entitlement reform

CBO study sheds light on income redistribution

Amid falling poll numbers, thanks to the Obamacare meltdown, President Barack Obama has tried to change the narrative with familiar, tired themes of income equality and higher taxes on the wealthy. But a new study from the Congressional Budget Office (CBO), via CNS News, undermines these themes, showing that the 40% of households paid 106.2% of net income taxes in 2010 (emphasis added):

The top 40 percent of households by before-tax income actually paid 106.2 percent of the nation’s net income taxes in 2010, according to a new study by the Congressional Budget Office.

At the same time, households in the bottom 40 percent took in an average of $18,950 in what the CBO called “government transfers” in 2010.

Taxpayers in the top 40 percent of households were able to pay more than 100 percent of net federal income taxes in 2010 because Americans in the bottom 40 percent actually paid negative income taxes, according to the CBO study entitled, “The Distribution of Household Income and Federal Taxes, 2010.
Although they paid negative federal income taxes on average in 2010, Americans in the bottom 40 percent of households did end up paying some taxes to the federal government that year, according to the CBO.

Filibuster change revives Obamacare’s “death panel”

Death Panel

Not only did Senate Majority Leader Harry Reid (D-NV) give Democrats a convenient political distraction from the Obamacare meltdown, the “nuclear option” was also very obvious power grab that gives President Barack Obama virtually unchecked power to whomever he wants to his cabinet or to federal courts.

But the executive appointments that can now be made without any real check in the Senate are not just innocuous posts. Sam Baker of National Journal noted last week that the elimination of the filibuster gives President Obama the ability to make appointments to the Independent Payment Advisory Board (IPAB), otherwise known as “death panels.”

“The IPAB is technically supposed to submit its first proposed cuts in January, but Obama hasn’t even nominated anyone to the board yet. Nominees have to be confirmed by the Senate, which until today required 60 votes—and Republicans were highly unlikely to help confirm anyone to the board,” wrote Baker on Thursday.

“But now that the Senate has moved to a 51-vote threshold for executive appointments, Obama will likely be able to fill the board and move ahead with one of the most significant cost-control measures in his signature health care law—if he wants to,” he noted, adding that Senate aide confirmed that the filibuster change applies to IPAB.

Elizabeth Warren wants to expand an already broken entitlement

Elizabeth Warren

Social Security faces a long-term funding shortfall of $23.1 trillion, according to the most recent report from the program’s trustees, up nearly $3 trillion from last year. Like other entitlements, the program — expected to consume 6.8% of the economy by 2038 — is in dire need of reform to ensure its fiscal sustainability.

But Leftists in Congress are in denial about the fiscal problems with Social Security. Instead of reforming the program to ensure that it’s around for future generations, they want to expand it.

In a speech from the Senate floor on Monday, Sen. Elizabeth Warren (D-MA) endorsed legislation sponsored by Sen. Tom Harkin (D-IA) to expand the fiscally shaky program and warned of, what she called, a “retirement crisis.”

“A generation ago, middle-class families were able to put away enough money during their working years to make it through their later years with dignity. On average, they saved about 11% of their take home pay while working,” Warren, who has been floated as a potential presidential candidate in 2016, told her colleagues.”

“Many paid off their homes, got rid of all their debts, and retired with strong pensions from their employers. And where pensions, savings, and investments fell short, they could rely on Social Security to make up the difference,” she said. “That was the story a generation ago, but since that time, the retirement landscape has shifted dramatically against our families.”

Big Labor may make entitlement reform more difficult to accomplish

The already small chance of Congress passing any sort of entitlement reform in a budget agreement before the mid-December deadline may have gotten a little smaller thanks to a prominent labor leader.

In a speech before the International Foundation of Employee Benefit Plans on Monday, AFL-CIO President Richard Trumka promised that Big Labor would “never stop working” to end the careers of congressional Democrats who support entitlement reform.

“Let me just say this one for the record. No politician — I don’t care the political party — will get away with cutting Social Security, Medicare or Medicaid benefits. Don’t try it. And this warning goes double for Democrats,” said Trumka, according to the Washington Examiner. “We will never forget. We will never forgive. And we will never stop working to end your career.”

For all the Democrats’ complaints about conservative groups and organizations making it difficult for Congress to get anything done, labor unions have long had a stranglehold on the party. Since 1990, Big Labor has given $751.8 million to Democratic candidates, which is 92% of their contributions. And in 2008, they worked heavily for then-candidate Barack Obama, who promised them their long-desired legislative goal, card check.

Sequester spending cuts may be in jeopardy as shutdown enters another week

Harry Reid and Mitch McConnell

Modifying or changing ObamaCare doesn’t even seem to be a part of the conversation anymore as at least some congressional Republicans are now trying to ensure that the spending cuts passed in the Budget Control Act of 2011, which created the sequester, remain the law.

The weekend started with some promise as the White House signaled that President Barack Obama would sign a short-term debt limiting increase while House and Senate negotiators hammered out a larger budget deal. But Senate Majority Leader Harry Reid (D-NV) nixed the idea.

Rep. Paul Ryan (R-WI) was willing to undo the sequester for a budget deal that enacted entitlement reforms, which are the real drivers of federal spending. That, like other House-backed proposals, was shot down by the White House and the Senate. The devil will be in the details on this, of course, as President Obama and Democrats will likely want tax hikes to supplement changes to entitlement programs, making the path to a deal very rocky.

Sen. Susan Collins (R-ME) had put together a potential deal, working with a handful of Senate Democrats, to fund the government and raise the debt ceiling. But the deal was rejected after Reid balked at the spending levels.

