tom Cole. People who work weekends developing solutions. People who understand how to write policies. People with degrees in economics, business and finance. People with private sector experience running businesses and creating jobs. Obama isn’t one of those people. Obama just reads a teleprompter. He doesn’t know how to create jobs – he never did it before becoming President. So why did we elect him?

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What produces more fraud? The free market or government-run programs?

From National Review, an article examining how government programs like Medicare and Medicaid are ripe for fraud and waste.

Excerpt:

The three most salient characteristics of Medicare and Medicaid fraud are: It’s brazen, it’s ubiquitous, and it’s other people’s money, so nobody cares.

Consider some of the fraud schemes discovered in recent years. In Brooklyn, a dentist billed taxpayers for nearly 1,000 procedures in a single day. A Houston doctor with a criminal record took her Medicare billings from zero to $11.6 million in one year; federal agents shut down her clinic but did not charge her with a crime. A high-school dropout, armed with only a laptop computer, submitted more than 140,000 bogus Medicare claims, collecting $105 million. A health plan settled a Medicaid-fraud case in Florida for $138 million. The giant hospital chain Columbia/HCA paid $1.7 billion in fines and pled guilty to more than a dozen felonies related to bribing doctors to help it tap Medicare funds and exaggerating the amount of care delivered to Medicare patients. In New York, Medicaid spending on the human-growth hormone Serostim leapt from $7 million to $50 million in 2001; but it turned out that drug traffickers were getting the drug prescribed as a treatment for AIDS wasting syndrome, then selling it to bodybuilders. And a study of ten states uncovered $27 million in Medicare payments to dead patients.

These anecdotes barely scratch the surface. Judging by official estimates, Medicare and Medicaid lose at least $87 billion per year to fraudulent and otherwise improper payments, and about 10.5 percent of Medicare spending and 8.4 percent of Medicaid spending was improper in 2009. Fraud experts say the official numbers are too low. “Loss rates due to fraud and abuse could be 10 percent, or 20 percent, or even 30 percent in some segments,” explained Malcolm Sparrow, a mathematician, Harvard professor, and former police inspector, in congressional testimony. “The overpayment-rate studies the government has relied on . . . have been sadly lacking in rigor, and have therefore produced comfortingly low and quite misleading estimates.” In 2005, the New York Timesreported that “James Mehmet, who retired in 2001 as chief state investigator of Medicaid fraud and abuse in New York City, said he and his colleagues believed that at least 10 percent of state Medicaid dollars were spent on fraudulent claims, while 20 or 30 percent more were siphoned off by what they termed abuse, meaning unnecessary spending that might not be criminal.” And even these experts ignore other, perfectly legal ways of exploiting Medicare and Medicaid, such as when a senior hides and otherwise adjusts his finances so as to appear eligible for Medicaid, or when a state abuses the fact that the federal government matches state Medicaid outlays.

Government watchdogs are well aware of the problem. Every year since 1990, the U.S. Government Accountability Office has released a list of federal programs it considers at a high risk for fraud. Medicare appeared on the very first list and has remained there for 22 straight years. Medicaid assumed its perch eight years ago.

They waste money because it’s not their money – it’s your money. Private companies minimize waste because it is in their interest to minimize waste – they have to be competitive and be responsive to customers, or they don’t get paid. The profit motive reduces waste and fraud.

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