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Economy

How To Understand The Debate Over Obama’s Non-Existent Spending Spree

Our guest blogger is Michael Linden, Director of Tax and Budget Policy at the Center for American Progress Action Fund.

Over the past two weeks, a couple of charts — one from yours truly and one from Rex Nutting at MarketWatch — have really riled up conservatives and confused a fair number of DC establishment media types. For the past three years, it has been an article of faith among those folks that President Obama went on some kind of spending binge. And a casual glance at yearly spending figures does appear to support that charge. But what my chart and Rex’s chart show is that, once you account for the fact that most of the increase in spending from fiscal year 2008 to 2009 happened before President Obama even took office, then the “binge” utterly vanishes.

And this is the key point. The only way to show that spending has gone up dramatically under President Obama is to pretend like he had complete control over what was spent in fiscal year 2009. And that notion is utterly false.

First of all, recall that President Obama took office nearly four months into fiscal year 2009. That simple fact, all by itself, is enough to discount any “analysis” that merely compares fiscal year 2008 spending to fiscal year 2009, and tries to attribute the entire difference to President Obama.

But it actually goes beyond that. By the time President Obama took office, nearly all the dramatic increase in spending had already been baked into the cake. How do we know that? Well, in January 2009, before President Obama had even taken office, the Congressional Budget Office projected that federal spending would exceed $3.5 trillion for fiscal year 2009, half a trillion more than the government spent in 2008. Again, that was BEFORE President Obama event took office. It’s reasonable to use that number as our best guess at what spending would have been in FY2009 under ANY president. That’s what my chart from last week did.

Of course, the CBO’s projections aren’t perfect. They change as the economy changes and as laws change. Fortunately, CBO also tells us in subsequent reports how and why its previous estimates have changed. We can use that to understand how much of the total federal spending in fiscal year 2009 was attributable to legislative changes that occurred AFTER President Obama took office.

The answer is that out of a total of $3.5 trillion actually spent in FY09, only $165 billion, less than 5 percent, was the result of policy changes signed into law by President Obama.

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Economy

Paul Ryan’s Plan To ‘Prevent European-Style Austerity’ Adds To Debt, Throws 4.1 Million Out Of Work

Republican efforts to cut the debt and put people back to work would help the United States economy avoid “European-style austerity,” House Budget Committee Chairman Paul Ryan (R-WI) said on NBC’s Meet The Press yesterday.

The House GOP budget seemingly embraces that model, calling for massive reductions in spending like those that have led to double-dip recessions across Europe. And though analyses have found that the budget, which Ryan authored, would actually add to the national debt, the GOP’s vision is necessary to address joblessness and avoid austerity, he said:

RYAN: What we’re saying is let’s get on growth and prevent austerity. The whole premise of our budget is to pre-empt austerity by getting our borrowing under control, having tax reform for economic growth, and preventing Medicare and Social Security and Medicaid from going bankrupt. That pre-empts austerity. The president, his budget, the fact the Senate hasn’t done a budget in three years, puts us on a path towards European-like austerity. That’s what we’re trying to prevent from happening in the first place.

Watch it:

Not only would Ryan’s plan add to the debt, it would also increase the number of people who are looking for a job, resulting in a net loss of 4.1 million jobs over the next two years, according to the Economic Policy Institute:

The Ryan budget would nevertheless immediately enact aggressive spending cuts — particularly to the social safety net — which would reduce employment by 1.3 million jobs in fiscal 2013 and 2.8 million jobs in fiscal 2014, relative to current budget policies.

Ryan claims he wants to avoid European-style austerity, rein in the debt, and put people back to work. His plan, however, would end similarly to European austerity, leading to higher levels of debt and an unnecessary and unneeded spike in joblessness.

Economy

Paul Ryan Claims Romney Budget, Which Adds $10 Trillion To Debt, Will ‘Prevent A Debt Crisis’

Presumptive Republican presidential nominee Mitt Romney’s budget would add $10.7 trillion to the debt and reduce federal revenues to just 15 percent of GDP, exploding the “prairie fire of debt” Romney warned the nation about in a speech last week in Iowa.

