POPULAR ECONOMICS WEEKLY
Will Ryancare replace Obamacare? Ryancare could become the campaign buzzword with Mitt Romney’s choice of Wisconsin Republican Paul Ryan as his Vice Presidential candidate. Ryancare is bringing budget-cutting austerity that Paul Ryan once called his “Path to Prosperity” budget proposals now endorsed by two Republican-led House majorities, vs. President Obama’s program of stimulus spending via health care, infrastructure repair, and job creation.
Yet history says Ryancare won’t work. It is a battle between almost polar opposites—government austerity vs. government stimulus—when the two must work together to bring back prosperity to the 80 percent of us who are wage earners that have lost out on this recovery.
Romney has come off the fence, in other words, since being Massachusetts’s governor that supported abortion and universal health care. Mitt has said during the campaign that he supported Ryancare, which “will greatly shrink the government, largely undoing the social safety net by shifting more costs onto individuals and essentially converting Medicare into a capped voucher program. It would also alter the progressive income tax system, which, like the safety net, was built through the 20th century under Republican as well as Democratic presidents,” said the New York Times.
So Ryancare is really about more austerity when we know the track record of austerity programs. The latest is England’s Conservative Party program that has returned it into recession with their program to slash government spending while lowering taxes for the wealthy, thus starving the government of revenues during the euro crisis. Only President Clinton was able to slow government spending while balancing the federal budget. He did it by raising taxes back to pre-Reagan rates for the highest income brackets, while slashing defense spending.
In fact, though few economists will admit it, Republican economic policies since 1980 based on slashing tax rates have been disastrous for economic growth and budget deficits, which is why President Reagan had to raise taxes 11 times during his tenure.
While GW Bush helped to create the largest federal deficit since World War II with his tax cuts of 2001 and 2003 that starved the government of revenues at a time when spending soared. The historical fact remains: the recessions, President Bush’s tax cuts and the wars in Afghanistan and Iraq explain virtually the entire deficit over the next ten years.
Graph: CBPP. Org
“In fact, the deficit for fiscal year 2009 — which began more than three months before President Obama’s inauguration — was $1.4 trillion and, at 10 percent of Gross Domestic Product (GDP), the largest deficit relative to the economy since the end of World War II,” said the Center for Budget and Policy Priorities, a progressive think tank.
So is it just coincidence that the historical record also shows all recessions since 1980 have occurred during Republican administrations? The recession score (gray shadings)—Presidents’ Reagan and GW Bush two recessions, GHW Bush, Sr. one, and Democrats zero.
Graph: Calculated Risk Blog
If austerity in the guise of slashing taxes to shrink government isn’t the answer, then what is? That, also, is no secret to most economic historians, at least. Promote economic growth in both the private and public sectors. It turns out that growth has been greatest when tax revenues were higher, because those revenues also boosted private sector growth. How so? Through almost too many ways to be counted—via boosting spending on education, environmental protection, infrastructure, and Research and Development.
President Clinton proved it with his 23 million jobs created and 4 years of actual budget surpluses. In other words, all those public tax dollars boost growth, while the historical record shows that the Bush and Reagan tax cuts benefited the wealthiest; including those corporate CEO’s whose salaries and benefits have gone through the roof, leaving their own employees with little to spend.
And so does social welfare spending, which should be a no-brainer. Medicare and social security have almost no overhead, so that more than 95 percent of revenues flow to the elderly and health care providers, which boosts job growth in the health care professions, as well as consumer spending.
“Nonpartisan analyses of Mr. Ryan’s proposed income tax cuts reached conclusions much like those of Mr. Romney’s tax proposals in recent weeks’” said the same New York Times column. “The tax cuts in Paul Ryan’s 2013 budget plan would result in huge benefits for high-income people and very modest — or no — benefits for low-income working households,” Howard Gleckman, a senior fellow at the Urban Institute, a policy research organization, wrote in summarizing the findings of the Tax Policy Center.
Thus we have the consequences of Ryancare, or shall we now call it Romneycare, which will provide very little care for most Americans.
Harlan Green © 2012