Streetwise

Lauren Rudd

Sunday, April 10, 2011

Is This The Path To Properity?

The melodrama currently being orchestrated within the hallowed halls of Congress brings to mind Harvey ‘Big Daddy’ Pollitt’s comments in the movie version of “Cat on a Hot Tin Roof.”

Pollitt (played by Burl Ives) is given to say, “Didn't you notice a powerful and obnoxious odor of mendacity...There ain't nothing' more powerful than the odor of mendacity...You can smell it. It smells like death.”

There was a distinct odor of mendacity emanating from the Nation’s capital as the House of Representatives offered up its newly minted budget proposal, one that incorporates $6 trillion in spending cuts, including an overhaul of government-run health programs, while at the same time slashing tax rates.

As the New York Times so adroitly put it, if the released blueprint is the “path to prosperity”, it is hard to imagine the “path to ruin.” The plan condemns millions to the ranks of the uninsured, raises health care costs for seniors, and reneges on the obligation to keep poor children fed. Taxes on the wealthy would be cut as the Bush era tax cuts become permanent, along with large permanent estate-tax cuts, a new business tax reduction and a lower top income tax rate for the richest taxpayers.

Unveiled by House Budget Committee Chairman Paul Ryan, a key focus is cutting Medicare and Medicaid. Those two programs, which provide healthcare for the elderly and poor, account for about one-fourth of all federal spending. They also have served as resounding pillars of support for the nation's social safety net since the 1960s.

While risking a political backlash from senior citizens, Republicans are hoping their plan will resonate with independent voters and Tea Party activists, many of whom have been railing against the rapidly escalating debt burden.

Under Ryan's plan, Medicare recipients would be given vouchers to buy coverage on the open market, thereby limiting the growing cost of medical care through competition. At the same time, the states would be given wide discretion over how to administer Medicaid health programs for the poor. Florida governor Rick Scott and his wife will love this.

Because Medicare recipients would shoulder more of their medical costs and fewer people would qualify for Medicaid, it enables the top tax rates for individuals and businesses to fall to 25 percent from 35 percent.

However the, “we need to cut the budget,” advocates continue to ignore the fact that two unpaid for wars, combined with the previous series of unpaid for tax cuts, have resulted in an unpaid tab, read deficit, amounting to trillions of dollars. There it is again, that odor of mendacity.

As we suffer through the current economic conundrum, there is an outflow of deprecating comments that inflame and subsequently hinder efforts to effectively deal with the fiscal issues at hand. Furthermore, both sides of the aisle are to blame for Washington’s current lack of congeniality.

Nonetheless, do you really want to watch the hapless slide unmercifully into the abyss of obscurity and desolation as the continuing depredation brought about by the unabashed lure of lobbyists’ dollars trumps all other considerations?

Hopefully, the answer is, “of course not.” But then the tantalizing thought of lower tax rates comes wafting through the air. And without that nagging thought of a rising national debt to contend with, you could spend the extra money with a clear conscience.

But would you really spend it in a way that contributes to greater economic activity and thereby lowers unemployment? It is unlikely because the marginal propensity to consume, or the amount of each additional dollar of income that is spent on goods and services, generally declines as income rises.