Romney isn’t the only one decrying the debt while ignoring that his budget would make it worse. House Budget Committee Chairman Paul Ryan (R-WI), in an appearance on Fox News this morning, made the laughable claim that a budget that explodes the debt will simultaneously prevent a debt crisis:

RYAN: More to the point, though, the kind of budget Mitt Romney is talking about is one that prevents a debt crisis.

Watch it:

Ryan praised Romney’s 20 percent, across-the-board tax cuts that are paid for, he claims, by closing loopholes that primarily benefit the wealthy. The only problem with that, of course, is that Romney hasn’t laid out such a plan, and even if he did, it wouldn’t make up enough revenue to avoid adding trillions to the national debt.

This isn’t anything new from Ryan. Though he paints himself as a very serious person who is trying to reduce the debt, he authored the House GOP’s radical budget plan, which manages to add to the debt despite cutting spending on programs that help the poor and middle classes because, like Romney, he gives away trillions in tax breaks to the wealthiest Americans.

Economy

Paul Ryan Carries Mitt’s Water, Claims The Romney Economic Plan Won’t Blow Up The Deficit

Mitt Romney yesterday traveled to Iowa, where he decried the “prairie fire of debt” that President Obama has supposedly allowed to engulf the nation. But Romney neglected to mention that his own economic plan would add $10.7 trillion to the debt, reducing federal revenue to just 15 percent of GDP.

As the Associated Press reported today, “Romney’s tax and spending plans don’t support his vow to dampen the debt fire.” But don’t tell that to House Budget Committee Chairman Paul Ryan (R-WI), who said to MSNBC’s Joe Scarborough that Romney’s tax plan won’t blow up the deficit:

SCARBOROUGH: So you talk about Mitt Romney talking about how he’s going to be responsible. You look at Mitt Romney’s plans, though, you add them all up, the deficit goes up as much under Mitt Romney as it does under Barack Obama. You know, if you look at their plans, there’s not a big difference.

RYAN: Oh, there’s a huge difference. Are you kidding me?

SCARBOROUGH: At the end of the day Paul, how much is the national debt going to be reduced under Mitt Romney’s tax plans and spending plans?

RYAN: So, under Mitt Romney’s tax plan, he’s keeping revenues where they historically have been, which they actually rise from where they are now, just like our budget does.

Watch it:

But Romney has simply asserted that his tax plan will be deficit neutral, because he will limit tax deductions for the richest Americans, without laying out any way to actually achieve that end. He’s even admitted that this rather relevant part of his plan is missing.

And he hasn’t laid out the spending plans that would supposedly cut the deficit either. As the AP put it, “the closest [Romney] has come to laying out a specific spending plan has been in his endorsement of the budget blueprint passed this year by House Republicans, which also fails to produce his promised deficit reductions.”

Even if Romney actually followed through on his pledge to limits deductions for the rich, he would need 6.5 percent economic growth for the next five years to keep his tax plan from adding to the deficit. The best five-year period of growth since World War II was from 1961 to 1966, when the economy grew at 5.8 percent per year, meaning Romney would have to see the greatest growth of the post-war period simply to keep his tax plan out of the red.

Of course, this is just par for the course for Ryan, who pulled the same trick with the House Republican budget, pledging to close tax loopholes and limit deductions, but refusing to give any specifics.

Economy

CHART: Spending, Taxes, And Deficits Are All Lower Today Than When Obama Took Office

Our guest blogger is Michael Linden, Director for Tax and Budget Policy at the Center for American Progress Action Fund.

Federal spending is lower now than it was when President Obama took office. I’ll pause to let you absorb the news.

In January 2009, before President Obama had even taken the oath of office, annual spending was set to total 24.9 percent of gross domestic product. Total spending this year, fiscal year 2012, is expected to top out at 23.4 percent of GDP.

Here’s another interesting fact. Taxes today are lower than they were on inauguration day 2009. Back in January 2009, the CBO projected that total federal tax revenue that year would amount to 16.5 percent of GDP. This year? 15.8 percent.

