Paul Ryan, Patty Murray and a budget walk into a bar

By Reihan Salam
March 15, 2013

This week, House Republicans and Senate Democrats released budget resolutions that illustrate the chasm that separates the two parties.

The Republicans, led by House Budget Committee Chairman Paul Ryan, aim to shave $4.6 trillion off of the federal government’s spending trajectory. They get there primarily by reducing the growth rate of domestic social programs like Medicaid and rolling back the coverage-expanding provisions of the Affordable Care Act. Although the Ryan budget accepts the revenue increases that were part of the fiscal cliff deal and the Affordable Care Act, it does not allow for any further revenue increases.

The Democrats, led by Senate Budget Committee Chairwoman Patty Murray, aim to reduce spending by $975 billion. Yet they also call for $100 billion in new stimulus spending and shutting off the $1.2 trillion in automatic spending cuts scheduled to take place under sequestration, which suggests that spending reductions will be more than balanced by spending increases. And while the Ryan budget resists revenue increases, the Murray budget calls for $975 billion in revenue from unspecified cuts to loopholes and spending in the tax code.

Beneath the surface of these two budgets lie coalition politics. The Ryan budget, for example, delays its major Medicare reforms until today’s 55-year-olds reach retirement age. It also leaves Social Security largely untouched. One way to look at this is as a concession to the political reality that older Americans tend to support Republicans, and so reforms that reduce benefits for older Americans will be met with strong intra-party resistance. At the same time, the main beneficiaries of Medicaid expansion are low-income adults who are not, as a rule, inside the GOP tent. Conservatives generally believe that smaller government is better for everyone, including the poor. Yet conservative politicians have more to fear from voters who rely on Social Security and Medicare than from voters who rely on Medicaid, which explains their reluctance to make deep cuts in old-age social programs and their willingness to make cuts in programs that tend to benefit the young.

The Murray budget, in contrast, tries to unite a very different coalition. Democrats represent low-income adults who rely on programs like Medicaid; unionized public employees and health-sector workers who rely on federal spending to make a living; students and educators who count on higher education subsidies; and college-educated professionals who favor tax increases on people richer than themselves. This unwieldy coalition makes it very difficult to cut spending. There is a strong intellectual case that Democrats should embrace a single-payer system like Canada’s to shrink health costs, thus allowing the federal government to spend more on, say, green energy investments. But for every left-of-center Democrat who likes the idea, there is a Democrat who represents hospitals and insurers who does not. And though Democrats are far more open to tax increases than Republicans, they have backed themselves into a position in which they can only raise taxes on, at best, the top 2 percent of earners.

Between these two budgets lies a potentially attractive middle ground, and the interesting question is which party will get there first. It has become commonplace to argue that Republicans are constrained by a highly ideological conservative base that will brook no compromise on taxes or spending. And there is something to that. But the tensions within the Democratic coalition mean that Democratic politicians will have an even harder time embracing root-and-branch spending reforms. By offering a fiscally sustainable path to universal coverage and a better deal for middle-income parents, conservative reformers have a shot at breaking America’s political stalemate.

The first step would be for Republicans to rally around James Capretta’s market-based alternative to the Affordable Care Act. Like Ryan, Capretta starts out by repealing most of the ACA. But he also reforms the tax treatment of health insurance to curb the benefits for the highest earners while creating a refundable tax credit for individuals without access to job-based coverage. He also overhauls the Medicaid program by giving state governments a fixed amount of money per Medicaid beneficiary that they can combine with the refundable tax credit to buy coverage for low-income residents. To broaden insurance coverage as much as possible, Capretta proposes that states provide default insurance options for individuals who don’t actively use their tax credit to purchase coverage. Capretta’s path to universal coverage wouldn’t be free, but he argues that it would cost a fifth or less of what the coverage provisions of the Affordable Care Act are expected per year.

The second step would be for Republicans to call Patty Murray’s bluff on taxes. Murray is right to believe that cutting tax expenditures on high earners could generate a great deal of revenue. Diane Lim of the Pew Charitable Trusts recently observed that capping the total dollar value of itemized deductions at $17,000 would raise $1.6 trillion in revenue over the next decade. One awkward challenge for Murray, however, is that some of the biggest beneficiaries of the loopholes and unfair spending in the tax code she condemns are two-earner couples living in high-tax jurisdictions like New York, New Jersey and California, a vital part of the Democratic coalition.

With this in mind, Republicans ought to embrace Murray’s call for closing loopholes and cutting unfair tax code spending. But instead of using this new revenue to finance government spending, Republicans should insist it be used to dramatically expand the popular child tax credit. Robert Stein has proposed a $4,000 per child credit that could be used to offset income and payroll taxes, a measure that would increase the disposable income of millions of middle-income families. While Democrats often accuse Republicans of wanting to cut social programs to finance tax cuts for the rich, they’d have a much harder time attacking the GOP for cutting tax breaks for affluent coastal suburbanites to finance tax cuts for middle-income families with kids.

