Cantor's Third World Budget

By Sam Uretsky

It would be nice if we could get out of the current economic mess before the next one starts, but don’t bet on it. The House of Representatives, which we all learned in elementary school looks after the welfare of the people, voted in favor of the latest Paul Ryan budget.

Eric Cantor, the House Majority Leader, recently said, “We also know that over 45% of the people in this country don’t pay income taxes at all, and we have to question whether that’s fair. And should we broaden the base in a way that we can lower rates for everybody that pays taxes.”

Those 45% Mr. Cantor is so concerned about have one thing in common – they’re broke. They still pay taxes – payroll taxes are taxes, sales taxes are taxes, and excise taxes on gasoline and other items are taxes – but Mr. Cantor is concerned that too many people aren’t paying more money on April 15th, and he wants to tax them so that he can lower the tax rates for his friends and benefactors. Meanwhile, Rep. Ryan proposed a budget that lowers taxes for the rich (over and above the Bush tax cuts) keep defense spending at current levels, and cut Medicare, Medicaid and Social Security.

Mr. Ryan has been quoted as saying “... we don’t want to turn the safety net into a hammock that lulls able-bodied people to lives of dependency and complacency, that drains them of their will and their incentive to make the most of ‘their lives.” Aside from the fact that being able bodied doesn’t assure that you can find a job these days, Dr. Aaron Carroll, writing in news@JAMA reports “a married couple in Texas who have 1 child and earn only $4,818 a year is too ‘rich’ for Medicaid.”

Dr. Carroll also writes, “The largest group covered by Medicaid by far is children. The second biggest group, adults, contains large numbers of pregnant women. Medicaid covers about 40% of births in the United States. The third largest group includes people who are blind or disabled. That leaves what are known as dual eligibles. Those are elderly people who are so poor that they receive both Medicaid and Medicare benefits.” Perhaps Mr. Ryan would endorse the Newt Gingrich plan to have poor children develop a work ethic by cleaning the toilets of their more worthy classmates.

Aside from things like basic human decency, Mr. Ryan and Mr. Cantor don’t seem to have much grasp of macroeconomics. When people have no money, they have a natural inclination to stop spending. This is the “demand” part of supply and demand, and when you cut back on the customer base, it doesn’t matter if you can get your products made more cheaply in China, or get tech support from India, it won’t accomplish anything if there’s nobody in a position to buy. While Republicans are fond of pointing out that competition lowers prices, it’s equally true that volume lowers costs. If you buy a $10 coffee pot and make only one cup of coffee, that one cup set you back $10 + the cost of the coffee.

Make two cups and the cost per cup drops to $5 + the cost of the coffee. At the end of a year, the pot only represents 2¢ towards the cost of your morning coffee. In Economics 101 we learned that’s called “economies of scale” and it explains why even the 1% would be better off if wealth were more equitably distributed. When America had a strong middle class, most people could buy things that were considered luxuries anywhere else, and that kept the prices down and people working and nmade the American standard of living the highest in the world.

As the country became more “business friendly” unions were attacked, salaries were frozen or even reduced, and payrolls were cut. That meant fewer buyers, lower production, higher costs, and a spiral that brought us to where we are now. The Romney endorsed Ryan budget is not only cruel, it’s destructive. Throwing more people into poverty will lead to fewer people able to buy goods and services, leading to more unemployment and more poverty. It’s hard to tell if Romney, Ryan et al., are mostly greedy or mostly ignorant, but they’re advocating mean-spirited policies that will drive America down. After creating the greatest economic disaster since the Great Depression and blocking Keynesian remedies which might have improved the recovery, they want to go back to the policies that got us here. Really, it’s as basic as economics can get.

Sam Uretsky is a writer and pharmacist living on Long Island, N.Y. Email sdu01@mail.com.

From The Progressive Populist, June 1, 2012