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Paul Ryan (R-WI): A Choice of Two Futures

Posted by Larry Doyle on February 15, 2012 10:17 AM |

Markets manipulated by the presence of massive infusions of liquidity from central bankers may give the appearance of calm, smooth sailing but under the surface an explosion of epic proportions continues to build.

What is fueling that volcanic eruption?

Chronic deficit spending.

With our fiscal deficit having grown by trillions of dollars over the last few years, make no mistake the withdrawal pains and devastation from this out of control spending WILL be extraordinary. Not might be. WILL be. Borrowing from future generations may be a political art form in Washington but it is truly nothing more than a failure of governance. 

With all due respect to those currently on our Presidential political stage, I see little of real substance in addressing this issue. President Obama’s recently submitted budget strikes me as little more than a political document. Who on the Republican side of the ledger is willing to truly elevate the discussion to an adult level on the deficit?

How I wish that Paul Ryan (R-WI) were running for President this year. Ryan may have been somewhat ostracized by House Speaker Boehner last year, but he consistently strikes me as having the courage and the vision which America needs to regain our footing, and transition away from the chronic deficit spending which will crush us.

Ryan has put forth The Roadmap Plan for America. At the very least America needs the adult discussion that goes along with Ryan’s roadmap. On that note and in attempt to promote the dialogue, I welcome highlighting Ryan’s work:

A Choice of Two Futures

Rarely before have the alternatives facing America been so starkly defined.

For the past year, Washington’s leaders have taken an already unsustainable budget outlook and made it far worse. They have exploited Americans’ genuine economic anxieties to justify an unrelenting and wide-ranging expansion of government. Their agenda has included, among other things, a failed, debt-financed economic “stimulus”;  an attempt to control the Nation’s energy sector; increasing domination of housing and financial markets; the use of taxpayer dollars to seize part ownership of two nearly bankrupt auto makers; and, of course, the planned takeover of Americans’ health care, already heavily burdened, manipulated, and distorted by government spending and regulation.

This domineering government brings taxes, rules, and mandates; generates excessive levels of spending, deficits, and debt; leads to economic stagnation and declining standards of living; and fosters a culture in which self-reliance is a vice and dependency a virtue – and as a result, the entire country weakens from within.

Increasingly, Americans are rejecting this approach, and for good reason. But the status quo is not acceptable either. The Federal Government’s current fiscal path is unsustainable: it leads to unprecedented levels of spending and debt that will overwhelm the budget, smother the economy, weaken America’s competitiveness in the 21st century global economy, and threaten the survival of the government’s major benefit programs.

The President and congressional Majority are only hastening America’s march toward this reckoning, adding to trillions of dollars worth of unfunded liabilities, and accelerating the erosion of Americans’ health care and retirement security. Their “progressivism” ironically points backwards – to a future in which America’s best century is the past century.

There is another choice, as reflected by the proposal described in this report: A Roadmap for America’s Future. It is a comprehensive, alternative approach to the Nation’s most pressing domestic priorities. Specifically, the plan addresses the following:

▫ Health Care. It provides universal access to affordable health coverage, not by expanding government, but by reinforcing the role of consumers – patients – in a truly competitive marketplace. In conjunction with this, the plan takes on the necessary task of restructuring the government’s medical entitlements, making them sustainable for the long term.

▫ Retirement Security. It saves and strengthens Social Security, making the program sustainable for the long run, and helping expand investments needed for economic growth.

▫ Tax Policy. It offers an alternative to today’s needlessly complex and inefficient tax code, providing the option of a simplified mechanism that better promotes and rewards work, saving, and investment.

▫ Job Training. It helps the Nation’s workforce prepare for success in the global economy by transforming 49 job training programs, scattered across eight agencies, into a flexible, dynamic program focused on results, and accompanied by clear measures of transparency and accountability. The plan requires the development of performance measures, and gives each State the option to consolidate funding into one program, if such an approach can be shown to improve outcomes and achieve job training goals.

