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Paul Ryan’s Budget Plan: Trillions for the Rich, Pain for Everyone Else

Algernon Austin: Director, Program on Race, Ethnicity and the Economy at the Economic Policy Institute – Posted: 04/15/11 05:21 PM ET


The metaphor of the federal government as a family that needs to cut back on spending is a popular one today. But when a family finds itself in difficult financial circumstances, there are at least two major options: (1) reduce spending, or (2) increase income. Now imagine a family that is having difficulty paying its bills, and the family decides that it needs to bring in less income. The family tells you that if they were $10,000 poorer, they would be better able to pay their bills. Most people would say that this family is insane. If you can’t pay your bills you need more income not less.

Yet, conservatives have been reducing the government’s income — tax revenue — massively. The tax cuts that conservatives have been pushing shows that they are not serious about addressing government deficits and debt. What they are serious about is increasing the wealth of the rich.

In December, the Tax Cut-Unemployment Compromise Bill included $139 billion in tax cuts to the wealthy. Among the items that conservatives won in this deal was a reduction in the taxes paid by people inheriting estates worth up to $5 million. Most of the people inheriting $5 million estates are no doubt quite well-off before the inheritance. Yet, conservatives were willing to keep unemployed workers from receiving unemployment insurance until they made certain that the rich would pay fewer taxes on inheritances.

The $5 million level in the new estate tax provision is indexed to inflation so that it does not decline in value over time. While this provision for millionaires is indexed to inflation, the minimum wage for the lowest-income American workers is not. Year after year, we allow the minimum wage to decline in value and allow the living standards of the poorest workers to degrade, but when it comes to policies for millionaires policymakers remember to make sure that millionaire’s benefits do not erode over time.

The latest and most-hyped among the conservative budget plans is Congressman Paul Ryan’s. Ryan’s budget plan proposes $4.3 trillion in cuts to programs for the needy with one hand and then gives $4.2 trillion in tax cuts to the wealthy with the other. Thus, there is little in the way of debt reduction, just pain for the needy and windfalls for the rich.

And Ryan is extremely generous when it comes to dishing out pain for those who are not rich. His plan greatly weakens Medicare, Medicaid, Social Security, the Supplemental Nutrition Assistance Program, and Pell Grants. Robert Greenstein of the Center on Budget and Policy Priorities states that Ryan’s plan “would produce the largest redistribution of income from the bottom to the top in modern U.S. history, while increasing poverty and inequality more than any measure in recent times and possibly in the nation’s history.” This is a money grab for the rich, not a serious attempt to address the national debt.

“The Federal Treasury loses twice as much revenue due to tax breaks than Congress appropriates on all nonsecurity discretionary spending” reports the Center for American Progress, yet over and over again the target for conservatives is nonsecurity spending and not tax breaks. Social Security does not add to the national debt since it is funded separately from the federal budget and still has a surplus in its trust fund, but conservatives keep throwing it into debt reduction plans. None of this makes sense if one is truly concerned about our annual deficits and the national debt.

The real goal of conservatives is the perennial conservative goal of giving tax cuts to the wealthy and drastically reducing government services to low-income Americans. They have skillfully used the economic crisis (caused by the conservative policy of deregulating financial institutions, by the way) to mask their agenda. They would not be able to so easily accomplish this goal without the assistance of Democratic leadership in Washington. Key Democrats are more interested in forwarding their re-election strategy of appearing centrist and compromising with conservatives than in criticizing dangerously misguided conservative policies.

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