One last nugget. The deficit this year is going to be lower than what it was on the day President Obama took office. Back then, the CBO said the 2009 deficit would be 8.3 percent of GDP. This year’s deficit is expected to come in at 7.6 percent.

The fact is that Obama inherited a disaster of a federal budget. Eight years prior, when President George W. Bush took the oath of office, there was a $281 billion surplus. By the time Obama was sworn in, he was facing a $1.2 trillion deficit. Inconvenient though it may be for conservatives (especially those who are running for president), the truth is that spending, taxes and the deficit are all lower today than when President Obama took office.

Economy

INFOGRAPHIC: How The House GOP’s Budget Would Hurt Kids

House Republicans have touted their budget as a prescription for economic growth that will return the United States economy to prosperity. In reality, as ThinkProgress has documented, the GOP budget slashes social spending on programs that protect the most vulnerable while giving more than $3 trillion in tax breaks to the wealthiest among us — and even after all that, it not only fails to reduce the national debt but actually adds to it.

More than 60 percent of the spending cuts in the GOP budget would come from programs that benefit the poor, including food assistance, Women, Infant, and Children programs, and potentially even tax credits that have huge effects on poverty and hunger. Those cuts would undoubtedly not only hurt adults in struggling families, but harm children as well. According to a new report from the Half In Ten project at the Center for American Progress, millions of children will lose assistance from a number of services, as the following infographic shows:

As Half In Ten’s Melissa Boteach noted yesterday, the GOP budget would also boot nearly 280,000 children from school lunch programs, even while protecting a massive tax break for multimillionaires.

Under the guise of creating economic prosperity, Republicans have pursued a tax-and-cut ideology with reckless abandon over the last two years, taking the axe to vital social safety net programs while also cutting tax rates on the wealthy. The casualties of the Republican agenda, however, are not numbers on a chart — they are poor kids who are struggling to survive.

Politics

After Previously Praising Her, Paul Ryan Now Disses Ayn Rand: ‘I Reject Her Philosophy’

Rep. Paul Ryan and his on-again, off-again political inspiration, Ayn Rand

In 2005, Rep. Paul Ryan (R-WI) heaped praise on Ayn Rand, a 20th-century libertarian novelist best known for her philosophy that centered on the idea that selfishness is “virtue”. The New Republic wrote:

The reason I got involved in public service, by and large, if I had to credit one thinker, one person, it would be Ayn Rand,” Ryan said at a D.C. gathering four years ago honoring the author of “Atlas Shrugged” and “The Fountainhead.”

Ryan also noted in a 2003 interview with the Weekly Standard, “I give out ‘Atlas Shrugged’ as Christmas presents, and I make all my interns read it. Well… I try to make my interns read it.”

But today, Ryan is singing a far different tune.

From an interview with National Review’s Bob Costa this week:

I reject her philosophy,” Ryan says firmly. “It’s an atheist philosophy. It reduces human interactions down to mere contracts and it is antithetical to my worldview. If somebody is going to try to paste a person’s view on epistemology to me, then give me Thomas Aquinas,” who believed that man needs divine help in the pursuit of knowledge. “Don’t give me Ayn Rand,” he says.

It’s understandable why Ryan would back off his former political muse. She described altruism as “evil,” condemned Christianity for advocating compassion for the poor, viewed the feminist movement as “phony,” and called Arabs “almost totally primitive savages.” Learn more about Ayn Rand in this short ThinkProgress video:

Despite Ryan’s newly-professed distaste for Rand, were she alive today, she would likely applaud Ryan for his draconian GOP budget, which cuts food stamps and other programs for the poor, ends Medicare as we know it, gives $3 trillion in tax breaks for corporations and the rich, and raises taxes on the poorest Americans.

Health

GOP Targets Safety Net Programs, Financial Regulations To Avoid Defense Cuts

Committees in the House are busily marking up legislation to avoid the scheduled cuts that lawmakers approved as part of the 2011 Budget Control Act. Those automatic reductions to domestic and defense spending — agreed to by both parties during the effort to raise the nation’s borrowing limit — will go into effect on January 2, 2013 unless Congress can agree on a proposal to lower the national deficit by at least $1.2 trillion over 10 years.

