entitlement reform

Economist call for pro-growth tax reform and spending cuts

The on-going debate on the “fiscal cliff,” automatic tax hikes and spending cuts that will take place at the beginning of the year, has constantly been at the forefront of the news over the last several months.

Last week, 180 economists signed a letter to members of Congress explaining why a tax hike would hurt the economy. They instead call on Congress to take up tax reform — a simplified tax code with lower rates — reduce spending and take up enetitlement reform:

Some in Congress have advocated allowing the 2001 and 2003 taxpayer relief laws to expire for some or all taxpayers. Such an action would have a significant, negative impact on the economy. Low taxes can have a constructive economic effect by keeping money in the private sector, where it is far more likely to be utilized for efficient purposes. By contrast, raising taxes would divert resources into the relatively inefficient public sector, thereby curbing potential job creation and economic growth. This effect would be even more pronounced during a persistent slump.

In particular, Congress should avoid raising marginal tax rates on income and taxes on investment, such as capital gains and dividends taxes. These types of taxes most directly and meaningfully affect job creation.

Democrats pull entitlements off the table in “fiscal cliff” talks

United States Capitol

During the debt ceiling debate last year, House Speaker John Boehner made a compromise on tax revenues, offering the White House $800 billion by closing tax loopholes, rather than raise tax rates. Boehner and at least some House Republican leaders saw the offer as necessary to reach a broader agreement on spending cuts. President Barack Obama played along, but eventually told Boehner, according to Bob Woodward, that he needed an additional $400 billion in tax revenue to make a deal work.

Boehner backed down and eventually all sides agreed on the sequestration deal — $1.2 trillion in automatic spending cuts over the next 10 years — that make up part of the “fiscal cliff” scenario that the White House and Congress are now trying to avoid.

The lesson for Boehner and Republicans should have taken from that particular situation is that when you show that you’re willing to compromise on a core economic principle, you’re almost always going to be asked to go another step. And now with many Republicans in Congress signaling their willingness to break their pledge not to raise taxes, provided that it is coupled with other fiscal reforms, Democrats are seizing the opportunity, according to The Hill, by raising their asking price in fiscal cliff negotiations by taking entitlements off the table:

Senate Democratic leaders signaled Tuesday they would not agree to any entitlement reforms before the end of the year that cut spending on Medicare and Medicaid beneficiaries.

Harry Reid ready to raise the debt ceiling to $18.794 trillion

Harry Reid

While the fight over the “fiscal cliff” is getting the attention of the media right now, the Treasury Department wants another increase in the debt ceiling and Senate Majority Leader Harry Reid (D-NV) is prepared to give it to them, apparently with no questions asked:

Senate Majority Leader Harry Reid (D-Nev.) said on Wednesday that if the $16.394 trillion current legal limit on the federal government’s debt must be raised in the next few months by another $2.4 trillion, “We’ll raise it.”

That would set the debt limit at $18.794 trillion.

During a Capitol Hill press conference on Wednesday, CNSNews.com asked: “Senator Reid, the Treasury Department said last week that we will hit the debt ceiling again near the end of the year. Are you prepared—will you support—”

“I think the debt ceiling will come after the first of the year,” Reid said. “But please everyone accept this: They tried it before—they, the Republicans.”

“They tried it before – ‘We’re going to shut down the government, and we’re not going to raise the debt ceiling,’” he said. “If they want to go through that again, fine.”

“But we’re not going to be held subject to something that was done as a matter of fact in all previous administrations,” Reid said.

CNSNews.com then asked, “But will you support raising it by another $2.4 trillion?”

“If it has to be raised, we’ll raise it,” he said.

Poll: Romney pulls even with Obama on Medicare

Remember when Democrats thought that Mitt Romney’s selection of Paul Ryan would be easy for them to tear down because of his reasonable proposal to reform Medicare? They’ve certainly tried to demagogue the issue — take, for example, DNC Chair Debbie Wasserman Schultz attempt during the summer on CNN when she was educated by Wolf Biltzer.

But new polling from the Kaiser Family Foundation shows that the attacks haven’t worked, as Romney has narrowed the gap with President Obama on Medicare:

Mitt Romney has pulled even with President Obama when it comes to the question of whom voters trust on Medicare, according to a new poll.

October’s Kaiser Health Tracking poll found that in one month, Romney brought Obama’s lead on Medicare issues from 16 points down to 5, a gap that was not statistically significant in the poll.

