In the Arena

How We Got Here

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Representative Paul Ryan’s budget proposal is, without question, an act of political courage. It contains more than a few provisions that are long overdue–like cuts in farm subsidies and the consolidation of job-training programs (many of which are outdated and useless). I would even be willing to consider a Medicare overhaul that creates a system, as Ryan suggests, similar to the Federal Employees Health Benefits Program–so long as the poor and middle-class did not have to pay a single dollar more than they are receiving now for Medicare.

But…the Ryan proposal is also an act of massive public amnesia. It seems to ignore that eleven years ago we had a balanced budget; indeed, we had deficit-lowering annual surpluses. Again: We didn’t have a deficit problem ten years ago. What happened?

1. George W. Bush cut the Clinton tax rates, egregiously, twice. Even many Republicans like John McCain–when he used to be honest–thought these cuts were unwise.

2. We went to war, twice–in fact, now, three times (Libya)–without paying for it. Iraq alone, when lifetime health care for our wounded warriors is taken into account, is estimated to cost as much as $3 trillion.

3. Bush added on a huge Medicare prescription drugs program–without paying for it.

4. We had an historically brutal recession, which reduced federal tax revenues by an estimated $500 billion per year.

5. President Obama buffered the economic blow caused by that recession by spending $838 billion on a stimulus plan. He also acceded to a huge, continued tax reduction plan proposed by the Republicans in 2010–which did not reinstate the Clinton tax rates for the wealthy.

6. The baby boomers have begun to retire and become eligible for Medicare.

And voila, historic deficits!

Rocket science is not required to rectify this problem. Here is what we can do:

1. Restore the Clinton tax rates–or their equivalent, by closing loopholes in the tax code.

2. Impose a war tax that covers the cost of all overseas operations–if foreign crises are so serious that we are willing to risk the lives of our soldiers, we should be willing to pay for them. We should also, obviously, cut antiquated cold war weapons systems, transform the Air Force into an all-drone force (or as close as we can get to that) and, as the wars in Iraq and Afghanistan draw down, reduce the number of military personnel.

3. Tinker with both Social Security (which Ryan doesn’t do) and Medicare to deal with the effects of baby boom retirement. That means raising the income cap on the social security tax and figuring out a cost-of-living structure that actually reflects the products that old people buy. It also requires a system for Medicare that is, as Ryan suggests, something other than the current fee-for-service plan, where doctors are paid (fees) to perform procedures (services) that aren’t necessary. Wealthier recipients should also be asked to pay higher co-pays.

The strength of Ryan’s plan is that he has put almost everything on the table. We can at last have an honest conversation about all this. But to have a truly honest conversation we need to put absolutely everything on the table–especially the one thing that Ryan refuses to do: restore taxes to the reasonable rates of the 1990s, an era when American prosperity, job creation and innovation were at their zenith.

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