Since the demise of the super committee tasked with identifying the savings, the GOP has relied on the House-passed Budget Resolution to initiate a budget reconciliation process that would eliminate or disperse the $600 billion of proposed reductions to military spending to other federal agencies. Now, in a memo from the Republican leadership to its members, House Speaker John Boehner (R-OH), Majority Leader Eric Cantor (R-VA), Whip Kevin McCarthy (R-CA), and House Republican Conference Chairman Jeb Hensarling (R-TX), spell out how they plan to generate “savings” in mandatory programs that “would first be used to offset the cost (approximately $78 billion) of replacing the automatic across-the-board discretionary spending cuts” and “further reduce the deficit.”

As it turns out, Republicans’ plan to protect the ballooning defense budget will come at a significant cost to lower-income Americans, women, and children, as well as the nation’s financial security. ThinkProgress has compiled a table of just some of the consequences of the GOP’s cuts:

CUT CONSEQUENCE
$11.9 billion from the Prevention & Public Health Fund: Would eliminate a special fund designed to help communities fight chronic conditions like heart disease, cancer, stroke, and diabetes. Chronic conditions are “responsible for 7 of 10 deaths among Americans each year and account for 75 percent of the nation’s health spending.” Investing in prevention will help reduce national health spending on costly acute care.
$600 million by reducing Medicaid enrollment: Would repeal the Medicaid Maintenance of Effort (MOE) provision, which requires states to maintain their existing enrollment eligibility in Medicaid and the Children’s Health Insurance Program (CHIP) or risk losing federal funding. The Congressional Budget Office (CBO) estimates that allowing states to kick people off the Medicaid rolls before the Affordable Care Act is fully implemented would cause 400,000 people to lose their Medicaid and CHIP coverage. Two thirds of those dropped from coverage would be children. By 2016, the number of those expected to lose CHIP coverage will climb to 1.7 million people, with 700,000 left uninsured.
$43.9 billion from recapturing exchange subsidies: Families or individuals who are receiving affordability credits through the health care exchanges would have to pay back the government if their incomes fluctuate throughout the year. The change could dissuade people from purchasing insurance, disproportionately impact women (who are more likely to experience income fluctuations), and could even increase costs for the entire population.
$33 billion by cutting food stamps: Via a handful of changes, the GOP would cut about $33 billion from the Supplemental Nutrition Assistance Program (SNAP), i.e. food stamps. The cuts would knock two million people off of food stamps entirely, while reducing benefits for 44 million others. In September, every beneficiary of food stamps would see their benefits cut by $57.
$11.7 billion by restricting “categorical eligibility” in the food stamp program: States would be prevented from automatically enrolling families in food stamps if they qualify for other assistance programs. The bill would knock about 1.8 million low-income people per year off of food aid and end automatic enrollment in free school meals for 280,000 children.
$22 billion by repealing the resolution authority: The authority for the government to dismantle failing financial firms, which was included in the Dodd-Frank financial reform law, would be eliminated. Without this power, the government would have to resort to the ad hoc bailouts of 2008, as it would be have no process to unwind a failed mega-bank. The savings here are also fabricated, based on a bizarre Congressional Budget Office score that has little basis in reality.
$2.8 billion by eliminating foreclosure prevention: The Home Affordable Modification Program (HAMP), one of the Obama administration’s key foreclosure prevention programs, would be terminated. HAMP has been underwhelming due to design flaws and bank intransigence, but the New York Federal Reserve estimates that 3.6 million foreclosures will occur in the next two years, while billions of dollars are still available for HAMP to actually make a difference.
$5.4 billion by cutting the budget of the Consumer Financial Protection Bureau: In addition to ending the CFPB’s independent stream of funding, the bill would cut the Bureau’s budget by more than half. The CFPB can craft regulations for any financial product, and is already working on new rules aimed at reining in credit card, mortgage, and student loan abuses.

