Blue and Green World Map wallpaper – Obama vs. Ryan, What apples-to-apples budget comparison?

Blue and Green World Map wallpaper

James Pethokoukis, an economics pundit who has written for the right-wing The Weekly Standard, Commentary and Investor’s Business Daily posted this on Reuters,  The $4 trillion gap: Obama vs. Ryan, an apples-to-apples budget comparison. His conclusion is all one needs to know as to why far Right blogs across the net were thrilled to find some straw to gasp after the beating Paul Ryan’s Road Map to Hell took for eviscerating Medicare and relying on some preposterous modeling, that for example, relied on a 2.3% unemployment rate by 2021. Most economists agree that the U.S. and most modern western free market economies can expect 4 or 5 percent unemployment under the best of circumstances ( some of it is just structural – seasonal workers, workers in career transitions, etc). A  couple red lights should go off for critical readers of Pethokoukis’s interpretation of a study he says was done by Goldman-Sachs.

* Where is that Goldman Sachs Study? Hard to argue with numbers that you can’t crunch. I would agree that the Obama budget proposals are stretchy or vague. Those numbers are probably some version of the Fiscal Commission’s proposal (Simpson-Bowles). But may also include some of the Bipartisan Policy Center’s plan (Rivlin-Domenici) plan. So if we’re to uphold the spirit of apples to apples comparison, implying bare knuckles honesty and critical analysis. How do does  Pethokoukis and his spiritual economics guru find an absolute difference between the Obama plan and the Road Map plan of $3.9 trillion dollars in federal savings over exactly ten years.

* Pethokoukis says “2) To do an apples-to-apples comparison, it’s necessary to a) plot them over the same time span; b) compare them against the same baseline and c) adjust them for similar economic assumptions. Goldman Sachs does the first two steps for me. It plots both plans vs. what the CBO calls its “alternate” baseline — the one it thinks most likely. (For instance, it does not assume all the Bush tax cuts get repealed like the main CBO baseline does.) Goldman thinks that’s what the White House did, too.” No mention here of the assumptions he is making about the Ryan plan. One of the reasons that it has been criticized is that Ryan asked for a CBO analysis where he told the CBO to make certain assumptions. Where is the Goldman Sachs analysis that does a comparison with a budget plan Obama proposed back in February with and without Ryan’s arm twisting to get better numbers.

Why is the CBO assuming that? Because Ryan’s staff told it to, without indicating how that revenue would actually be raised:

The path for revenues as a percentage of GDP was specified by Chairman Ryan’s staff. The path rises steadily from about 15 percent of GDP in 2010 to 19 percent in 2028 and remains at that level thereafter. There were no specifications of particular revenue provisions that would generate that path.

If you tell the CBO to assume a certain amount of revenue will be raised, it does, even if that revenue is wildly optimistic. Ryan did the same thing when he had the CBO score his Roadmap For America’s Future. He told the CBO to assume that the plan would raise 19 percent of GDP in revenue, and the CBO based the rest of its numbers on that assumption. But when the Tax Policy Center ran the numbers, it found the Roadmap would raise far less than Ryan said it would:

Assuming taxpayers choose their preferred tax system, revenue would average 16.1 percent of GDP between fiscal years 2011 and 2015, rising to 16.6 percent by 2020, compared with 20.2 percent under CBO’s January 2010 baseline. The fall in revenue would result primarily from the lower individual income tax rates and the exemption of capital income.

Without the level of revenue specified, Ryan’s Roadmap wouldn’t set the country on a path to reducing the debt, with debt growing to 175 percent of GDP. Are the revenue assumptions for Ryan’s 2012 budget any better? If they’re not — and we have no reason to believe they are, given Ryan’s previous performance — the radical cuts that Ryan has in mind will fail to reduce the country’s debt.

* Goldman and Pethokoukis admit they are making speculative assumptions about the expiration of the Bush tax cuts. Pethokoukis is making the assumptions about revenue that Ryan wants everyone to make. Gee, how accommodating.

* The sin of omission. Pethokoukis leaves out that Ryan can attribute a large chunk of his savings to gutting Medicare. A biased or casual reader of Pethokoukis’s column would see the bottom line – discount a lot of assumptions – many of them favorable to Ryan’s best spin on his plan – and think, wow, the Ryan plan saves so much more on the deficit. Where do those savings come from? Leaving seniors, the disabled and children begging for health care once their vouchers run out. Within Ryan’s framework of assumptions is that seniors will be able to afford to buy more health care insurance and that the private health insurance market will sell it to them. Seniors don’t have too much of a problem finding supplemental insurance to their Medicare now, but that insurance is to fill small to medium-sized gaps. Ryan’s plan will create huge gaps once you get sicker or suffer an injury that is above what Ryan and his health care cost increase projections.

Under Ryan’s plan, the value of the vouchers would fall further behind the rising cost of health care with each passing year, so they would purchase less health coverage over time. By 2080, Medicare would be cut 76 percent below its projected size under current policies, according to CBO. In other words, by 2080, the vouchers that would replace Medicare would receive one-quarter of the resources that Medicare would otherwise use.

* Goldman and Pethokoukis cannot have used a complete CBO score of Ryan’s plan, because despite citations of CBO, the CBO only scored portions of the plan that could be reasonably evaluated with the information Ryan gave them and again, with projections Ryan told them to use,

Reports of Plan’s Fiscal Soundness Rest on Misunderstanding of CBO Analysis

Assertions that the Ryan plan is fiscally responsible rest on a serious misunderstanding of a Congressional Budget Office (CBO) analysis of the plan. CBO only partially analyzed the Ryan plan. Contrary to some media reports, CBO has not prepared an actual cost estimate of it. [2] CBO generally does not produce estimates of the effects of proposed changes in tax policies; that is the responsibility of the Joint Committee on Taxation. In its analysis of the Ryan plan, CBO did not attempt to measure the revenue losses that Rep. Ryan’s proposals would generate.