Neither of these ideas is incompatible with Ryan’s broad objectives, and neither threatens the GOP’s core constituencies. Yet they would make it far easier for Republicans to make inroads among the independents and moderates both parties will need to win in 2014 and beyond.

PHOTO: House Budget Committee Chairman Rep. Paul Ryan (R-WI) holds a news conference to unveil the House Republicans’ FY2014 budget resolution in Washington March 12, 2013. REUTERS/Gary Cameron | Senate Budget Committee chair Senator Patty Murray holds up a copy of a federal employees’ Worker Adjustment and Retraining Notification (WARN) at a news conference on Capitol Hill in Washington  February 28, 2013. REUTERS/Larry Downing

7 comments

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I had to check and see what website I was on–as there were not any personal attacks in the article.

Perhaps we might ask Mr. Salam to head to Washington and explain to the President how one goes about achieving a “grand compromise” in resolving our fiscal issues. (But securing that access will cost you $500,000 since you’re obviously not part of the blessed few.)

Posted by COindependent | Report as abusive

I posted a reply to this article in Reuters, which has also has a direct bearing on this one.

“Has military Keynesianism come to an end?”

Nice to see the plain, unvarnished truth for a change.

Ryan and his ilk are attempting to persuade the problem is “entitlements” — which, if you remember, used to be a good thing before these people started their devious propaganda campaign — but the real problem is exactly what a former president, Dwight Eisenhower, warned the American people against when he was leaving office in 1961. That is 52 years ago, before the full effect of the Pandora’s Box of the Military-Industrial Complex was open to anywhere the reality of what it is today.

Contrary to what Ryan is attempting to sell the American people, ALL of our present problems can be traced directly to the rise of the Military-Industrial Complex.

If we let Ryan sell us a “bill of goods” that it is the “entitlement” programs — Social Security (which is actually self-funded, but used as a “slush fund” by the government, mainly for miltiary expansion it could not otherwise afford), Medicare and Medicaid (two social programs that were added by Johnson without ANY separate funding for them at all, and are the main reason Social Security is in trouble) — are the problem, this country will collapse economically.

Without these social programs — which are actually already far below the standards of ANY other OECD country — many people will lose everything they have, with no recourse except to either become homeless or die or both.

Ryan is not selling a rational plan for the future of this nation. Ryan is selling a plan to keep the Military-Industrial Complex from collapsing, because we can no longer afford to maintain an economy based on war.

THAT is the problem. This country has literally been “at war” since the end of WWII, and the “war” has expanded exponentially. It is a well known fact that war begets excessive profits and creates a blight on society called “war profiteering”.

THAT is what we have become, a society of war profiteers and “merchants of death”.

THAT is what we must reduce in our budget — the wages earned from war profiteering!

Granted that capitalism and free trade is the most effective economic system ever invented, we need to realize that our highly effective system of free enterprise has morphed into a self-destructive war machine that continually demands more of society to keep it oiled with the blood of innocent victims.

Do we want the Military-Industrial Complex to consume our own society, especially those who are unable to care for themselves?

THIS is what Ryan and his ilk are arguing for! The simple truth is Ryan’s path leads to self-destruction.

Ryan is a “merchant of death” peddling his “wares” to anyone who cares to believe his lies.

We MUST say NO to Ryan and stop the insanity!

http://blogs.reuters.com/nicholas-wapsho tt/2013/03/15/has-military-keynesianism- come-to-an-end/

Posted by PseudoTurtle | Report as abusive

By the way, there is NO middle ground in this zero sum game. Anyone who believes that is a fool.

Posted by PseudoTurtle | Report as abusive

Excellent analysis.

As H.L.Mecken once put it: “In this world of sin and sorrow there is always something to be thankful for. As for me, I rejoice that I am not a Republican.”

Posted by jrpardinas | Report as abusive

Paul Ryan will not win re-election in his own district in 2014. His own state legislature had control over redistricting in 2010 and they still lost state seats in 2012. He’s been playing a full on queen’s gambit. He and his handlers don’t realize they are too close geographically to Dane County to win after pissing off so many.

Posted by sql_yoda2 | Report as abusive

Robert Stein has proposed a $4,000 per child credit that could be used to offset income and payroll taxes, a measure that would increase the disposable income of millions of middle-income families.

But would not that program simply increase the “47%” to even higher numbers? And Republicans seem to often demand that everyone pay taxes. Of course, how much is a matter of debate.

But there is also one big difference between the two budgets. The Ryan budget would slash entitlements, but that huge ‘entitlement’ called defense spending, is untouched.

Posted by pavoter1946 | Report as abusive

I’ve written before, when you say that you’re going to cut your household budget by cutting healthcare, food and school lunches, but leave your allowance for jewelry, guns and expensive cars intact, something is wrong.

The Republicans keep trying to cut spending and taxes one way and one way only – by taking money out of the pockets of our elderly parents, grandparents and children. They are the most vulnerable in our society.

Democrats just want an intelligent reduction of spending, intelligent program reforms, and intelligent increases in taxes. Yet still we are reviled as Communists, Socialists, deadbeats, takers and Welfare queens.

Posted by JL4 | Report as abusive