The Path To American Redundancy

Yesterday, Rep. Paul Ryan (R) from Wisconsin revealed the GOP's Alternative Budget (again), and while this version had actual figures (which I think is mandatory in an actual budget), it raised any many questions as it provided answers. Since the overwhelming voter decision to reject the policies and direction of the Republican Party in November's election, there has been significant question as to what direction the party will go in the future. This budget proposal gives us a bit of an insight into the thinking of the leaders (?) of the House GOP.

The first piece of this "plan" is to repeal most of the Stimulus Bill recently enacted. This would cut off funding to all states for items such as unemployment benefits, healthcare benefits, infrastructure projects and education. In a period where revenues have been dramatically reduced by the elevated unemployment or underemployment figures, this seems logical, if further stagnation is your goal.

Second, there is a huge tax benefit for corporations and those wealthy enough to see Capital Gains Taxes. This is obviously a continuation of the time rotted "trickle down" theory that has plagued the right wing for decades now. The concept, if you are not familiar with it, is that if you allow the wealthiest, most influencial people to keep more of their money, they will personally spread that wealth in job creation, higher wages, better benefits, etc. In reality, it just improves their bottom line, and does virtually nothing for the average person. If you want businesses to expand, send them customers spending money they make because they have jobs and can afford their house payments, etc. This will drive employers to hire, driving the unemployment rate lower, causing employers to battle for the most qualified employees, requiring them to look at improved benefits and other incentives to draw these employees. The reality is that economic growth begins at the bottom, not at the top. The only thing that has trickled down over the last decade is misery. Many people also have no idea what a "Capital Gain" is. In simple terms, a Capital Gain is the profit realized on the sale of a non-inventory asset that was purchased at a lower price. The most common capital gains are realized from the sale of stocks, bonds, precious metals and property. The current tax rate of 15% is scheduled to end after 2010. President Obama has proposed returning that rate to the pre 2001 rate of 20%. In simple terms again, an increase of $5 for every $100 you make on the sale of your asset.

The one area of their tax proposal I find intriguing is the simplification of the tax code. The income tax code in this country is a joke, and further enables those most able to pay their fair share to avoid it through loopholes requiring a well paid CPA or firm to find the loopholes. Their proposal is pretty simple. For individuals, their first $50,000 of income would be taxed at 10%. This does not necessarily equate to a tax cut for all in that bracket, but it is fair and consistent, unlike the current code. This rate would also apply for couples filing together up to $100,000 of income. Above that level, the rate rises to 25%. Where these changes may not impact lower income families, there would be an increase in the personal deductions and exemptions that would really benefit these lower income families. I have to admit, this is one of the better proposals I have seen from the GOP in some time. I have been a long time advocate of elimination of the income tax in favor of a National Sales Tax. Sales taxes are inherently propoortionate to your ability to spend. If you can afford a yacht, you can afford the sales tax that goes with it. If on the other hand, you can only afford the monthly necessities, you will only be taxed on those. Some argue this would discourage consumer spending by those with a higher income. I couldn't disagree more.

Now on to the spending plan. This is where there has been MASSIVE disagreements in policy and approach. When an economy recesses as fast and as deep as ours has, and when a huge segment of that is in the financial sector (banks, investment firms, mortgages, etc.) the only organization capable of injecting the necessary capital into the system is the government itself. Ideally, we would not be doing that at a time when our budget deficit (the difference between what we spend and what we bring in, in negative terms) and National Debt (essentially money we have borrowed to cover the deficits over a period of time) have risen to record rates, but we have little choice right now. By injecting capital and investing in projects such as infrastrcture and energy, extending benefits for unemployed and propping up state budgets, you minimize job losses in some sectors of business, increase employment in areas like construction and technology, and overall stabilize consumer spending, which then boosts numbers for other businesses who had lost customers and then jobs because of it. It is not a magical elixir, but the fundamental principals are sound. I'm not going to tell you that I think every dollar of the Stimulus Bill is money well allocated, but the overall impact of the Bill is 100% necessary. In addition to the Stimulus, the President and his economic team have increased spending in the budget for areas that have taken a back seat for far too long, such as education, healthcare, and renewable energy. The GOP proposal includes a spending freeze for all areas aside from National Defense and Veterans Affairs. This so far beyond unrealistic, it is hard for me to put in words. Gen. Colin Powell echoed that sentiment last night on The Rachel Maddow Show on MSNBC when he said "spending freezes just don't work." His question, as with most logical thinking people is "what are you going to cut first? Not to mention that as of 2006, 19.7 million people work for the government on some level, a number that almost certainly has exceeded 20 million by now. How many of those do we want to join the unemployment ranks? We only saw another 742,000 jobs lost in March, meaning 5.56 million people are currently unemployed nationwide, not even mentioning those who are underemployed. Again, the economy will begin to improve when we employ people, enable people to spend, and enable our government to resume normal collection of revenues from increased employment, not from further job losses, reduced spending and reduced revenues. Hello? Can you hear me?

Then there's the graph that showed the projected spending difference between the two budgets from now until approximately 2080. 2080? Really? It indicates that the Congressional Budget Office (CBO) is the source, yet the CBO only projects out to 2019 right now. Just another exaggeration from a party that has become known more for imposing fear and paralyzation than hope and stimulation.

Another way this proposal lags behind any true vision for this country is in energy. There has never been a more critical time for us to become energy independent than right now, for a couple of different reasons. Reducing our dependence on foreign oil, produced for the most part by countries who are not our biggest fans, reduces our potential for being held hostage by these same countries. Renewable energy development in this country would require job creation, and good paying jobs in a field that could NEVER be outsourced, no matter how bad our trade agreements are. And let's not forget the impact on our environment. Argue all you want on either side of the climate change debate, there is no question that the constant pouring of toxins into our air, our water, and our soil is just simply unhealthy, and needs to stop. The GOP proposal eliminates President Obama's Cap and Trade policy. Cap and Trade essentially places a cap on the amount of a company's polluting emmisions, and if they wishe to exceed those standards, they pay for the excess pollution. That is a crude explanation of the process, but in essence covers the concept. House Republicans, specifically Rep. John Boehner of Ohio, would have you believe this Cap and Trade program would increase the typical family's utility costs by approximately $3,100 per year. Here's what Reid Detchon, of the Energy Future Coalition says - "The surprising secret is that a carbon cap would be an economic stimulus for low and middle-income consumers. If the revenue from a carbon cap is returned to the public, most consumers will come out even, and consumers whose energy use is below average will come out ahead - their rebate checks will be larger than the increase in their energy costs. " Now, I am a realist, and believe the truth is somewhere in the middle. Projections I have seen would mean maybe an $80 per year increase in energy costs in a typical household, or $6.67 per month. The trade off for significantly reduced toxic emissions is a bargain. They also want to expand offshore drilling, continuing to fall back on the "drill baby, drill" that was so influential during the recent campaign. Renewable, clean energy should be our focus, our priority, and our mandate.

There is also an aspect of their proposed budget that covers healthcare and entitlements (Social Security, i.e.), but I am going to leave that for another blog, as I will have enough trouble limiting that one subject into a short diatribe.

The bottom line is this "proposal" does not create the deficit reduction or debt reduction even in it's projections to offset the setbacks it would impose on so many areas of our country that simply cannot afford more setbacks. The Republicans have been labeled "the party of NO" since the election for their unwillingness to suppport anything they haven't proposed, but maybe now that they have proposed something, we can change it to "the party of NO NEW IDEAS".