The GOP fiscal plan

Or rather the lack of one. One after another, GOP statements on what they want in a budget hit the same points again and again. Republicans have decided this year that the federal budget deficit is terrible and must be curbed immediately. Ignore for a moment the Hooverism–that cutting federal spending today will prolong the recession and increase unemployment.

Look at the Republican plan–balance the budget by cutting taxes, increasing defense spending, and leaving Social Security and Medicare intact, and cutting other unspecified programs. The remaining budget, discretionary spending excluding defense only totals $5-600 billion and includes everything from road construction to federal courts to food stamps. With the permanent budget deficit about $600 billion (the 2008-9 bank bailouts and stimulus are one time costs), balancing the budget under the Republican plan doesn’t add up. Adding tax cuts and increased defense spending just make it extra impossible.

Sometimes the impossible can be done in small steps. The Senate voted this week on PAYGO, the deficit reduction measure that allowed Clinton to balance the federal budget in the 90’s. But no, every Republican voted against it.

Stan Collender sums it up in a blog post collecting GOP statements on the federal budget . Here are the bits:

Item 2. All Senate Republicans voted against re-establishing the pay-as-you go rules, which would have required that, with certain exceptions, any new mandatory spending or revenue legislation not increase the deficit. The rules were adopted with only Democratic support.

Item 4. Republican Chairman Michael Steele is saying so often that Republicans are against cuts in Medicare that it’s starting to sound like a mantra. Add to that their stated opposition to revenue increases (see #1 above), military spending reductions, homeland security reductions, and the extremely low possibility that, if Medicare is too hot to handle, they’ll go anywhere near Social Security, and the deficit reduction math becomes totally impossible.

There have been recent fantasy GOP budget proposals along these lines. See Tim Pawlenty’s (Gov. of MN and 2012 Presidential candidate) editorial in Politico. Or the budget proposal by Rep. Paul Ryan, ranking Republican on the House Budget Committee.

Even conservative economist Bruce Bartlett is unimpressed:

Like all Republicans these days, Pawlenty wants to have it every possible way: complain about the deficit while ignoring everything his party did to create it (Medicare Part D, two unfunded wars, TARP, earmarks galore, tax cuts up the wazoo, irresponsible regulatory and monetary policies that created the recession that created the deficit, etc.), illogically insisting that tax cuts are a necessary part of deficit reduction, and never proposing any specific spending cuts.

It would hardly be fair for me to fail the Republican proposals without offering my own. So here it is:
1) The federal government should spend an additional $600 billion a year until unemployment is down under 6%. Send at least half of it directly to states where it can be spent quickly, spend the rest on unemployment, food stamps, long neglected infrastructure, and a massive New Deal class jobs program.

2) Raise taxes. First, let the Bush tax cuts on income over $200K, capital gains, and large inheritances expire. Second, make the banks pay for their bailout with a combination of financial transaction taxes, an end the hedge fund income tax special treatment, etc, to total $150 billion a year. Third, add progressive tax brackets at the high end, and extra 1% for income over $1 million, $5 million, and $10 million. End a few of the large corporation tax breaks that leave many of them paying essentially no taxes. These modest tax increases are enough to put the budget in the green.

3) Cut total war/security/defense spending back so it equals what the entire rest of the world spends, about $500 billion a year–that would be a cut of $150 billion a year. End the Iraq and Afghanistan wars, saving $150 billion a year.

4) Whoa, now the federal budget has a $200 billion surplus!

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