Flaws evident in Ryan’s plan. Doesn’t add up.

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REP. PAUL RYAN (R), HOUSE BUDGET COMMITTEE CHAIRMAN: For starters. We propose to cut $6.3 trillion in spending over the next ten years from the president`s budget. We`ve reduced the debt as a percent of the economy. We put the nation on the path to actually pay off our national debt.

(END VIDEO CLIP)

UYGUR: It`s the big, bold new republican plan, $6 trillion in spending cuts over a decade, reshaping Medicare and Medicaid. It`s Paul Ryan`s path to prosperity, as he calls it. Here`s one giant-sized problem though. Scratch the surface even a little and just look at the facts and it all comes apart. Ryan`s claiming a cut of $6.2 trillion, but it turns out the actual program costs or more like 4.3 trillion, because the extra money is money that goes to Iraq and Afghanistan that`s going to be cut by Obama`s budget anyway, so he knows that, but he put it in there, anyway, to say, oh look at me, I am cutting $6 trillion. I love their gimmickry. They`re just shameless about it. President Obama agrees to the same exact thing. Do they say he`s he`s cutting that money, no, they don`t say that, no, no, they`re cutting. All right. Now, Ryan calls his idea for overhauling Medicare. Here`s another great trait premium support.

(BEGIN VIDEO CLIP)

RYAN: We support people more if they`re low income, more as they get sick and wealthy seniors don`t get as much support. And doing it that way fixes the problem, saves Medicare.

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UYGUR: That sounds really good, right? Listen, they`re going, oh yes, that`s great, except for this part. The Congressional Budget Office estimates that most future retirees would actually pay more for health care under Ryan`s plan. Look at this devastating quote, “Beneficiaries participating in the new premium support program would bear a much larger share of their health care cost, than they would under the current program.” The CBO says, that by 2030, Ryan`s plan will have seniors paying over $20,000 out of pocket for health care, 20,000. Strangely, Paul Ryan has neglected to mention that pesky little fact. And here`s another pesky fact that Ryan isn`t talking about.

The spending cuts he`s calling for overwhelmingly hit programs that help the poor. Now, take a look at this cart. It`s from an article from Robert Greenstein on the Center on Budget and Policy Priorities. It shows that two thirds of the spending cuts come from programs that help lower- income Americans, programs like Medicaid, food stamps and low-income housing, but I guess it shouldn`t be a surprise.

After all, someone`s got to pay for all those tax breaks for the rich. Now, remember, Ryan`s proposal also drops the top tax bracket for individuals and corporations from 35 to 25 percent. That`s a huge gift to the rich. Somebody`s got to pay for it.

That is part of why you have so much that you have to take from the middle class and the poor. Here`s the scary part. The plan might just work anyway. But you have to understand its real goal. Even though Ryan`s numbers don`t add up, they could have a huge impact on the bigger fight, which is the ultimate objective. Imagine this is a current budget debate. Democrats on one end of the spectrum and Republicans on the other. And you see where the center is, right? OK. That`s interesting. Now, here comes Paul Ryan with his gigantic specter-shifting proposal, $6 trillion in reductions he claims over ten years. And what happens?

Suddenly the whole debate shifts, and you`ve got a whole new center. Suddenly Democrats are forced into a fight over defending Medicare. Last year, the fight was over whether we should extend the Bush tax cuts for the wealthy. This year was overcutting spending by tens of billions. Next year, it will be overcutting trillions instead. You see how they move the center. So, all of a sudden the whole country is further and further right? That`s the big win for extremist ring-wingers, shifting the whole debate. That`s the whole point of this exercise. They realized that the Democrats can`t be pushed around, so they figure the further we put our side out to the right, the further we can bring Democrats in that direction. Now, let me tell you how you stop that. You stop giving into them, and you fight back.

All right. Now, let`s talk more about this issue with Robert Greenstein, he`s the president of the Center on Budget and Policy Priorities. And Dana Milbank, national political reporter for the Washington Post.

All right. Robert, let me start with you. Some of those numbers are pretty devastating, two thirds coming from the poor, even though of course Ryan claimed almost exact opposite from the clip that we showed you. What`s the reality here? Where do most of the cuts come from?

