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Bob Cesca

By Bob Cesca
Author of One Nation Under Fear

It only makes sense that a party currently being wagged by fringe crazy people like Glenn Beck, Rush Limbaugh and Michele Bachmann would release its alternative budget on April Fools’ Day.

Not only does the Republican plan freeze discretionary spending for five years in the midst of a recession which, by most accounts and proved by history, will countermand any sort of economic recovery, but it also cuts taxes by 10 percent for the same Wall Street executives whose actions largely got us into this economic mess in the first place. In other words: Congratulations, Republicans, you just released a budget that rewards wealthy corporate executives while blocking any attempt to dig us out of the economic catastrophe they created.

Smart!

The only bit of Republican legislation that’d be more ridiculous would be if Michele Bachmann were to introduce a constitutional amendment thwarting a fake plot to eliminate the dollar as the form of currency in the United States.

Oh wait. She’s already done that. And 30 Republican congressmembers so far have co-sponsored the amendment. 30 Republicans have irrevocably tethered their wagons to the Bachmann crazy train. Excellent. Next on the agenda: a bill creating the Office of Robot Insurance, protecting us from robot attackers who use old people’s medicine for fuel. Speaking of which, the Republican plan also phases out Medicare.

The marquee item, however, in the Republican plan is their inexplicably regressive tax cut for the super rich. Wealthy Americans in the top three tax brackets would see their tax burden cut to a flat 25 percent from previous rates of 35, 33 and 28. According to the Center for American Progress Action Fund, CEOs from any of the top 800 corporations would receive a tax break of around $1.5 million a year. Meanwhile, if you earn $15,000 a year, your tax break will be around $0 a year.

But get this. Under the Republican plan, Americans are given the option of paying the old tax rates instead of the new, expensive and regressive Republican rates. So, for example, if your household income is $100,000, you could pay the same tax rate as someone earning $15,000. Or you could be a swell egg and go back to your old rate. Aside from the utter lack of fairness in the notion of a $100,000 household paying the same rate as a $15,000 household, who in their right mind would voluntarily pay higher taxes?

Now you might be asking, given that the Republicans are all about fiscal responsibility, how much does this Republican tax cut for the wealthiest three brackets actually cost? Some estimates, according to Steve Benen, project upwards of a $4 trillion price tag. At the very least, according to their own projections, the Republican plan would run up a $500 billion annual budget deficit through at least 2080. Again, the Republican grasp of fiscal responsibility is about as firm as their grasp of reality and sanity. The subtext here being: The trillion dollar Bush tax cuts weren’t irresponsible enough. Let’s go crazy! WOOO!

And by the way, those are annual deficits that factor into the mix a completely insane five year freeze on discretionary spending — a freeze that would surely plunge the American economy into a deep depression. To that point, the Republican plan doesn’t account for such an economic catastrophe, and therefore doesn’t factor such an inevitable consequence into their revenue and deficit projects.

All told, imagine if you will the Monopoly man running up and shoving you into a deep precipice. The Republican plan not only gives that Monopoly man a $1.5 million check for his trouble, but it also cuts the rope you were using to climb out of the hole — provided you actually survived the fall in the first place.

Speaking of holes, did you see the graph Paul Ryan clearly yanked out of his?

Check out that steep blue line illustrating the alleged Democratic budget deficits extending to upwards of 50 percent of GDP by 2060. Put another way, suggesting a deficit that’s 50 percent of GDP is like presupposing a living human being that’s 50 percent marshmallow man. It’s insane. Furthermore, the Congressional Budget Office (CBO) projections only extend out to 2019. Yet the Republican chart somehow extends out to 2080. The steep upwards slope of the Democratic budget begins at around 2030 — 11 years after the furthest CBO projections stop.

What does this mean? For starters the claim on the chart: “Out-years based on CBO’s Long-Term Alternative Fiscal Scenario” is a lie. And the text: “Source: House Budget Committee Republican Staff” might as well say: “Source: Paul Ryan’s Ass.” In other words, that steep upwards slope is entirely made up.

The graph might as well look like this:

Yes, the Democratic budgets will be so out of control they’ll eventually make little curly-cues and travel backwards in time — adding to past deficits — while also looping around the word “government” — you know, because the Democrats love government.