Paul Ryan urges Obama to discuss entitlements in op-ed, doesn’t mention ObamaCare

One of the most notable absences from the debate over funding the federal government has been Rep. Paul Ryan (R-WI), the 2012 Republican vice presidential nominee and House Budget Committee Chairman.

Aside from participating in a photo op last week with other House conferees ready to negotiate with their missing Senate counterparts, Ryan has been relatively quiet as of late, which is peculiar since he is one of the most prominent Republicans in Congress and the architect of two House-passed budget plans.

But Ryan spoke out about the budget stalemate yesterday in the pages of the Wall Street Journal and urged President Barack Obama to talk with Republicans, who he said are ready to negotiate, and also noted precedent for such discussions in a divided government. The Wisconsin Republican also talked up the idea of reforming entitlements, which are the drivers of federal spending.

“The president is giving Congress the silent treatment. He’s refusing to talk, even though the federal government is about to hit the debt ceiling,” wrote Ryan in an op-ed at the Wall Street Journal. “That’s a shame—because this doesn’t have to be another crisis. It could be a breakthrough.”

Ryan noted that President Obama is misleading the public he says that negotiations on the debt ceiling would be “unprecedented,” pointing to agreements forged under Ronald Reagan and Bill Clinton. He also pointed out that President Obama himself has negotiated on the debt ceiling in the past, citing the Budget Control Act of 2011, which was passed with bipartisan support and backed by the White House.

Young Americans Should Support Social Security Reform

Social Security

Since last fall’s election, Republicans have been trying to figure out ways to reach out to young voters. President Barack Obama was successful in courting them by using certain wedge issues that appeal to millennials. To this point, Republicans are unwilling to back away from some of these stances to their own detriment.

Despite their support of President Obama, many of the economic policies he’s managed to push through Congress, including ObamaCare, leave them on the short end of the stick. And his inaction on entitlements — and yes, they are entitlements — leaves them at risk of substantial economic problems down the road.

For example, Veronique de Rugy recently highlighted the long-term funding shortfalls and eventual insolvency of the Social Security system. Here’s the chart she posted that shows the significant fiscal issues that will eventually have to be addressed (click to enlarge):

Social Security Funding

“In 2010, the deficit was $46 billion, and in 2012 the deficits amounted to $49 billion,” de Rudy notes. “To fill the gap, the program is drawing from the trust-fund balances (first using interest, then the principal) to keep payments to retirees going (light red section).”

Everything You Need to Know About the Ryan Budget

Written by Daniel J. Mitchell, a senior fellow at the Cato Institute. Posted with permission from Cato @ Liberty.

Sigh. Even when they’re sort of doing the right thing, Republicans are incapable of using the right argument.

Rep. Paul Ryan (R-WI), chairman of the House Budget Committee, has unveiled his proposed budget and he and other Republicans are bragging that the plan will balance the budget in 10 years.

That’s all fine and well, but good fiscal policy is achieved by reducing the burden of government spending, and that means restraining the budget so that federal outlays grow slower than the private sector.

It’s good to balance the budget, of course, but that should be a secondary goal.

Now for the good news. The Ryan Budget does satisfy the Golden Rule of fiscal policy. As you can see in the chart, federal spending grows by an average of 3.4 percent annually, and that modest bit of fiscal discipline is enough to reduce the burden of government spending to 19.1 percent of economic output by 2023.

House Republicans Unveil New Budget Blueprint

Paul Ryan

House Republicans have begun the roll out their new budget, which, like their previous budgets, aims to reduce the national debt and tackle entitlement reform. House Budget Committee Chairman Paul Ryan (R-WI) previewed his budget plan this weekend on Fox News Sunday and this morning in the Wall Street Journal:

America’s national debt is over $16 trillion. Yet Washington can’t figure out how to cut $85 billion—or just 2% of the federal budget—without resorting to arbitrary, across-the-board cuts. Clearly, the budget process is broken. In four of the past five years, the president has missed his budget deadline. Senate Democrats haven’t passed a budget in over 1,400 days. By refusing to tackle the drivers of the nation’s debt—or simply to write a budget—Washington lurches from crisis to crisis.

House Republicans have a plan to change course. On Tuesday, we’re introducing a budget that balances in 10 years—without raising taxes. How do we do it? We stop spending money the government doesn’t have. Historically, Americans have paid a little less than one-fifth of their income in taxes to the federal government each year. But the government has spent more.

So our budget matches spending with income. Under our proposal, the government spends no more than it collects in revenue—or 19.1% of gross domestic product each year. As a result, we’ll spend $4.6 trillion less over the next decade.

Tax hikes on rich won’t save entitlements

Last week, the Congressional Budget Office (CBO) released its latest budget outlook for the United States. The report didn’t mence any words about the fiscal situation in which the country will find itself if entitlements continue to growth at an unchecked pace.

“The aging of the population, increasing health care costs, and a significant expansion of eligibility for federal subsidies for health insurance will substantially boost spending for Social Security and for major health care programs relative to the size of the economy,” reported the CBO. Further down the report, there was a very clear warning that “such a large debt would increase the risk of a fiscal crisis, during which investors would lose so much confidence in the government’s ability to manage its budget that the government would be unable to borrow at affordable rates.

During an testimony before the Senate Budget Committee yesterday, CBO Director Doug Elmendorf was asked by Sen. Ron Johnson (R-WI) about steps that would need to be taken to avoid the substantial fiscal shortfalls that Medicare and Social Security face. Pointing out that President Obama has pushed tax hikes to deal with these unfunded liabilities, Philip Klein offers some points on the exchange:

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