Monday, February 1, 2010

Passing the laugh test

Rep. Paul Ryan (R-WI) has released his vision for how to balance the budget over the long term. I haven't looked closely at his plan, but it includes privatizing Social Security and Medicare and ending the tax exclusion of employer paid insurance. Ezra Klein has a detailed discussion and CBO has weighed in and said that in 2080 under no change the deficit will be 80% of GDP, and under this plan we would have a surplus.

I will read this carefully and comment more fully later, but let me say several things. First, good for him for saying what he would do, and for saying it 9 months before an election (of course the House is always running for re-election). Second, it certainly makes sense to say something like for those 55 and over, nothing will change....for those of us younger, we intuitively know that something MUST change. And it will take a big change. You have no hope politically if you don't exempt those right on the door step, though. If you are my age or younger, we will have to embrace that it will be harder for us than past generations, if for no other reasons than our parents didn't have more children. Third, I completely agree with his goal of ending the tax exclusion of employer paid insurance....there is really quite a bipartisan consensus developing that the current bottomless subsidy for those with it, with none for others needs to be a thing of the past. Fourth, I think that tax rates need to increase as well, to around 20% of GDP, the general level each time we have had a balanced budget since World War II. Meaning, I suspect my solution would include cuts but also tax increases designed to be around 20% of GDP (there were 17-18% since 2001 and 2003 tax cuts).

Again, more later after I have a chance to read the specifics and what CBO says.

Most analysts will say, 'no chance in Hell this passes!' I think I will simply say the status quo is fiscal insanity, and this sure aint the status quo....

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