August 22, 2011
The Post gave Eric Cantor the opportunity to lay out his economic vision today. Let’s have a little fun seeing how many things he got wrong.
Cantor begins by telling us:
“Our country is facing two related but separate crises. The first is the federal government’s debt crisis, the result of decades of fiscal mismanagement by both political parties as well as unsustainable entitlement commitments.”
Debt crisis? Does Cantor mean the fact that we have to pay just over 2.0 percent interest on 10-year Treasury bonds, a post-depression low? Of course, there was a near debt crisis when the Republicans refused to raise the debt ceiling. If they had held to this position, then legally prohibiting payment of the debt can be viewed as a debt crisis, but this has nothing to do with the level of the debt or its sustainability.
As a practical matter, the debt-to-GDP ratio was actually relatively low prior to the downturn. It had been falling in the Clinton years, so the 90s should not be included in his list of “decades of fiscal mismanagement.” Even with the Bush tax cuts, the cost of the wars, and the Medicare drug benefit, the deficit was projected to be just 1.4 percent of GDP in 2009, until the collapse of the housing bubble brought down the economy.
Cantor then tells us:
“the Obama administration’s anti-business, hyper-regulatory, pro-tax agenda has fueled economic uncertainty and sent the message from the administration that ‘we want to make it harder to create jobs.'”
He then tells us about, “…the “Transport Rule,” which could eliminate thousands of jobs.” Hmmm, thousands of jobs. That’s not millions, hundreds of thousands or even tens of thousands. Back in the late 90s the economy was generating 3 million jobs a year or 250,000 a month. Cantor’s “thousands of jobs,” if accurate, would translate into one day’s job growth back then.
But Cantor then comes back with the “ozone regulation” which he tells us “would cost upward of $1 trillion and millions of jobs in the construction industry over the next decade.” It would be interesting to know where these numbers came from, perhaps they are somewhere near the story of creation in the bible.
Then we get:
“There is the president’s silence as the National Labor Relations Board seeks to prevent Boeing from opening a plant in South Carolina that would create thousands of jobs.”
No, this was about shifting jobs from plants that are unionized to plants that are not unionized. There was not an issue of net job creation, unless Cantor thinks that non-union workers are less efficient so that it takes more of them to build a plane.
Cantor next jumps back to taxes, complaining that these regulations:
“coupled with the president’s insistence on raising the top tax rate paid by individuals and small businesses, has resulted in a lag in growth that has added to the debt crisis, contributing to our nation’s credit downgrade.”
Yep, President Obama wants to raise the tax rate paid by the wealthy, a group which excludes the vast majority of small business owners, back to the level it was at when we were creating 3 million jobs a year. Clearly this is a job killer.
Oh yes, and the debt crisis has reappeared. It is featured again in the next paragraph:
“The debt crisis threatens our long-term future: the ability of our children and their children to have the same opportunities to succeed that this and previous generations have enjoyed. Republicans passed a budget this spring, written by Rep. Paul Ryan, that would address our challenges head-on by putting in place common-sense reforms to manage our debt over the short and long term.”
According to the Congressional Budget Office, the Ryan plan would increase the cost of buying Medicare equivalent insurance policies by $34 trillion over the program’s 75-year planning horizon. Note that this $34 trillion figure is the higher cost to the country. The total cost shift to future seniors (our children and their children) is $38 trillion.
Then we get another shot at Social Security, Medicare, and Medicaid:
“The president has acknowledged that without reform, spending on entitlement programs is unsustainable. But he has also made clear that he would never support the type of structural changes to Medicaid, Medicare and Social Security needed to make these programs solvent as envisioned in our budget.”
Mr. Cantor probably missed it, but Congress passed health care reform last year. According to the Medicare trustees, the bill eliminated more than 75 percent of Medicare’s long-term shortfall. That’s not 100 percent, but Cantor seems more than a bit off the mark when he complains that Obama “would never support the structural changes … needed to make these programs solvent,” at least in reference to Medicare.
Cantor probably also failed to notice that the Republican budget did not include any thing to improve Social Security’s long-term budget situation. This was no doubt an oversight.
For those keeping score, a tax increase that is equal to 5 percent of the wage growth projected over the next thirty years would be sufficient to keep the program fully solvent over its 75-year planning horizon. That doesn’t sound like an insoluble problem.
Cantor then concludes with a paean to growth. Yes, more growth would be better, but it’s not clear why anyone would think that Cantor’s path of tax cuts and lax regulation, which we just tried (remember George W. Bush?) would be the route to fast growth.
Okay, enough fun for now, I have work to do.
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