ROBERT GREENSTEIN, PRESIDENT, CENTER ON BUDGET AND POLICY PRIORITIES: The two thirds is a conservative estimates, probably more than two thirds of Ryan`s cuts come from programs that are targeted on lower, moderate- income people. Let`s just right there in the budget. Medicaid alone takes a $1.4 trillion hit, hundreds of millions more taken away from subsidies to help modest income people by health insurance. And we learned just this afternoon that he has a $127 billion cut in the food stamp program. I remember when the big food stamp opponent was Jesse Helms. This would make Jesse Helm looks like a liberal by comparison. The cuts in those areas are huge. And as you said, Cenk, they`re right alongside massive tax cuts.

The Urban Institute Brookings Tax Policy Center tells us that making the Bush tax cuts permanent at the high end as Ryan`s budget would do, would provide an annual average tax cut of over $125,000 every year for people who make over a million dollars a year. Over a ten-year period, that`s over a million in tax cuts. And that doesn`t even count the huge estate tax giveaway for the richest estates in the country that Ryan would also make permanent. Nor does it count the reduction in the top rate to 25 percent. But when you look at his plan as a whole. He has $4.3 trillion in budget cuts overwhelmingly aimed at lower-income people, and $4.2 trillion in tax cuts which are regressive, so the main issue here isn`t deficit reduction. It`s really what would be the greatest transfer of resources in modern American history by an act of the government from the bottom part to the top part.

UYGUR: You know, it`s ironic, because the Republicans always talk about redistribution of wealth. You don`t get any more redistribution of wealth than this, except it`s going from the poor in the middle class right up to the rich. You know, Dana, let`s talk about a Washington reaction to this. You know, there`s so many people out there saying, oh this is a wonderful, serious plan. Now, we`re finally having a conversation. Is this Washington`s idea of a great discussion? Redistributing all the wealth to the top?

DANA MILBANK, WASHINGTON POST: Well, you see, Paul Ryan himself said yesterday — I don`t know if he exactly meant to say this, he said, this is not a budget, this is a cause. I think that was a rare moment of honesty, because it really is about a cause, and that cause is sort of permanently lowering the tax burden. And look, everybody knows how to get out of this — the looming debt problem that we have, and that is, you can`t do it all by spending cuts. And for that matter, you can`t do it all with tax increases. Everybody is going to have to feel some pain in here. What Paul Ryan did is say, look, actually it`s just the other side that`s going to have to feel some pain and have their beloved social programs cut, we`re not going to take much out of the Pentagon. And in fact, not only we are not going to increase taxes, but we`re going to decrease the top rates for corporations and for the wealthiest Americans.

So, in that sense, it wasn`t a serious proposal. I think the way you set it up is correct, it`s really sort of the opening game but here to say, OK, we`ll be over here to try to pull you in our direction and you have the president sort of being I think in his own way, a bit extreme by saying nothing needs to be done here is essentially what his budget does…

UYGUR: Really?

MILBANK: Well, yes.

UYGUR: It`s not the sense I get from the president, I mean, he did the deficit commission, which is at least halfway towards Ryan, so.

MILBANK: Exactly. I think, and that`s the — and that`s where things are going to have to end up. I mean, you have the bold Simpson proposal. The final solution is going to have to look something like that.

UYGUR: I don`t agree with that, I`ll be honest with you. Because in that proposal, taxes were also cut. I mean, they raise them in other ways. But I want to go to Robert on this, I don`t know if you studied up on the Deficit Commission, but what they seem to do is lower the top brackets like Ryan does, but then increase taxes, which wind up hitting middle class again. So, I like that solution in some ways even less. The middle class gets spending cuts, and tax increases, and the rich still get their tax cut.

GREENSTEIN: Well, the Bowles shows some commission clearly as preferable to Ryan. My concerns about the deficit commission package is that I think a really balanced package would be about half budget cuts and about half revenue increases. And the Bowles-Simpson is about two-thirds budget cuts, and one-third revenue increases, it does have some revenue increases from closing a lot of tax deductions, credits and the like, but it didn`t specify which deductions and credits. And in the real world, those provisions will be, I think almost impossible to pass on the hill. That`s one of my worries about Bowles-Simpson. It held out there lowering the top rate to 28 or 29 percent. And more than paying for it by massive changes unspecified in areas that would have to include the employer health exclusion, the mortgage interest deduction.

