“Tea Party” Tilts At Windmills (Again) #TCOT

Things that make you smiley in the morning….

Members of the Senate Tea Party Caucus on Thursday announed a plan to balance the budget in five years, cutting spending by nearly $11 trillion compared to President Obama’s budget.

The plan, dubbed “A Platform to Revitalize America,” is a wish list of conservative policies, none of which have any chance of passing the Democratic-controlled Senate or being signed into law by a liberal Democratic president.

You have to laugh, really, given the last sentence in that quote.  Of course it’s true, but it shouldn’t be.

The problem is once again the reliance on “growth” to achieve the numbers “within five years.”  The growth will not happen because as soon as you cut the budget the spending comes off dollar-for-dollar against GDP, and that in turn means that “growth” goes negative and so does tax receipts.

This means that the only way such a plan, no matter who’s it is, can possibly “work” is if it’s “all at once.”  That is, you must slash the spending immediately and in one chop, accept that GDP will fall (a lot), accept that tax receipts will plunge (a lot), and at the same time put into place policies that (1) tie tax receipts to the economy as a whole, unlike the current system, (2) drop “handout” assistance to bare subsistence minimums (in other words, “three hots and a cot”, and yes, I know this would be extremely unpopular with the public), (3) reform trade policy so that wage and environmental arbitrage is eliminated as a corporate strategy and (4) fix the energy paradigm on a durable basis so the foundation for economic growth exists to foster recovery.

The lawmakers said they would turn Medicare into a premium support plan that would give seniors the same healthcare plan as members of Congress. They say this would save an estimated $1 trillion over 10 years.

“What we’re doing is telling seniors that you can have the same plan that congressmen and senators have,” DeMint said. “They get the same premium support that we do.”

Doesn’t matter.  Unless you fix medicine by outlawing (under penalty of imprisonment) forced cost-shifting in all of its forms (which is, in fact, theft — no matter how you care to “spin” it) there is no solution to the Medicare problem.  This will inevitably mean facing the fact that we have promised our Seniors things most of them cannot have.

In other words, politicians lied.

The proposal would fund Medicaid, the State Children’s Health Insurance Program, food stamps and child nutrition programs through block grants.

That simply tosses the shortfalls onto the states and says “find ways to become more efficient if you can, but if you can’t then you eat the blame for it.”

This is probably a good thing, in that the closer a particular program is to the people it serves the better the odds that the best-obtainable efficiency can be recognized.  However, it leads one to ask where the federal government obtained the authority to do any of the above things — and Medicare, for that matter.

The Constitution certainly doesn’t contain the required authority.

It would also permit construction of the Keystone XL oil pipeline, and implement broad tax reform by establishing a 17 percent flat tax for individuals and corporations.

What does the pipeline have to do with budget reform?  Nothing, of course, but it’s red meat in an election year.  It also does nothing for long-term energy sustainability — for that we need a real nuclear program, and as I have repeatedly pointed out the path forward is, in my view, found in thorium.

“Broad tax reform” sounds good on the surface, but unless that 17% flat tax literally includes shredding the entire tax code so that there are no deductions or credits there is not a snowball’s chance in Hell that it would be anything approaching revenue neutral with what we have today.

This is, incidentally, the reason I like The Fair Tax — it is a hell of a lot harder to hide special giveaways and games when you’re assessing a consumption tax, and it is also much easier to avoid it through entirely-lawful behavior through thrift, which in turn results in capital formation.

The latter, incidentally, is the necessary predicate for true economic growth.

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