I like a good political donnybrook as well as anyone - when it’s worth it - but I don’t think this Ryan-Murray budget deal is worth getting worked up about. It increases domestic and military spending for the next two years by $63 billion – about three percent of the two-year $2 trillion discretionary budget, and less than one percent of the two-year $7 ½ trillion overall budget. It’s about two-tenths of one percent of the economy.
Republicans liked the amount of the sequester spending cuts, because it did help produce an actual spending decrease (from the Obama stimulus spending bubble so one shouldn’t exaggerate the feat) but they never liked the makeup. Republican appropriators and their military industrial complex supporters, the Pentagon, plus bi-partisan members representing military districts, always thought the Budget and Control Act cut military spending disproportionately and (they argue) dangerously.
Democrats never liked either the amount or the makeup of the sequester cuts. They considered them too deep and unfair to their poor constituencies.
The major prize for Republicans, if they will guard it, is that this deal ends what could have become a permanent extension of unemployment benefits beyond 26 weeks. It had been extended every year for five years, and the Ryan-Murray budget deal severed that extension. Now, Democrats would have to pass a stand-alone bill, and figure out how to pay for it within the two-year budget framework, which Republicans can easily block if they want.
A permanent extension of long-term unemployment benefits would be a permanent drag on the economy. It would make more and more people less attractive to employers, probably result in permanently higher unemployment, and higher disability roles. When the extended benefits, averaging $300 a week, run out for 1.3 million people at the end of December, at least some of those people will scramble to get back to work and begin producing again because they can no longer make it without either producing, stealing, or trying to get on disability.
When more people are producing, the economy will grow. I don’t know whether researchers will be able to measure it and attribute it to the long-overdue expiration of the long-term unemployment benefits, but I expect they will be able to, if they try. This is a significant achievement for which Cong. Paul Ryan should get a measure of credit.
Also, the move to reduce pension benefits, even sacred cow military benefits albeit slight – just $12 billion dollars over 10 years – is at least an acknowledgement that U.S. pension systems are over-promised and can’t be adequately funded, meaning they will all have to sustain benefit cutbacks. The sooner it begins, the smaller the cut can be, but this retiring population is too large for its children and grandchildren to support with the same early-to-mid 20th century Ponzi schemes our parents’ generation produced (yes, even the greatest generation had its flaws). The pension trim was a small step into those dangerous political waters, but it was enough to start the conversation, which is long overdue.
After two years, the baseline for discretionary spending reverts to the sequester levels, and at that time, another budget agreement will be due. At that time, one election will have been held and the makeup of both the House and Senate will have changed. Odds are, they will change to the better for conservatives, thanks to the now 73-day old train-wreck called Obamacare. Conservatives should have a stronger hand to strike a better bargain then, and the GOP presidential candidate – who will have to win and lead before any big entitlement and tax reform can take place – can campaign on the outline of his plan, if he dares.
Finally, to be candid, Republicans too are not yet ready to lead on healthcare and entitlement reform. Rep. Tom Price (R-GA) said on Wednesday that his plan, which is considered a leading plan among Republicans, would “give everyone a tax credit” to make healthcare affordable for everyone. There’s only one reason to give a tax credit to everyone, instead of to no-one. It’s a less obvious (to the untrained eye) way to redistribute income to make basic needs “affordable” to everyone, even if they have to use other people’s money to buy it. And, to make them even more progressive, the tax credits would surely be subject to the same “means testing” that Republican Paul Ryan wants to employ to make Medicare solvent.
Government wealth redistribution, bearing any mask, is destructive to economic growth.
The way to make basic needs affordable to everyone is, always has been, and always will be, to turn an unfettered free market loose on the problem and let innovation and mass marketing make if so affordable that anyone but the “dirt poor” can afford it, and we’ll all chip in to buy it for them – or better yet, we’ll provide it through charity.
If Republicans don’t wise up before they get power again, they’ll make the same mistakes they have before, and I’m not sure how many chance we have left.
That said, they have managed to craft a “holding pattern” two-year budget that will first, do no harm, and second, do at least two positive things that merit some credit – stop long term unemployment benefits and start down the path to pension reform on the federal level.