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Newt Gingrich has done it again. With his new tax plan he has raised the bar from irresponsibility to recklessness.

Every dollar estimate I’m about to share with you comes from the independent, non-partisan Tax Policy Center — a group whose estimates are used by almost everyone in Washington regardless of political persuasion.

First off, Newt’s plan increases the federal budget deficit by about $850 billion — in a single year!

To put this in perspective, most forecasts of the budget deficit cover ten years. The elusive goal of the White House and many on both sides of the aisle in Congress is to reduce that ten-year deficit by 3 to 4 trillion dollars.

Newt goes in the other direction, with gusto. Increasing the deficit by $850 billion in a single year is beyond the wildest imaginings of the least responsible budget mavens within a radius of three thousand miles from Washington.

Imagine what Standard & Poor’s or Moody’s or Fitch would do if it became law. We’d go directly from a triple-A credit rating to triple X — the veritable porn star of fiscal mayhem. Interest on our debt would become larger than most of the rest of the budget.

Most of this explosion of debt in Newt’s plan occurs because he slashes taxes. But not just anyone’s taxes. The lion’s share of Newt’s tax cuts benefit the very, very rich.

That’s because he lowers their marginal income tax rate to 15 percent — down from the current 35 percent, which was Bush’s temporary tax cut; down from 39 percent under Bill Clinton; down from at least 70 percent in the first three decades after World War II. Newt also gets rid of taxes on unearned income — the kind of income that the super-rich thrive on — capital-gains, dividends, and interest. (more…)

The country is still celebrating the inability of the supercommittee to cut Social Security and Medicare, but it is important to move on from this victory to retake control of the political debate from the One Percent. As it stands, the One Percent are insisting that the country genuflect over the non-problem of the budget deficit, at a time when tens of millions of workers are unemployed or underemployed, millions of people are facing the loss of their homes and tens of millions of baby boomers are approaching retirement with little other than their Social Security to support them.

The deficit is the agenda of the One Percent. There is no reason that the rest of us should be concerned about budget deficits when the rest of the country is struggling with the economic disaster created by the greed and incompetence of the One Percent.

This is not a statement of morality; it is a statement based on economic reality. Budget deficits can be a problem when an economy is near full employment and the deficit can be pulling resources away from private investment, thereby slowing growth. However, it is not a problem with large numbers of unemployed workers and vast amounts of excess capacity.

This is what the financial markets are telling us every day as interest rates on long-term government bonds hover near 2.0 percent. If deficits were really crimping the economy, we would be seeing interest rates of 6 or 7 percent, or even higher. The deficit hawks do not have an economic case to support their argument, just money and influence.

In the longer term, the deficit hawks can point to projections of outsized deficits, which they invariably attribute to Social Security and Medicare. The first part of this story is completely untrue.

Under the law, Social Security is financed from its designated tax. It, therefore, cannot contribute to the deficit unless Congress changes the law. (The payroll tax credit in 2011, which was replaced with general revenue, is an exception to this rule.) (more…)

This week I stumbled on the figure below regarding Reagan’s tax record at around the same time we got the TPC score of the Cain 9-9-9 tax plan.

The party may revere Reagan, but they definitely wouldn’t recognize each other if they met at a tax policy conference today. Nor would the gipper last for long on the Republicans side of the deficit-reduction super committee. Recall from work done by my CBPP colleague Kathy Ruffing that 82% of the savings in the 1984 Deficit Reduction Act came from revenues.

(I realize I’m straying into a space that the former Reagan official Bruce Bartlett covers extremely well, by the way.)

Anyway, with the caveat that I’m no psychotherapist, let me offer a few new categories from the fiscal DSM-IV:

- Hyper-Inequality Syndrome: The average level of income inequality (percent going to top 1%) from 1980-89 was 12.6%; from 2000-08 it was 20.3%. That’s an increase in over $600 billion to the richest households (using most recent Piketty/Saez inequality data). (more…)

By Robert Reich
Former U.S. Secretary of Labor, Professor at Berkeley

The silence is deafening. While the rest of the nation is heading back toward a double-dip, Washington continues to obsess about future budget deficits. Why?

Republicans don’t want to do anything about jobs and wages. They’re so intent on unseating Obama they’d like the economy to remain in the dumps through Election Day. They also see the lousy economy as an opportunity to sell Americans their big lie that government spending is the culprit — and jobs will return if spending is cut and government shrinks. (more…)

By Robert Reich
Former U.S. Secretary of Labor, Professor at Berkeley

Technically, the federal government has now reached the limit of its capacity to borrow money.

Raising the debt ceiling used to be a technical adjustment, made almost automatically. Now it’s a political football.

Democrats should never have agreed to linking it to an agreement on the long-term budget deficit.

But now that the debt ceiling is in play, there’s no end to what the radical right will demand. John Boehner is already using the classic “they’re making me” move, seemingly helpless in the face of Tea Party storm troopers who refuse to raise the ceiling unless they get their way. Their way is reactionary and regressive — eviscerating Medicare, cutting Medicaid and programs for the poor, slashing education and infrastructure, and using most of the savings to reduce taxes on the rich. (more…)

By Ethan Rome
Executive Director, Health Care for America Now!