Those figures represent the leanings of likely voters. Among seniors, Kaiser found that Romney leads Obama on Medicare by 5 points (48 percent to 43).
[…]
Kaiser found that 61 percent of likely voters and 72 percent of seniors oppose converting Medicare to a premium-support system. Romney and his running mate, Rep. Paul Ryan (R-Wis.), have endorsed plans to partially privatize the program, giving future seniors a fixed dollar amount to buy coverage from traditional Medicare or on the private market.

Opposition to premium support is stable among non-seniors, though Kaiser cited other research that found opinion on the issue to be “quite malleable” and disposed to “persuasive messaging.”

Obama, not Ryan, “spurned” deficit commission

Erskine Bowles

Politico ran an interesting story on Wednesday about how Rep. Paul Ryan (R-WI), chairman of the House Budget Committee and now Mitt Romney’s running mate, “spurned” the Simpson-Bowles commission, which was put together by President Barack Obama to find a solution to the United States’ debt and long-term entitlement issues:

he commission has lived larger in mythology after its demise than it ever did while doing its work. Partisans and commentators on all sides — and in particular centrists and business leaders — hail the efforts of co-chairmen Alan Simpson, a Republican, and Erskine Bowles, a Democrat, as exactly what Washington needs more of.

And they cite the inability of its recommendations — a mix of spending cuts and increased revenue proposals — to gain momentum as deplorable evidence that Obama and GOP leaders won’t put the national interest in solving the budget crisis over their own narrow partisan concerns.

Now the saintly, do-good aura that surrounds Simpson-Bowles presents an awkward challenge for Mitt Romney and his running mate. Romney is pitching Ryan as a problem solver who wants to use his command of the budget to forge bipartisan deals to solve the nation’s fiscal crisis.

But in reality, Ryan, according to the recollection of some commission members and staffers, was a key part of the dynamic that undermined the commission and allowed the triumph of partisan and ideological loyalties over a budget deal.

Under its charter, the commission needed a supermajority of 14 members in order to give its formal endorsement to any recommendations. Ryan joined six other members — the dissenters came from both parties — in voting against the final proposal, with 11 members in favor.

Obama pressures House on tax hikes

With the Senate passing his tax plan, President Barack Obama is making a push to pressure the Republican-controlled House of Representatives do to the same. Before the start of a cabinent meeting yesterday, President Obama said, “I would encourage the House of Representatives to do the right thing,” which means passing his tax proposal.

President Obama’s view of what is “right” and “wrong” is odd. From a practical perspective, the $967.6 billion in revenues expected over the next 10 years from his proposed tax hike pales in comparison to the $46.9 trillion in spending. Budget deficits will still run high, and, as a result of the tax hikes, the economy will contract, according to at least two separate studies. The affect of this will be slower job creation, if not a recession.

The other aspect is moral the moral argument. What is exactly the “right thing”? The tax burden in the United States is already high and, thanks to President Obama and Congress, budget deficits are out of control; reaching $1 trillion for the fourth straight year. Is it moral to coerce people to pay more in taxes when the government is spending so irresponsibly?

During White House press conference, ABC News reporter Jake Tapper asked Jay Carney, Obama’s press secretary, how they can make the argument that continuing current tax rates is a “giveaway” to higher-income earners. Here’s the exchange:

Why conservatives don’t trust Mitt Romney

You know from looking at the polls in the Republican primary that conservatives seem to be backing anyone but Mitt Romney, despite the fact that he was the “conservative alternative” to John McCain just four years ago. Some of the reasons for the animosity towards Romney are hypocritical, but others are reasonable.

Among the reasons we often hear from Romney’s critics is that he’s fake; someone that will say anything to get elected. A textbook example of that comes in comments Romney recently made about President Barack Obama’s budget proposal. Here’s what Romney said via Marginal Revolution:

“This week, President Obama will release a budget that won’t take any meaningful steps toward solving our entitlement crisis,” Romney said in a statement e-mailed to reporters. “The president has failed to offer a single serious idea to save Social Security and is the only president in modern history to cut Medicare benefits for seniors.”

Let me address the main issue in these comments first. Romney rightly says that Obama will not address entitlement reform in a meaningful way, but at the same time criticizes cuts to Medicare; which aren’t substantial to begin with. This ignores that fact that cuts to Medicare in entitlement reform is an inevitability. This has to happen in order to bring the federal budget back to a sustainable path.

Dick Armey encourages GOP to back Roadmap for America’s Future

While appearing on Meet the Press yesterday, Dick Armey, author of the Give Us Liberty: A Tea Party Manifesto, warned Republicans that they need to run on ideas, specifically encouraging them to support Rep. Paul Ryan’s Roadmap for America’s Future, the only serious plan that has been offered from either party that tackles reforming entitlement programs.

Here is the video:

 


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