Wednesday, April 06, 2011

Ryan's budget and the Democratic bind

I don't have a lot to add to what's already been said, and my overall take is perhaps best summed up by Warren Meyer:

I want to thank the Republicans for actually producing a budget plan that actually attempts to bring some fiscal sense to the government. I would have like to see other changes (less defense spending, elimination of Dept. of Education in favor of block grants, zeroing out of all farm and ethanol subsidies, etc) and Ryan’s numbers seem screwy, but let us be happy there is at least one adult in Washington.

I'm also on board with this more detailed assessment from Nick Gillespie and Veronque de Rugy.

A couple of observations:

*  Ryan's call for a 25 percent top marginal tax rate and revenue-neutral approach to taxes is unrealistic. His failure to call for any defense cuts, meanwhile, is deeply disappointing. My *hope* is that both are merely intended as an opening gambit, with Republicans prepared to settle for at least some Pentagon cuts along with, say, a 30 percent top marginal rate that is scored as revenue-positive.

*  While all eyes are now on the Democrats to see if they will offer up an alternative, no one should hold their breath. While we might see something dressed up as an alternative -- such as a 5 page paper calling for increased taxes on the rich and oil companies -- we are unlikely to see anything that can be counted as serious.

There are at least two reasons for this: offering an alternative would be a tacit admission that President Obama's 2012 budget proposal is a joke, and cutting government, which must be done, simply is not in the Democratic DNA. Asking Democrats to eliminate or scale back key elements of the welfare state, such as Medicare, is the political equivalent of demanding the sacrifice of one's own children.

And sacrifice they must. There is no more gruel to be wrung from the taxpayers with which to feed these spawn of the welfare state. Consider: even if the government confiscated every dollar from every billionaire in the country, it would raise only $1.3 trillion, an amount insufficient to close even the current deficit of $1.6 trillion. The only tax increase sufficient to generate the funds needed would go far beyond the rich -- a solution that is politically unpalatable.

Faced with the conundrum of raising taxes on everyone or cutting the welfare state, expect the majority of Democrats to simply stand pat and criticize from the sidelines. While one can argue that this is essentially what Republicans did during the health care debate, the difference is that the status quo was preferable to the measures proposed by Democrats. In the current situation, the status quo is utterly disastrous and regarded by pretty much every serious observers as simply not an option.

Update: Just as I predicted the first Democratic alternative budget comes through, and it's essentially just a bunch of tax increases

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