If the Republicans have their way and privatize Medicare, it will put millions of seniors at the mercy of health insurance companies and force them to pay $39 trillion more for Medicare coverage than they would under existing law, according to the Center for Economic and Policy Research (CEPR). That’s why this is a massive windfall for insurers. The GOP budget plan will also shift trillions of dollars in costs onto America’s seniors and families. When the program begins, new Medicare enrollees would have to pay at least $6,400 more each year out-of-pocket for private coverage equivalent to current Medicare benefits. And the average Medicare beneficiary’s contribution to the cost of Medicare benefits would skyrocket from 25 percent under the existing system to an astonishing 68 percent in 2030, according to CEPR and the Congressional Budget Office.

The Republican plan will enrich insurance companies at the expense of consumers and actually increase the overall net cost of health care by $34 trillion over the next 75 years, the planning period Medicare trustees are required to use. The increased costs are because of the private health insurance industry’s excessive profits, obscene CEO salaries and the costs of the bureaucracy it creates to deny care to consumers. These private plan administrative costs often eat up 20 or even 30 cents of every insurance premium dollar compared to Medicare’s roughly 3 cents. And in the past few weeks it’s become clear that the industry’s profits keep going up as consumers are being crushed by ever-rising co-payments and deductibles. (more…)

By Dean Baker
Co-Director, Center for Economic and Policy Research

That is what people should be asking Missouri Senator Claire McCaskill along with her fellow senators who are advocated strict caps on government spending. The idea being pushed by Senator McCaskill, together with Tennessee Senator Bob Corker and several other prominent senators, would limit federal spending to 20.6 percent of GDP. It would require difficult-to-obtain super-majorities to exceed this cap. Spending would be cut across a variety of programs if the cap is not reached.

This proposal is hugely deserving of ridicule for a variety of reasons. First, it operates from a blatantly wrong premise — that government spending has grown out of control.

Those familiar with arithmetic know that government spending had increased by little as a share of GDP prior to the downturn caused by the collapse of the housing bubble. In 2007, the last year before the onset of the recession, spending as a share of GDP was 19.6 percent. That is 1.1 percentage points less than the 20.7 percent share 30 years earlier in 1977. So the idea that there is a long-term trend of out-of-control spending is simply not true, or what they call outside of Washington, a “lie.” (more…)

By Dean Baker
Co-Director, Center for Economic and Policy Research

Ever since House Budget Committee Chairman Paul Ryan put out his proposal for voucherizing Medicare we have seen a steady drumbeat of stories telling us that this is a battle over the size and role of government. This is not true. It is a battle over money.

This point is important because there are very few people in this country who are interested in debates over philosophy. Insofar as they do give it any thought, most people will say that they prefer small government over big government. They want to see government play a less intrusive role in our lives.

There are probably less than a hundred people in the entire country who support “big government” as a matter of principle. Unfortunately, most of them write columns in major national papers.

This is bad news for progressives because insofar as the Ryan plan is seen as being about reducing the size of government, then it could be acceptable to a substantial portion of the electorate. On the other hand, if the public understands that the Ryan plan will transfer tens of trillions of dollars from the middle class to the insurance and health care industries, the plan will become radioactive to politicians seeking reelection. (more…)

By Robert Reich
Former U.S. Secretary of Labor, Professor at Berkeley

How debates are framed is critical because the “center” or “middle ground” is supposedly halfway between the two extremes.

We continue to hear that the Great Budget Debate has two sides: The president and the Democrats want to cut the budget deficit mainly by increasing taxes on the rich and reducing military spending, but not by privatizing Medicare. On the other side are Paul Ryan, Republicans, and the right, who want cut the deficit by privatizing Medicare and slicing programs that benefit poorer Americans, while lowering taxes on the rich.

By this logic, the center lies just between.

Baloney. (more…)

By Dean Baker
Co-Director, Center for Economic and Policy Research

For years people have accused the Republican Party of being the servants of the rich and powerful at the expense of the broader public. In the past, they would deny this charge and claim that they just had a different view of how the economy works.

Republican House Budget Committee Chairman Paul Ryan sought to eliminate any confusion on this point. He proposed, and last week the Republican House approved, a budget bill that will transfer tens of trillions (yes, that is “trillions” with a “T”) of dollars from ordinary working people to the insurance industry, the pharmaceutical industry and generic rich people from any industry. This money will come in the form of higher payments by seniors in their old age for health insurance and another round of tax breaks for the country’s richest people.

The Medicare story is the bigger transfer here. Representative Ryan wants to replace the current Medicare system with a voucher system. The size of the voucher in Ryan’s plan is held even with the overall rate of inflation. This means that it will not rise at anywhere near the rate of projected health care cost growth. As a result, a greater portion of the cost of health care will be shifted from the government to retirees.

However, this is the less important part of the story. The main reason that retiree health care costs will increase is that the private sector is less efficient at delivering care than the existing Medicare program. The Congressional Budget Office (CBO) projects that, under the Ryan plan, the increase in the cost of buying Medicare equivalent policies would be more than $30 trillion over Medicare’s planning horizon. (more…)