24 September 2010

Republicans Commit To Increasing Deficit

There is a school of thought in political science that says that elections are basically referendums on the incumbents, and that the policies advanced by the insurgents don't have much impact on the results.

Republicans have to be praying that this is true. Because their plan to increase the federal deficit by 20%, increase the number of people employed by the federal government, and increase health insurance premiums, unveiled yesterday, isn't a very impressive policy platform. It has been universally canned by Democrats (of course) and also decried by more conservative groups like the anti-deficit Concord Coalition, the libertarian CATO institute, and the conservative blog Red State.

Voters Are Restless

If voters treat this election as a referendum on incumbents that hinges not on policy, but on whether the state of the union is good, Democrats will take a beating 32 days from now. There are plenty of reasons for voters to be restless.

The economy is still sour. Unemployment is high and there are fewer jobs than there were a few years ago in the economy. Consumers are defaulting on debts in droves. Housing prices haven't recovered. Middle class investors have seen very little return on their nest eggs in the past decade. While Iraq is winding down, the war in Afghanistan continues with little outward sign of progress.

Democrats inherited most of these problems. They arose mostly during the administration of George W. Bush, and voters replaced him and many members of Congress with Democrats in 2008 because of these problems. But, Democrats have not managed to get problems that were eight years in the making corrected in two years, and so now they are the target of voter wrath.

The Republican Agenda Is Horrendous

But, if voters are comparing the policies offered by the opposition to the policies offered by incumbents, Democrats' prospects are looking up, because the "Pledge To America" is awful.

In my world, as a lawyer, a "pledge" is another word for a mortgage, which is apt because the "Pledge To America" is a plan to mortgage our children's future by increasing the deficit over current levels by about $3.3 trillion dollars over ten years, and increase private health insurance premiums as well.

Yesterday, Republicans rolled out their plan for the nation if they are elected. It calls for a dramatic increase in the deficit, an increase in private health care costs, and a federal government with more employees. Who knew that this was what Americans talking about fiscal responsibility craved?

The federal government spends $3600 billion dollars a year. Republicans have promised to cut $100 billion dollars a year over ten years from "discretionary spending" other than defense spending (programs like welfare and roads), from that total, for a total of $1,000 billion of spending cuts.

But, they promise not to make cuts in defense spending (which is already at record highs), and to increase spending on missile defense (something that will cost something on the order to $10 billion to $20 billion a year), so this part of their plan increases federal spending by $100 billion to $200 billion over ten years.

They also promise to repeal the health care reform legislation, adding another $143 billion to the deficit over ten years. The health care reform bill lowers the budget deficit by $143 billion over the next ten years with a variety of revenue raisers. Over ten years the health care bill reduces Medicare payments by $335 billion, increase drug company fees by $107 billion, raises $32 billion from a tax on "luxury" health insurance policies, increases Medicare taxes by $210 billion, raised $65 billion from employers who don't provide health insurance and ends $19 billion in Sallie Mae subsidies. These revenue raisers offset the other spending in the health care reform bill.

They also promise to extend all of the Bush tax cuts at a cost of $4,000 billion over ten years, and to pass $25 billion a year of tax cuts for small businesses over the next two years for a total of $50 billion a year in reduced federal revenues.

Add up the numbers and the Republican "Pledge to America" increases the deficit by $3,293 to $3,393 billion over the next ten years, which is an average of about $335 billion a year. The deficit this year is about $1,600 billion. So, basically, Republican promised us yesterday that they would increase the deficit by about 20%.

The Republicans don't plan to repeal quite all of the health care reform law. While they do want to repeal the parts of the plan that reduce the deficit and reduce the ranks of the uninsured, they do plan to keep provisions like a ban on insurers denying coverage based on pre-existing conditions that when not accompanied by near universal health care coverage will dramatically increase health insurance premiums. This will squeeze businesses that keep health insurance, while increasing the number of people who don't have health insurance.

They have pledged to stop additional spending under the TARP plan, which isn't very hard since the program is almost discontinued already, and to halt the hiring of non-security federal employees, which also isn't very hard since "Federal government employment has decreased over the last 35 years (mostly in the 1990s)." Clinton shrunk federal government employment significantly. President Bush grew it.

Of course, since Republicans, have merely promised to freeze non-security federal government employment, and have also promised to increase defense spending, they are actually promising to expand the number of people who work for the federal government.

The Republican Plan Is Also Class Warfare

The Pledge To America reduces taxes on those with high incomes over $250,000 a year several trillion dollars. It promises spending increases of $335 billion to high income doctors. It promises a big tax break for drug companies. It promises a major increase in profits for the big defense contractors with missile defense contracts who have been the most notorious perpetrators of waste, fraud and abuse receiving money from the federal government. It promises more premiums for health insurance companies.

But, who loses out? Families making less than $88,000 a year who would have received subsidies to help them pay for health insurance. Families and business with health insurance who will pay higher premiums. Families that can't get health insurance due to higher premiums.

And, while the plan doesn't specify where precisely the $100 billion dollars of cuts to discretionary non-defense spending will come from, that part of the budget overwhelmingly goes to programs that help poor and working class Americans.

It is the most blatant redistribution of wealth from the poor to the rich in modern political memory.

Do Voters Care?

Do voters care?

Maybe not. If political scientists are right, Republicans could be promising to ritually sacrifice middle school students and triple compensation for members of Congress and it wouldn't make any difference as long as the public wants to throw the bums out because the economy is in bad shape.

But, if voters do care about the policies Republicans are proposing and someone tells them about it, Democrats can probably hang onto control in November.

UPDATE: More via Paul Krugman:

Howard Gleckman of the nonpartisan Tax Policy Center has done the math. As he points out, the only way to balance the budget by 2020, while simultaneously (a) making the Bush tax cuts permanent and (b) protecting all the programs Republicans say they won’t cut, is to completely abolish the rest of the federal government: “No more national parks, no more Small Business Administration loans, no more export subsidies, no more N.I.H. No more Medicaid... No more child health or child nutrition programs. No more highway construction. No more homeland security. Oh, and no more Congress.”

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