Instead, as its report states, CBO simply used an assumption specified by Rep. Ryan’s staff that the overall level of revenues would remain unchanged from what the federal government would collect through 2030 under current policies, and would equal 19 percent of GDP in later years. CBO did not find that the Ryan plan actually would achieve these assumed revenue levels. (For commentary by Howard Gleckman of the Tax Policy Center on the widespread misunderstanding of the CBO analysis, see the box on page 5.)

The reality is different; TPC finds that the Ryan plan would result in very large revenue losses relative to current policies. TPC estimates that even with its middle-class tax increases, the plan would reduce federal revenues to 16 percent of GDP in 2014. Because the tax cuts for the wealthy would dwarf the tax increases for the middle class, the Ryan plan would allow the federal debt to continue growing for a number of decades to come, despite its steep cuts in Medicare, Medicaid, and Social Security.

Goldman and Pethokoukis both rely on CBO estimates of revenue that do not exist. Once more that makes any assertion that Ryan’s plan would shave $6.9 trillion and the Obama tentative plan, $3 trillion, I don’t know, chose your adjective – absurd, meaningless or smoke and mirrors. It is not an apples to apples comparison.

* Lie of omission number two. Goldman and Pethokoukis make no mention of how Ryan’s plan partially dismantles Social Security through the backdoor, in the name of reducing the deficit of course. Ryan’s Assault on Medicare Would Unravel the Value of Social Security Benefits

The Ryan plan’s omission of direct cuts to Social Security is no doubt a victory for the program’s advocates, whether it was due to sober electoral considerations (polling shows the vast majority of Americans strongly oppose benefit cuts) or the messaging efforts of progressive coalitions like the Strengthen Social Security Campaign. But that progress would be instantly negated if Ryan’s cuts to Medicare are enacted, since people would be forced to reallocate their Social Security income (the part that isn’t already dedicated to fixed expenses – food, mortgage payments, etc.) towards medical expenses, which can’t exactly be skimped on. Grandma, can’t that knee replacement wait until next month?

These cuts amount to a direct assault on the purchasing power of Social Security – as well as any other source of retirement savings a person has amassed. The government may as well send seniors their Social Security checks with a forwarding envelope to send right along to the private insurance companies waiting to collect! In the zero-sum world of retirement security programs, cuts in one program necessarily damage the goals of another. The Ryan plan threatens the entire foundation of programs we have established to care for our elderly for three important reasons:

Medicare cuts have a domino affect on everyone’s’, but the very wealthiest, retirement security. As Our Future notes Medicare recipients will be paying more our of pocket with Ryan’s vouchers. In many households they will use their Social Security benefits to pay for out-of-pocket expenses or to pay for more insurance. Those receiving some kind of conventional pension plan benefits – a fixed income – will also be forced to dip into those funds. 401Ks have proven to be less than ideal since their value is connected to the stock market. Maybe those with a large 401K will weather the storm, others not so much. How’s that Ryan back of the envelope projection of deficit savings looking now. Savings for who. Ryan’s plan includes a huge tax cut for corporations and millionaires. Like all conservatives and especially Randians like Ryan, he thinks we all have to keep the one percent at the top of the pyramid happy because they create jobs – or they create the nation’s income and revenue. Even far too many conservative Democrats believe that. Creating the nation’s wealth is a partnership. Without labor the most creative, most brilliant entrepreneur in the world is largely one person with a pipe dream. Only labor turns dreams and ideas into money. There has been a steady erosion of this fact of economic life in the U.S. at least since Nixon. Not all, but many of America’s wealthy – the Koch brothers school of economics, believe they are modern royalty, they are the princes of supply side economics – they and they alone create wealth. No dollar is created in this country that does not owe its origins to someone who did some actual work – who built the frame for the house, who assembled the car frame, who delivered the fuel, who programmed the data, who created and tallied the spread sheet, who changed the bed pan. These are the people the right-wing conservative bloggers call thugs.These American workers are the people who only exists as some kind of background noise to Ryan and Pethokoukis; the great unwashed masses who should be grateful that our overlords give us work. While we need some good federal stewards of the economy, we also need one political movement and a good portion of the business community to learn some humility. America’s wealth depends on a partnership, not the kings in their McMansions handing down edicts to the peasants.

Some useful links: Paul Ryan’s Tax Plan Based On Discredited Heritage Foundation Analysis That Forecast Bush Boom

This from conservative David Frum, Ryan’s Rosy Job Numbers: Fact or Fantasy?

Specifically, the Ryan budget touts analysis from the Heritage Foundation which argues that the unemployment rate will reach 2.8% by 2021. (For comparison, ‘natural’ unemployment is estimated to be around 5%) FrumForum contacted the Heritage Foundation’s Center for Data Analysis to ask about this figure.

The Heritage Foundation is just making stuff up. They can call Paul Krugman names all days it still doesn’t make their math right.

The Reviews Are In for Paul Ryan’s Budget and based on what he actually says and with fewer rosy assumptions, it ain’t good.

Ryan Plan Pushes Optimism to the Outer Limits

Paul Ryan already benefited from the Social Security fund he now wants to gut. Like Sarah Palin, Ryan thinks government checks to them are good, bad when anyone else gets one.