US Politics Special: A New EA Series on the Debates Over the Economy

Two political stories will dominate US news coverage this year: the campaign for the Republican nomination to face President Obama in the 2012 election, and the efforts by both parties, bi-partisan commissions, and independent think tanks to find a solution for the state of the American economy. Included in the latter debate will be terms that turn us all bleary-eyed; debt ceilings, discretionary and non-discretionary spending, entitlement reform, tax reform, and a myriad of health,care acronyms like MSAs (Medical Saving Accounts). The grim reality beyond the terms is that the United States is facing a fiscal crisis, and this year will see the beginnings of policies that will have long-standing consequences for the future of America.

Over the next few weeks EA USA will post a series of articles looking in-depth at the various recommendations for changes. Hopefully, by the time that the debate over this year's budget reaches a predictably divisive stage, these posts will set the foundation for understanding the choices that face the President and Congress.

Our first programmes for consideration come from Rep. Paul Ryan (R-Wisc.): "A Roadmap for America's Future Version 2.0: A Plan To Solve America's Long-Term Economic and Fiscal Crisis." Ryan is Chairman of the House of Representatives Budget Committee; a position that will see him leading the GOP's efforts to restrain Government spending proposals. An indication of Republican esteem for Ryan's report was their selection of him to deliver the party's response to the State of The Union Address last Tuesday.

As Chairman of the Republican-controlled Budget Committee, Rep. Ryan has the power to seriously hinder the President's spending plans. The Committee can do this in two ways: by analysing the Administration's projected figures through the independent Congressional Budget Office, and by using its control of the power of the purse to negotiate a budget with the Executive Branch and the Senate.

The starting point, before considering the measures that might be included in this year's (Fiscal Year 2012, from Oct. 2011 to Oct. 2012) budget, is that the process for even debating possible policy solutions is in serious trouble. Last year Congress failed to agree on a Fiscal Year 2011 budget, and the country is still running on a continuing resolution that kept funding for federal agencies at the levels mandated the previous year. This impasse led, in the words of Secretary of Defense Gates, to Congress “dumping a "crisis on my doorstep" by holding the Pentagon to last year's spending levels and creating a potential $23 billion gap that could weaken a wartime military.”

This year's budget, compiled by the Office of Management and Budget (OMB), will be submitted by the President on Monday, beginning the long process of negotiation that usually leads to agreement late in the year. The first point of conflict will come in the House Budget Committee, where Rep. Ryan and his allies will hold hearings on the budget and then submit a concurrent resolution that determines the spending authority of each of the committees in the House. Although these allocations are not mandated by law --- as the President has not signed them --- they are enforceable through the use of points of order, and set up the parameters of debate for spending and revenue bills in both the House and the Senate.

In those discussions the Ryan 'Roadmap' will receive a full airing because it attempts to address deficit reduction through the politically explosive subject of reforms of entitlements,including Medicare, Medicaid, and Social Security. These non-discretionary programmes, along with defense spending, form the bulk of federal expenditure. Without cuts in these areas, or radical transformations in the ways they are administered, there is little chance of reducing the deficit. As A.B. Stoddard noted last week, “until the battle is joined on entitlements we can all just look forward to watching the debt grow larger still along with political posturing and hypocrisy.”

Rep. Ryan's central contention in the Roadmap is that the United States is currently at a "tipping point" where it must act now on far-reaching entitlement reforms. The alternative, he maintains, is a catastrophe that will see the end of the promise of America, where each generation's children are better off than their forebears. This is nothing less for him than a moral crusade to save the traditional American virtues of independence and self-reliance, and to defeat the "culture of dependency" that is destroying the United States from within.

In following entries, I'll consider the ideological rationale of the Roadmap and then look at its major sections: Healthcare, Medicare, Medicaid, Social Security, and Personal and Business Tax Rates. I'll also cast an eye on other issues such as the global economy and investment.