September 13, 2012

Ryan's cuts

If Romney were to get elected and adopt Ryan's budget plan, a double-dip recession would be almost guaranteed.  As the UK is proving, a premature return to austerity measures is far worse than a bigger deficit.  Even without the threat of double-dip, Ryan's cuts would be disastrous to the people who are already struggling most.

It is important to understand that a lack of demand has led to the sluggish recovery in order to truly grasp how short-sighted and destructive these cuts would be.

$134 billion in cuts to food stamps:  Food stamps are, in most studies, the most stimulative spending the government can do.  The money from food stamps goes to people who will spend the money immediately on essential goods (unless Paul Ryan would like to argue that food is a luxury).  The money from these goods then goes to the people who transported, packaged, made, and grew the food, which allows them to then go buy more products which goes to... do I really need to explain this?  Apparently, Ryan needs someone to explain this to him.  Supply-side economics does not work if there is no demand.  The main principle of capitalism is supply and demand, and when they are out of balance, no amount of increased supply will fix this.

$2.4 trillion in health care and Medicaid reductions:  Some research needs to be done to see if this would actually result in any significant savings.  If these people are taken off of health insurance, they will still go to the emergency room for care, for which the taxpayers will still have to pay, which results in higher premiums, which leads to more people not being to afford insurance and becoming uninsured, leading to even higher premiums.  There are a lot of savings to be had in healthcare; cutting coverage should not be among them.

$754 billion in unnamed mandatory and discretionary spending:  It is hard to assess these as they have not named specific cuts to be made.  Cuts to function 500 (education, training, employment, and social services portion of the budget) and Pell Grants would greatly decrease the likelihood of low-income Americans to find good jobs, squashing any hope of upward mobility.  Again, these programs are aimed at people who would immediately spend most of the money they receive on necessities, increasing demand and boosting economic growth.

There are surely cuts to these programs that could be made to decrease waste, fraud, and unnecessary spending, which could result in cheaper, more effective, and perhaps better quality of assistance.  However, these kinds of savings should start in areas which provide less stimulative effects and are skewed towards people who can afford to cut back.

To underscore all of this, Ryan wants to increase defense spending by $200 billion.  What could possibly be the reason for that increase in spending?  Not even counting the expenses of the Iraq and Afghanistan wars (which somehow have always remained off the budget) and after cuts have already been made by both Defense Secretaries Gates and Panetta, the defense budget is higher in constant 2012 dollars than it was during the height of the Cold War buildup under Reagan.  What possible threats do we foresee that can compete with the Soviet Union threat?

A defense official under Reagan agrees.  A defense director under Bush and policy advisor for McCain's 2008 campaign also agrees.

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