At this point, the laughable street vendor pamphlet that John Boehner rolled out was probably less ridiculous than this actual budget plan and its accompanying Wall Street Journal graph. But it stands to reason that given their track record the Republicans would churn out a budget proposal that’s fully in line with their backwards, zero cred reputation.

BobCesca.com

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CORRECTION: I erroneously credited the CEO taxation numbers to the Center for American Progress. These numbers came from the Wonk Room at the Center for American Progress Action Fund.

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One Nation Under Fear, with a foreword by Arianna Huffington of  Huffington Post is available on Amazon. For more by Bob Cesca, see BobCesca.com! Go!

Dean Baker

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

In the movie Lars and the Real Girl, the main character imagines that a female blow-up doll is his fiancé. To humor Lars, his brother and sister-in-law go along with the charade. Over the course of the movie, more people are drawn into the circle, until eventually the whole town is treating Bianca the blow-up doll as one of its leading citizens.

This seems to pretty well describe the debate over the budget deficit, except it’s not clear that many people realize it’s a charade. The main story is that Lars’ budget hawk counterparts are upset that the deficits projected for 2013 or 2019 are too large. They want President Obama to commit to spending cuts and/or tax increases in order to bring these deficits to levels they consider acceptable.

The unreality of this picture is striking because the budget hawks seem not to notice that we are in the middle of an economic meltdown.

People are losing their homes through foreclosures at the rate of more than 100,000 a month. The default rates on credit cards, car loans and other debt is at record levels. Most of our major banks are effectively insolvent.

Home and stock prices have plummeted, destroying most of the wealth of the baby boom cohort as they stand on the edge of retirement. The economy is shedding almost 700,000 jobs a month, with the unemployment rate rapidly approaching the highest level since the Great Depression.

In this context we are supposed to be up in arms over the deficit projections for 2013 or 2019? This is a bit like someone complaining about the lawn not being mowed at a time when the house is on fire, it’s just not the first priority. And the media all seem to go along with the charade – yes, they are very concerned about the projected deficit for 2013, just as the characters in the movie expressed concern about the health of Bianca the blow-up doll.

It is especially annoying to hear the whining from this group of deficit hawks since their whining in prior years helped to drown out serious discussion of the dangers posed by an $8 trillion housing bubble. While some of us were yelling at the top of our lungs about the imminent disaster that would hit the economy when the housing bubble burst, the media chose to focus on these deficit hawks with their dire warnings about budget deficits 40 or 50 years in the future.

Because the media and political elites chose to pay more attention to the deficit hawks than those warning about the housing bubble, we now get to enjoy the current economic crisis. And, one result of the economic crisis is (drum roll, please) ……..record deficits.

To put the point so simply that even a Washington Post editor can understand it: because the media highlighted the views of the people who were ranting about the deficit rather than the views of people who understood the economy, we both got a wrecked economy and larger deficits.

The moral to this story is that the economy must take priority, not only because the state of the economy is what most directly determines people’s well-being, but also because the state of the economy will be the most important determinant of the deficit.

The experience of the 1990s provides an example of exactly this sort of story. In January of 1994 the Congressional Budget Office projected that the deficit in 1999 would be $204 billion or 2.4 percent of GDP. This projection incorporated the impact of President Clinton’s tax increase and spending cuts.

It turned out that there was a surplus of $125 billion in 1999, or 1.4 percent of GDP. This shift from deficit to surplus of 3.8 percentage points of GDP (equivalent to $540 billion in 2009) was not caused by further spending cuts or tax increases, it was caused by the strong economic growth of the period.

There is no guarantee that President Obama’s policies will be successful in restoring strong growth, but they are clearly a step in the right direction. If we have strong growth, then our deficits will be manageable. If the economy remains weak, the deficit will remain a serious burden no matter how much we raise taxes or cut spending.

Someone has to tell the deficit hawks that their blow-up doll is not real. The issue is the economy, not the deficit.

Dean Baker is the author of the new book,“Plunder and Blunder: The Rise and Fall of the Bubble Economy.”  This piece was first published on  Huffington Post.