I think a lot of what it recommended there would be good policy, don`t get me wrong, but I don`t see how you could pass it. And I do think Bowles-Simpson went too far on some of its budget cuts, but in any event, Dana makes a good point that that`s one possible way out. What we don`t know is whether Republicans on the hill, other than the few of them who were on the Bowles-Simpson commission would ever accept something like Bowles-Simpson, which does have significant defense cuts and does have net tax increases, even though it lowers the top rate. Paul Ryan and all the House Republicans are on the deficit commission voted against it. So, a big concern would be if this group in the Senate, bipartisan, that`s trying to produce a bill based on Bowles-Simpson came forward with it, and it somehow got 60 votes in the Senate, I think Paul Ryan and the House republican leaders would reject it out of hand anyway.

UYGUR: Right. Now, look, a lot of the tax increases that you mention, that you give credit to the commission for are again, they hit the middle class. So, I don`t like that deal, either. And look, last question for you, Dana, look, when you asked American people and NBC did, the poll shows, they say, 81 percent say, raise taxes on the rich. Ryan plan doesn`t have that at all. And in fact, I don`t think really the deficit commission has that plan, either in terms of the rich. Why don`t we try what the American people want?

MILBANK: Well, the American people don`t want any of these things, let`s face it. You know, we just want, you know, have our cake and eat it. But Bob is correct, it is going to have some sort of a mix of tax spending cuts here. And people are not going to like it, you`re not going to like it, Cenk. Bob is not going to like it. I`m not going to like it. But that`s where the debate has to be.

UYGUR: If you went by the polls and he said, all right, now the percentage we`re going to cut, largely comes from the tax increases the American people are in favor of. And we will cut in X, Y and Z places, we would have a deal. Just listen to the American people. We`re supposed to be a democracy. Look at what they`re saying, don`t cut Social Security, don`t cut Medicare and Medicaid. There are other places to cut. In other polls, they also say cut defense. This Ryan`s plan is the exact opposite of what the American people want.

MILBANK: And the problem is, it only takes a small group in the Congress right now to prevent anything from happening. You see that even in this short-term thing here. The White House said to Speaker Boehner, look, we`ll give you the $32 billion cut you want, and all of a sudden, he`s got the small group of Tea Partiers won`t let him accept what he originally asked for in the first place.

UYGUR: Right.

MILBANK: So, there`s not a whole lot of hope that we can come to any sort of agreement even if we get reasonable people to table.

UYGUR: Yes. Dana Milbank and Robert Greenstein. We`ve got to leave it there, right there, unfortunately. We`ll be right back.

About William Brighenti

William Brighenti is a Certified Public Accountant, Certified QuickBooks ProAdvisor, and Certified Business Valuation Analyst. Bill began his career in public accounting in 1979. Since then he has worked at various public accounting firms throughout Connecticut. Bill received a Master of Science in Professional Accounting degree from the University of Hartford, after attending the University of Connecticut and Central Connecticut State University for his Bachelor of Arts and Master of Arts degrees. He subsequently attended Purdue University for doctoral studies in Accounting and Quantitative Methods in Business. Bill has instructed graduate and undergraduate courses in Accounting, Auditing, and other subjects at the University of Hartford, Central Connecticut State University, Hartford State Technical College, and Purdue University. He also taught GMAT and CPA Exam Review Classes at the Stanley H. Kaplan Educational Center and at Person-Wolinsky, and is certified to teach trade-related subjects at Connecticut Vocational Technical Schools. His articles on tax and accounting have been published in several professional journals throughout the country as well as on several accounting websites. William was born and raised in New Britain, Connecticut, and served on the City's Board of Finance and Taxation as well as its City Plan Commission. In addition to the blog, Accounting and Taxes Simplified, Bill writes a blog, "The Barefoot Accountant", for the Accounting Web, a Sift Media publication.
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