Sunday, May 1, 2011

Republicans Backed Into a Corner

The 2010 mid-term elections here in the US were all about how the Republicans were going to improve the economy and create jobs. And balance the budget. How they were going to do this in an economy that was arguably the worst since the Great Depression was anybody’s guess. But enough people were convinced to give them another chance and voted them control of the US House of Representatives along with a number of state governorships.

This lead to my posting right after the election Put Up or Shut Up Time for the Republicans.

[The Republican] plan to balance the budget is to extend the tax cuts to all including the wealthiest 2% along with mostly unspecified “spending cuts”. We don’t know exactly what they have in mind but the most consistent story is that defense, Social Security, and Medicare cuts are not on the table which is the lion’s share of the budget. With precious little else to cut, how do they propose to balance the budget while not only refusing to raise taxes but also swelling the deficit with more tax cuts for the wealthy? The math just doesn’t add up! But then again, they now have a chance to propose their own budget in the House to answer these questions.
But by forcing the extension of the Bush tax cuts for the wealthiest during the Congressional Lame Duck session last year, the Republicans were already starting to back themselves into a corner. The only possible ways out were to make cuts in defense, Social Security, Medicare, or all three.

But Social Security and Medicare are extremely popular programs and recent polls have shown that over 3 out of 4 Americans have rejected the idea of any cuts to these programs.

So by process of elimination, there are only two remaining alternatives for the Republicans to choose from. One is to propose cuts in defense which usually goes against conservative ideology but would mitigate or avoid having to deal with the "third rail" associated with messing with Social Security and Medicare. Or give in to the right and try and sell the public on making all the cuts to Social Security and Medicare without touching defense.

The Republicans chose the latter and apparently felt that Congressman Ryan could sell this to the American public. But the more Americans read the fine print of Ryan’s plan, the less they are buying it.

Here from his "Roadmap" site is Ryan’s proposal for Medicare.
It preserves the existing Medicare program for those currently enrolled or becoming eligible in the next 10 years (those 55 and older today) - So Americans can receive the benefits they planned for throughout their working lives. For those currently under 55 – as they become Medicare-eligible – it creates a Medicare payment, initially averaging $11,000, to be used to purchase a Medicare certified plan. The payment is adjusted to reflect medical inflation, and pegged to income, with low-income individuals receiving greater support. The plan also provides risk adjustment, so those with greater medical needs receive a higher payment.
So instead of the government acting as the insurer as in Medicare, it will offer payments for individuals to shop around for their own private insurance. Just the idea of people in this age group with all of their mental and physical infirmities shopping around for the best deal on their health insurance boggles the mind!

But what happens if (most say when) the premiums for the so-called Medicare certified plans grow faster than what the government is willing and able to pay for? The policyholder must then make up the difference or go without health insurance.

This would be a really tough sell to get present Medicare beneficiaries to accept. But to get around that, this plan is being sold as affecting only those presently under the age 55. As long as it’s someone else getting screwed, that’s not so bad! The plan for Medicaid which insures low-income people leads to a similar problems that may result in some losing coverage.

And here is part of Ryan's proposal for Social Security.
Offers workers under 55 the option of investing over one third of their current Social Security taxes into personal retirement accounts, similar to the Thrift Savings Plan available to Federal employees…Makes the program permanently solvent…with an eventual modernization of the retirement age.
Of course the “modernization of the retirement age” means raising it, a position openly advocated by New Jersey Republican Governor Chris Christie. But postponing the retirement age creates an additional hardship for those who do physical labor for a living in addition to those near the present retirement age who have been especially hit hard by unemployment. Raising the maximum taxable earnings for Social Security above $106,800 would likely address any future shortfalls without having to cut benefits. But this goes against the Republican ideology that taxes should never be raised!

Perhaps the most controversial part is Ryan's proposal for Tax Reform.
Simplifies tax rates to 10 percent on income up to $100,000 for joint filers, and $50,000 for single filers; and 25 percent on taxable income above these amounts…Promotes saving by eliminating taxes on interest, capital gains, and dividends; also eliminates the death tax [the Republican epithet for the estate tax].
So instead of the present highest marginal tax rate of 35% for the wealthiest under the present extended Bush tax cuts (compared to about 39% under Bill Clinton when the budget was last balanced), Ryan advocates cutting it even further to 25%. And while those who work for their income would still have to pay taxes, those more well to do who can afford to live on just investment income get a free pass on taxes.

More and more people are starting to see a pattern here. It is difficult to continually advocate governmental policies that are seen to benefit the wealthy at the expense of everybody else. Any while Mr. Ryan is a pretty slick salesman for his budget policies when he appears as a TV talking head, his recent experiences at local town hall meetings have resulted in booing and heckling by some of the attendees.

Rep. Dan Webster (R-FL) along with many other Republicans around the country suffered a similar fate during one of his recent town hall meetings while trying to defend the Ryan plan.

Republican governors adopting policies that have made budget cuts in areas like education while at the same time supporting tax cuts for corporations are also getting some pushback sometimes in the form of recalls from some of its citizens.

Don’t think the Democrats haven’t noticed the turmoil among some Senate Republicans in deciding if they really want to stick their necks out in support of the Ryan budget plan that passed the Republican controlled House. So with no danger of losing and in the spirit of "cooperation"
Senate Majority Leader Harry Reid (D-Nev.) announced on Wednesday that he would host a vote on Rep. Paul Ryan’s (R-Wis.) budget as a means of forcing moderate GOP senators to weigh in on the legislation’s controversial proposals.

While the Tea Party purists may choose to ignore the growing voter dissatisfaction with the Ryan tax and budget proposals, the more moderate Republicans may well feel that they have been backed into a corner trying to defend these proposals that may well lead to some heavy losses in 2012. And what about the promised creation of more jobs? Of course they say that will come along if we agree to even more tax cuts. So how many Republicans will continue to try and defend the Ryan proposals in the face of such strong and emotional opposition? Stay tuned!

Post Script - May 25, 2011

Democrat Captures House Seat in Special Election

The results set off elation among Democrats and soul-searching among Republicans, who questioned whether they should rethink their party’s commitment to the Medicare plan, which appears to have become a liability heading into the 2012 elections.

Two months ago, the Democrat, Kathy Hochul, was considered an all-but-certain loser in the race against the Republican, Jane Corwin. But Ms. Hochul seized on the Republican’s embrace of the proposal from Representative Paul D. Ryan of Wisconsin, to overhaul Medicare, and she never let up.