The Big Lie

The Big Lie

The Republican Party (GOP) has put forth its budget plan and called it The Path To Prosperity. I have spent the last several weeks looking this thing over and am ready to call it what it is: The Path To Regaining the Whitehouse Through a Misrepresentation of the Facts.

Let’s start with the voucher program and Medicare.

The idea behind this plan is to give us a voucher so we can buy our own medical insurance instead of the government paying for it. The idea of a “choice” is supposed to sound appealing. Also, there is the supposed benefit of this voucher being increased in size along with inflation.

Here are the four main problems:

Right now, there is no profit-taking off the top. The government does not take in taxes and the keep some as profit to distribute to shareholders. This means all of your insurance money is used to pay claims (less a small portion that must go to system administration). So, right now, the government spends $15,000 on each Medicare enrollee and that enrollee gets about $14,900 in benefits. If we put a for-profit insurance company in middle of the food chain, they will take 40% off the top. So, you pay them $15,000 and get only $9,000 in coverage. There is no avoiding this so long as the new component of “profit” is added to the mix.

Secondly, the Medicare program is one of the few government programs that, by all accounts, is well run.

Thirdly, the voucher will increase with inflation while the cost of medical care increases at its own pace. Let’s take a look at a $15,000 voucher that goes up at 1% (inflation) a year for 30 years. At the end of the 30 years, that voucher is now about $20,000. However, if we take a $15,000 policy and allow it to increase in cost at 10% a year (the rate that medical costs go up), then to buy your insurance in 30 years, you will need $60,000.

Finally, the purpose of Medicare is for us to have healthcare when we can no longer afford to pay for it ourselves. If you retire rich, this may not be a problem. It is certainly a problem if you are not rich. That means that this portion of the GOP plan equates to a burden on the elderly, middle class and the poor.

Now, let’s talk about the second part of the budget: A 10% tax cut across the board to make up for a tax increase that will occur when the loopholes are closed.

First of all, most of us don’t know what a loophole is. The reason for this is we don’t make enough money to use them. An example of a loophole is when Cisco has 2% of its sales force in Amsterdam and yet it attributes 50% of its sales to those people. This allows them to act like they made the money overseas. So long as they don’t bring it back to the United States, they don’t pay taxes on it. This saved Cisco $7 billion last year alone.
So, close the loophole and the rich will have to pay their fair share of taxes. Right now, the richest 400 people in the country pay an average of 17% tax rate while you and I pay 35%. You and I will be unaffected by the loophole.

After the loopholes are closed, the GOP wants to lower the tax rate by 10%. Supposedly, this will give back the money lost by closing the loopholes.

The GOP says that cutting the tax rate will create jobs.
The GOP also says that the Economic Stimulus plan was a bust.

Let’s take a look at these two issues.

First of all, no one thinks that tax cuts pay for themselves. Even the GOP admits this. When asked, on Meet the Press, if tax cuts paid for themselves, Alan Greenspan simply stated, “They do no.”

The GOP is correct in stating that tax breaks create jobs. What they don’t tell you is how much each of those jobs created costs us, the taxpayers.

Let’s look at an example. A rich person gets a tax cut and ends up with an additional $500,000 in his hands. He will use this to create a job that pays $50,000. That job is someone working for the rich person. This newly hired person will now have to pay about $17,500 in taxes. So, we gave a person $500,000 and the return was $17,500. What did the rich person do with the rest of the money? Maybe a new house somewhere. By the way, most rich will not be creating jobs. Only the small business owners will be doing that. The Trumps and the movies starts just buy boats.

The GOP never claims that the tax breaks pay for themselves because this would be to make a statement that is so false, everyone would see through it. What do say is they create jobs which is true. What they don’t tell you is the jobs created are rare and most of the money from the tax breaks go into already bulging bank accounts.

By the way, the money that we are giving to the rich is borrowed.

As for the economic stimulus; this is a program where the government created jobs that needed to be done anyway. So, they take $50,000 and give a man a $50,000 job and he builds a bridge. Simple as that. I should mention that all reputable economists, including the Nobel Prize winners say this was a good idea.

So, which would you rather do?

Give a millionaire $500,000 to create a $50,000 job
Or
Use $50,000 to create a $50,000 job.

Yes, tax breaks pay for jobs and that is what you will hear over and over again. But nearly all of that extra money for tax breaks has nothing to do with job creation.

If you really want to create jobs, then you must create customers. There are a lot of companies out there just sitting on cash as they wait for the economy to improve. They rightly see no value in producing something that no one will buy. Put more money in the hands of the middle class and they become customers. The rich are much less likely to change their spending habits with more money as they can already buy whatever they want.

Here is my final issue.

The GOP is saying they don’t want to raise the debt ceiling because the Democrats are overspending.

There are two problems here.

One, the debt ceiling has nothing to do with current spending. We need to raise the debt ceiling to pay for things we’ve already bought. For example, we bought the wars in Iraq and Afghananstan. We bought the Social Security Plan. We bought our military. We borrowed money to pay for these so we also bought the debt.

The money has been spent over the last decade. Now we need to pay for it.

The GOP is acting like it’s a cap on the current budget but in reality; they are just saying that because most of us think that it is true. The GOP is using the lack of understanding to hold the debt ceiling hostage. They imply that raising it means raising current spending levels when the two are not related.

In Summary, the GOP has, at best, been disingenuous about:

The Medicare voucher
The fact that tax cuts don’t pay for themselves
The Debt ceiling being linked to current budget negotiations.

Why are they doing this?

The answer is as distasteful as it is simple: Every poll shows that the only way the GOP will win in 2012 is for the economy to stay bad.

They are fighting to stifle growth.

I was a GOP member until about halfway through the last Bush term. I began to see a pattern of dishonesty that focused on trying to put lipstick on the Pig that was George W. Bush’s administration.

I cannot stand silently any longer while the GOP uses sound-bites to sway those that don’t care enough to check the facts.

For more on this, check my blog at http://JamesDillingham.com