This plan is not simply a slimmer version of the “progressive” ideology. It is a true alternative, and a complete legislative proposal consisting of specific policies supported by Congressional Budget Office estimates of its fiscal and economic consequences. More important, it is based on a fundamentally different vision from the one now prevailing in Washington.

It focuses government on its proper role; it restrains government spending, and thus limits the size of government itself; it rejuvenates the vibrant market economy that made America the envy of the world; and it restores an American character rooted in individual initiative, entrepreneurship, and opportunity – qualities that make each American’s pursuit of personal destiny a net contribution to the Nation’s common good as well. In short, it is built on the enduring truths from which America’s Founders established this great and exceptional Nation.

This proposal does not attempt to abandon commitments Americans established over the past century, or to dismantle government. It recognizes that government has a necessary role in supporting the institutions through which Americans live their lives, and in providing a safety net for those who face financial or other hardships. But it rests on the conviction that government’s principal role is to maintain the freedoms through which individuals can pursue their own destinies.

As Jefferson put it: “A wise and frugal government, which shall restrain men from injuring one another, which shall leave them otherwise free to regulate their own pursuits of industry and improvement, shall not take from the mouth of labor the bread it has earned. This is the sum of good government.”

The balance of this introduction describes these two futures in detail. The remainder of the report describes the principal domestic challenges through which this choice appears at present, and then presents a full description and explanation of the policies embraced in this legislation.

I am not blindly promoting Ryan’s plan nor a Republican agenda. As a registered Independent, I am merely stating that we had better wake up and accept the fact that we need to have an adult dialogue on these issues.

There is not a lot of sand left in the hourglass.

Let’s talk!

Larry Doyle

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I have no affiliation or business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets, our economy, and our political realm so that meaningful investor confidence and investor protection can be achieved.

  • LD

    Jeff Carter recently wrote the following,

    Headlines all over are cropping up about how the Greek economy is shrinking by leaps and bounds. Portugal’s economy is contracting. Spain, contracting. It’s all because of those dirty austerity programs they have enacted to get their budgets back into control.

    Ironically, Ireland enacted austerity programs too, yet their economy only contracted by 1.9% in the third quarter.
    What’s the difference? Taxes.

    The other countries enacted large tax increases on the wealthy along with government spending cuts. Sounds like Obama’s recent budget! The Irish went against the grain, and cut spending but held the line on most taxes. The Irish raised their VAT tax, but held firm against corporate tax increases.

    On this side of the pond, Keynesian economists vehemently wail that any cut in government spending by the US will be fatal to our domestic economy. They are wrong.

    The US government spends a lot of money but the primary drivers of the US economy are consumers and business. The US has an incredibly dynamic private sector. If we slashed federal spending, and combined it with tax cuts similar to the Reagan era the US economy would grow, not sputter.

    In countries like Greece and Portugal, the government borrowed money from the taxpayers and transferred that wealth back to them. They had little or no private industry that drove their economies. Instead, they were big Ponzi schemes.

    Keynesians will try and make the case that a cut in government spending will automatically slow GDP growth in the US. The Irish example will tell you they are wrong. Ireland’s on a much firmer footing than the other PIIGS in Europe. It’s trying to grow its private sector. The headwinds for them are fierce, because the European economy is sputtering. Absent that macro trend, the Irish would be in pretty good shape.

    Obama’s recent budget didn’t cut spending, left us with trillions in deficits, and increased taxes on everyone. In addition, the increased tax proposals are disincentives to invest. Why is he taxing dividends so heavily? Why huge raises in the capital gains rate? He continues to talk a good game about starting and supporting companies, but his actions and policies belie a person out of touch with the way a business operates and a champion of a centrally planned statist society.

    He needs to go.

  • fred

    LD,

    Recent poll of likely voters shows the public is now more concerned with jobs, less with deficits, less with the economy, more with taxes.

