Federal Budget Outlook

Republican and Democratic responses to Standard & Poor’s negative outlook on the federal debt are so predictable they could have been scripted years ago. Democrats want to address the deficit by soaking the rich; Republicans want to cut supposedly vital programs such as Medicare and Planned Parenthood.

The problem with soaking the rich, as economist Kurt Hauser points out, is that it doesn’t increase overall revenues. As the above graph from American Thinker shows, since World War II, tax rates on the wealthy have ranged from 25 percent to 90 percent, yet total tax revenues have never varied much from 19 percent of GDP. As Reason’s Nick Gillespie emphasizes, the lesson is that, if you want to eliminate the deficit, you have to reduce spending to 19 percent of GDP.

Debates over things like Planned Parenthood confuse social policy with fiscal policy. The real problems are entitlements like Social Security, Medicare, and Medicaid. According to my Cato colleague, Michael Tanner, these three programs alone will consume almost 19 percent of GDP by 2050, meaning defense and almost all other federal programs will have to be funded out of deficit spending.
But whatever the problem is, there is definitely a lot of help available to cope with ED. levitra australia prices You should buy tadalafil in australia also eat lot of vegetables and fruits to enhance semen volume. This is the only reason that the doctor specifies and also it has been mentioned that the kamagra is not a magical pill; it needs sexual arousal to cure the ED symptoms and free viagra tablet deliver rock hard-on. VigRX Plus directly affects the Corpora Cavernosa (two paired http://deeprootsmag.org/2012/12/04/remembering-mr-earl-they-often-called-him-speedo/ viagra cost in india cylinders of penis) cells to allow more blood supply to be pumped into it hence offers more rapid and solid erection.
Republican Paul Ryan’s budget plan deals with proposes a major change in Medicare: he would turn it into a voucher program for all people who are currently under 55 years old. Democrats profess to be shocked by Ryan’s supposedly daring proposal, but the truth is that Social Security, Medicare, and similar entitlements are going to bankrupt the country sooner than most politicians are willing to admit.

Democrats claim Ryan’s proposal would short-change seniors since their Medicare funds would not grow as fast as the projected increases in health-care costs. That’s not exactly true: the Congressional Budget Office has said that the annual increase in Ryan’s proposed vouchers would not be as great as the CBO’s projected increase in Medicare costs. But one reason why health care costs are projected to increase is that Congress has generously agreed to fund a large share of those costs. Given less revenue, hospitals and other health-care providers are likely to find ways to reduce costs without necessarily reducing service.

Yet even Ryan’s plan is probably inadequate. Richard Posner argues that Ryan’s plan “probably would make only a small contribution to reducing future deficits.” This is partly because the controversial Medicare reforms it proposes would not take effect until 2021 (when people who are now under 55 begin to retire). As a result, the Congressional Budget Office estimates that, under Ryan’s plan, federal deficits will continue passed 2030.

In an effort to divert attention from S&P’s negative outlook, some politicians are questioning the ratings agency’s integrity because it previously underestimated the riskiness of mortgage bonds. But, as with mortgage bonds, the real question about S&P ratings of the federal debt is not why it is giving a negative rating now but why it didn’t give one a long time ago.