Posted by Shyam Moondra
President Ronald Reagan pursued trickle-down economics by cutting taxes for the rich in the belief that prosperity of the people at the top would trickle down to the people at the bottom of social strata. It didn't and President Reagan left a huge budget deficit and rapidly increasing national debt. President Bill Clinton raised taxes for the rich, in spite of fierce opposition from Republicans who predicted that higher taxes would lead to economic recession. It didn't lead to recession. Instead, we had one of the most enduring periods of economic vitality full of innovations made possible by venture capital that created over two million high-paying jobs and the stock markets reached to all-time highs. President George Bush increased spending to finance two wars that he initiated, got the Congress approve large tax cuts, especially for the rich, and spent a huge amount of tax dollars to bail-out the financial institutions. Bush's actions led to record high budget deficit and national debt that he handed over to President Barack Obama. Last week, the Chairman of House Budget Committee, Rep. Paul Ryan (R-Wisconsin), managed to have the U.S. House of Representatives, controlled by Republicans, approve his 2012 budget plan that slashes spending, largely targeted at senior citizens, children, and poor people, while cut taxes for the rich individuals and corporations. Will the third time be a charm for trickle-down economics? No way, no how!
Here are some observations on the Ryan's plan:
· About 90% of the people, especially low-income and middle-income people, will be hit the hardest while 10% of the richest people would come out ahead. The Ryan plan would create the worst class-warfare we have ever witnessed in the U.S. history.
· The middle class is the fuel that feeds our economic engine. The Ryan plan, which is lopsidedly anti-middle class, would scuttle the economic recovery currently underway and lead to higher unemployment right around the 2012 election time. May be that's what Republicans have in mind because the voters tend to punish the party in power in the White House for any economic ills.
· The biggest spending cut would come from privatization of Medicare. This will cause an unprecedented cost shift from the government to the senior citizens who can least afford. The proposed changes in Medicare would lead to millions of senior citizens joining the ranks of uninsured, while the insurance companies would reap windfall profits. The negative economic consequences would go beyond senior citizens and would be borne by their children who would have to deal with the cost shift to senior citizens. The extreme economic severity of the proposed Medicare changes would undoubtedly lead to an increased number of suicides among the depressed millions of sick senior citizens.
· The Ryan plan is proposing drastic cuts in Medicaid, education, childcare, food-stamp program, EPA funding, and in Obama's initiatives such as infrastructure, energy, and high-speed train system. No one has even bothered to figure out what would be the social consequences of these unprecedented cuts. The college bound U.S. students are already among the bottom of the top twenty-five countries and cuts in student financial aid will only accelerate this decline that will have negative impact on our competitiveness in global trade.
· The Ryan plan wants to lower corporate taxes. Recent reports indicate that GE paid zero income tax, Google paid only 2% in taxes, and Goldman Sachs paid only 10% in taxes. Today, in a multi-national environment, most U.S. companies have empty offices (in some cases just mailboxes) in tax havens and they move money around the globe to hide their profits from the U.S. regulators. The top corporate tax rate my be 39%, but most companies pay far less than that, so what do we really accomplish by giving more tax breaks to the companies that do not pay their fair share of taxes to begin with. The focus should be more on closing the tax loopholes and making sure that the multi-national companies pay their fair share of taxes.
· The Ryan plan is not a well thought out plan. It is so imbalanced and unfair to the vast majority of the people that it would lead us all to "hell" and not to "prosperity" as Republicans have been advertising.
President Obama has proposed his own budget plan which includes tax increases for the rich, reforms of Medicare and Medicaid programs, and investments in education, infrastructure, alternative source of energy, and high-speed train system. This plan also cuts defense spending by $100 billion over and above what Defense Secretary Gates has already put in motion. Given that the Pentagon is a wasteland of tax-dollars (more dollars don't necessarily buy more security), it is appropriate to expect the Defense Department to also bear the brunt of spending cuts like everybody else. The Obama plan incorporates both tax increases (25%) and spending cuts (75%) that seem to be more balanced and prudent. The tax increases could be higher, but President Obama is mindful of not overdoing it because that might put economic recovery at risk.
Between the two plans, President Obama's plan is more realistic and a clear winner compared to the plan proposed by the Republicans. When the debate begins over these two competing plans and the Congressmen and Senators start hearing from their constituents, it will become abundantly clear that the Obama plan is indeed politically viable and the Ryan plan is dead-on-arrival.