    “Give me a job and lower my taxes, I don’t care how you pay for it”.

    Sounds like a recipe for an Obama re-election unless we get a disorderly Greek default and/or a spike in gas prices.

    The backlash against Obama and the Dems during the midterm elections was prompted by the passage of Obamacare. Obama immediatley threw the Pubs a bone with the Bush tax cut extension.

    If I were advising Rep Ryan I would advise him to present debts and deficits in terms of Obamacare. Curiously, neither party has clarified the costs or the benefits of Obamacare.

    Sadly, fiscal and monetary policy will probably remain backburner issues as long as the ‘plunge protection team’ is able to manipulate the stock market higher.

  • Diana

    I disagree with you wholeheartedly on Ryan’s plan for health care. It is a disaster that will produce an earthquake. Health care should not be used as a competitive market for profiting.

    • LD

      Diana,

      The point of the commentary is to raise the scope of our ENORMOUS deficit as a topic not receiving the proper attention on Capitol Hill or at 1600 Pennsylvania Avenue.

      I am not promoting Ryan’s healthcare plan nor any other piece of his Roadmap. What I am promoting is the fact that Ryan at least is willing to have THE very credible discussion on the deficit that neither President Obama nor many others in Washington are willing to address.

      I appreciate that healthcare is a very hot button topic for you and everybody in our nation. Dare I say, though, that healthcare may be the least of our issues when the deficit drives interest rates through the roof and civil strife into the streets.

      Thanks for writing.

      • Eric

        On your suggestion, I decided to go check out this roadmap plan. I have to say that I was sorely disappointed.
        It starts with tax reform–not a bad place–but for Ryan reform means tax cuts. Obviously tax cuts will only make the deficit worse.
        His solution to social security is to raise the retirement age to 67. His medicare/medicaid prescriptions are similarly pedestrian. In other words, unless I’m missing something big, his “roadmmap” really won’t do much to bring down the deficit, and might even raise it a la Bush.

        But I’ve been thinking recently that it might be best to wait until we’re out of this recession to reduce the deficit. Reducing the deficit means reducing GDP unless private spending magically increases to fill the gap–which won’t happen because reducing the deficit doesn’t put any more money in private hands. In addition, interest rates on government debt are practically zero. So while I’d like to see some fiscal sanity, I wonder if the middle of a recession isn’t the worst time to try it, since it’s much easier to run a surplus during boom years.

  • Diana

    Ryan’s plan will shred our safety net.

    Before Shredding the Safety Net, Consider the State of Older Americans.

    Posted on 29 December 2011

    By Mark Miller

    The social safety net that protects seniors already is frayed, but expect politicians to try poking some new holes in the mesh during the 2012 campaign season.

    This year, lawmakers and presidential candidates have batted around proposals to privatize Social Security, raise its retirement age or reduce cost-of-living adjustments. Medicare privatization has been pushed in three or four versions; any of the options would slash the value of benefits by changing Medicare from a program of defined benefits to one of defined contribution levels.

    Against that backdrop, it’s worth stopping and asking: What is the state of older Americans and our system of retirement? Before the debate kicks into high gear on just how much to shred the safety net, let’s consider just how much the recession has ravaged the economic security of seniors:

    –Retirement confidence is low. The annual Retirement Confidence Survey from the Employee Benefit Research Institute (EBRI) finds that Americans’ confidence in their ability to afford a comfortable retirement has hit a new low. The percentage of workers who say they’re “not at all confident” about having enough money for a comfortable retirement grew from 22 percent in 2010 to 27 percent in 2011, the highest level measured in the study’s 21-year-history.

    Meanwhile, Americans are pushing back their expected retirement ages. For example, 15 percent of Americans now tell EBRI they expect to work until age 70, up from 11 percent as recently as 2006.