NEWS FLASH

Ryan’s Medicaid Cuts Would Have Cost States $555 Billion Over Past Decade | States would have lost $555 billion over the past decade if House Budget Committee Chairman Paul Ryan’s (R-WI) proposed Medicaid cuts had been in effect starting in 2001, analysis from The Center on Budget and Policy Priorities (CBPP) shows. Under Ryan’s plan, which would convert Medicaid to a block grant, federal Medicaid funds in most states would be reduced by more than 35 percent by 2010 — and by more than 50 percent for some — totaling an estimated $80.7 billion in cuts in 2010 alone. For fiscal years 2013 through 2022, the Ryan budget would cut Medicaid by at least $1.7 trillion, with the repeal of the ACA’s Medicaid expansion accounting for $919 billion of these cuts, and about $810 billion in reductions stemming from the block grant itself. CBPP used ten years of factual spending data — as opposed to hypothetical estimates — in the analysis. — Fatima Najiy

Health

Republicans Advance Proposal To Undermine Obamacare By Penalizing People Who Get Married

Yesterday, the House Ways & Means Committee — following the instruction included in the House Budget — passed legislation that would require families who qualify for subsidies in the health care exchanges to pay higher taxes if their incomes change mid-year. The change could dissuade people from purchasing insurance, disproportionately impact women (who are more likely to experience income fluctuations), and — as a new analysis from the Center on Budget and Policy Priorities explains — could increase costs for the entire population.

Under the Affordable Care Act, families between 100 and 400 percent of federal poverty line (FPL) qualify for government assistance when purchasing health coverage through the state-based exchanges. The government will pay insurance companies a refundable amount based on an estimate of the family’s annual income (the assistance is available on a sliding scale in which higher-income earners receive smaller subsidies). Should a family’s income change during the year (were a single mother marries in the middle of the year, for instance), it is required to pay the government back a specific capped amount come tax season. Congress has increased the fee twice since the law was enacted (the original legislation set the cap at around $400) and now the Republicans are hoping to boost the amount to the full overpayment.

The Joint Committee on Taxation and the Congressional Budget Office estimate that the higher tax bill would discourage 350,000 people from signing up for the subsidies in the first place. Many would be dissuaded from enrolling in insurance because “the amounts they could be required to repay to the IRS if they received subsidies would be more than five times higher than the penalty they would owe if they remained uninsured in 2014.” Judith Solomon and Robert Greenstein explain what this means:

If the caps on repayment are eliminated, the amounts that families would be required to repay in 2014 would, in many cases, be well over five times the penalty they would face in 2014 under the ACA’s individual mandate if they failed to obtain coverage. [...]

Our analysis indicates that 38 percent of the estimated $43.9 billion in savings credited to this provision comes from the reduction in the number of people who would enroll in coverage in the exchanges.

As noted, because people who decided to forgo coverage would disproportionately be healthy individuals, the pool of people enrolling with the exchanges would be sicker on average, which would push up everyone’s premiums for insurance. The higher premiums, in turn, would lead additional healthy people to forgo coverage. The result would be “adverse selection” that could weaken the viability of the exchanges. For some families, the result also would be huge marriage penalties, as the example cited at the beginning of this analysis shows. Under the House provision, the family in that example would owe the IRS almost $5,000 as a result of getting married during the year.

Solomon and Greenstein note that this repayment system is fairly unique — after all provisions that penalize people who marry or obtain jobs don’t make for smart policy. Other programs, they write, are based on eligibility on current income so that “if a household’s income rises during the year, it ceases to receive assistance or receives a reduced benefit, but it is not made to pay back the aid it received during its period of need.” And the Affordable Care Act itself takes great pains to ensure that families don’t receive more government dollars than they’re entitled to. Under rules issued by the Secretary of Health and Human Services, applicants are required “to validate and update the information on their prior tax return; if their income has increased in the interim, the updated information must be used to determine their subsidy amount.”

But all this matters little to a Republican party eager to enact the Ryan budget and unravel President Obama’s signature health care law.

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