    –Assets are inadequate. The median level of financial assets in 2007 — before the market crash — was about $72,000 for households approaching or entering retirement (age 55 to 64), according to a recent report from the U.S. Government Accountability Office (GAO). Assuming a four percent withdrawal rate in retirement, those assets would replace only about five percent of annual household income for median-earning families ($55,000), GAO says. Most financial planners agree with that four percent withdrawal rule of thumb — but most also tell their clients that they should aim to replace 80 percent of pre-retirement income.

    Forty-four percent of full-time workers in their 50s have neither a defined benefit (DB), nor a defined contribution (DC) pension from their current employer, according to GAO.

    –For many, Social Security is everything. Americans over 65 in the lowest income groups depend on Social Security benefits for 83 percent of total income, GAO found; middle income seniors depend on Social Security for 64 percent of total income.

    –Joblessness has jumped. Unemployment among workers over age 55 has doubled since the recession began, according to GAO. Once older workers do lose their jobs, it takes much longer to find new ones — if they’re able to find employment at all. The BLS report for October stated that it took 52.9 weeks for workers over age 55 to find new jobs, compared with 37.3 weeks for younger workers.

    –People are making difficult choices. Nearly a quarter of respondents to an AARP survey of Americans over age 50 said that that they or someone in their family had exhausted or used up all of their savings during 2007-2010, while more than 12 percent stated that they or someone in their family had lost their health insurance. Among this group, nearly half reported that they delayed getting medical or dental care, or delayed or ceased taking medication.

    The GAO report was produced at the request of the U.S. Senate subcommittee on Primary Health and Aging, Committee on Health, Education, Labor and Pensions. At a committee hearing on the report in October, Sen. Al Franken (D-Minnesota) asked one of the report’s principal researchers what older Americans reeling from the recession could do to rebuild their retirement savings.

    “I wish I knew,” replied Barbara Bovbjerg, GAO’s director of education, workforce and income security issues, according to a transcript of the briefing. “If you’re already retired and you’re reliant on a 401(k) or an IRA, you’re reliant on the financial markets. You are probably really reducing your spending on other things. You’re probably making a significant change to the standard of living.”

  • Richard Pečar

    Government spending isn’t bad.

    The world wouldn’t have advanced to its current level had not the USA created money out-of-thin-air and spent the stuff on useful and socially relevant projects. These expenditures range from health research to constructing infrastructure like highways, dams for hydropower and airports, water treatment facilities and on and on…to that of literally paying in advance for a ticket to go beyond the bounds of earth’s gravitational pull and to where no man has gone before.

    Spending money badly is bad.

    What is bad is creating money out-of-thin-air and handling the stuff over to wrongdoers and one’s elite friends. It’s bad to create money out-of-thin-air to buy bombs that serve no function but exploding in distant lands and killing peoples who pose no threat to this nation and its peoples.
    Representative Ryan is just bean-counter wannabe acting like he is a great public policy wonk. Follow him, and suffer in the years ahead a dirty environment, weeds growing in school yards where children once shot hoops and danced the hokey pokey, uneatable fish in lakes and streams, just to name a few outcomes.

    • fred

      Richard,

      Is the end goal the creation of a job or the fulfillment of the need outlined in the job description?

      Is productivity a measure of economic output per employee or how much people contribute to the betterment of society?

      Is education the completion of a certain number of years spent in a classroom or a measure of understanding and ability?

      Will our social and economic problems be solved with expensive spending programs or through the investment of time and commitment by Americans with a common cause?

      Administrations with their pet projects (both pubs and dems come and go) but we the people are the ones ultimately responsible for cleaning up the mess after the party is over.

      I don’t necessarily agree with Rep Ryan’s politics, but I sure agree with his stated desire to hold gov’t more accountable.

  • Ben Wolf

    The public debt contains the sum total of the private sector’s savings. When someone buys government bonds the buyer’s bank dispatches reserves to the government’s account at the Fed. When the bonds mature the reserves are switched back. The Fed is the monopoly supplier of reserves in the form of government spending, so all that happens when government “borrows” is it utilizes money it put into the banking system in the first place. The debt isn’t an issue.

    • LD

      Ben,

      Whom do you think holds all our debt?

      Whom exactly do you think is going to pay it all back?

      Many foreign entities own our bonds.

      Future generations are stuck with an ever increasing bill which will lower the overall quality of growth and life within our nation.

      Living on borrowed funds and beyond our means is certainly no path for long term safety and prosperity.

      • Ben Wolf

        LD,

        Foreign purchase of government bonds does not fund government spending. China is an excellent example.

        As you know, when China sells goods and services in the U.S. it gets paid in dollars which are deposited in China’s checking account at the Department of Treasury. China can leave the dollars there, buy assets in the U.S. with them, exchange them for a foreign currency, or put them in a savings account which pays a small amount of interest. That savings account consists of U.S. bonds and the money is always available; it doesn’t get spent by Congress.

        U.S. bonds are issued solely as a method of draining excess bank reserves so the Fed can maintain its target interest rate. The money “borrowed” isn’t spent.

  • Obsvr-1

    I like the MMT concepts, because it is a simple yet often misunderstood explanation of our current Fiat Based system.

    What confuses everyone is the terminology and semantic arguments. Folks use the personal/home budget as an analogy for the baseline discussion which is wrong and confuses the issue, with the simple fact that people do not have a printing press (or access to the FED computer) to create money; they have to pay the bills either at time of demand or over time with credit. This can be applied to any entity that is not sovereign in their currency such that they can inflate their way out of their ‘debt’ or on the other side of the coin, extract wealth from those holding the ‘debt’ (those private sector savers).

    In fact the US gov’t spends money into existence, unconstrained by anything but artificial contrivances (e.g. debt ceiling). And in fact the US Treasury issues UST bonds to soak up the Fiat Crap, er, reserves that were created.
    But what happens when the interest rates which would have normally go up when the supply/demand changes, the FED intervenes and creates demand by purchasing the UST, indirectly of course, because buying directly from the UST is not “legal” – so they use the money laundering scheme called QE. What happens when the banking sector makes bad decisions, bad bets, over leverage their assets – the FED jumps in an buys their crap assets inflating the FED balance sheet to astronomical levels. Now the ECB is following the money laundering lead of the FED and indirectly purchasing (against the EU treaty) sovereign debt from the over spenders (debt laden countries).
    All of this seems to be OK with the Keynesians, but it is certainly driving wealth to a smaller and smaller class of elite insiders and on the opposite pole driving more and more working/middle class onto the scrap heap of poverty.

    Allowing any system to run unconstrained is problematic. Obviously the US Gov’t, the FED and the elite plutocrats have screwed the pooch and now are desperately trying to recover from blowing up the system. However, without structural changes we are doomed to repeat these boom/bust business cycles.

    The biggest problem is the WHAT the money is spent on by the US Gov’t – allowing a small group of pols to pick the winners and losers in the market. One of the structural changes people continue to flap their gums about is tax reform — yes, scrap the entire pile of tax code and replace with a flat consumption tax (with the obvious provisions to handle the safety net and capital gains on secondary market and derivative transactions), thereby eliminating all the special interest deductions and loopholes. This would also shut the door on the lobbyist power as most of their efforts are directed to wealth redistribution in the tax code. This would also eliminate the payroll tax, which is a radically regressive tax applied to the working class. Also eliminate the inheritance tax, but do not forgive capital gains passed on, they should be taxes when the gain is ultimately realized (index to inflation is reasonable).

    MMT is the best explanation of our Fiat Based monetary system, and with the all important concept of spending, unconstrained as a foundational element, people need to understand that forcing a constraint is the important governor on run away Keynesianism. Obviously the debt ceiling is not the appropriate constraint, it is just a theatrical artifice of the corrupt cronyism embedded into what is supposed to be a Gov’t Of, By and For the people.






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