Paul Ryan's latest budget relies on even bigger unnamed savings
There's something breathtaking about any Paul Ryan budget. There are the savage cuts to healthcare and safety-net spending for the young and poor. The deep cuts to education, research, and infrastructure. The way current seniors are spared from any of this fiscal pain. The increased defense spending. And the tax cuts -- heavily tilted towards the rich, of course -- that will supposedly be paid for by eliminating loopholes.
It's this last bit that might be the most breathtaking. Ryan wants to radically simplify the tax code, and radically reduce rates in the process. His plan shrinks our seven brackets into two -- 10 and 25 percent -- while eliminating the Alternative Minimum Tax, the Obamacare taxes, and the expanded tax credits from the stimulus. On the corporate side, he wants to move to a territorial system, and lower the rate from 35 to 25 percent. Oh, and he wants revenue to average 18.8 percent of GDP for the next decade. The only way to do all of this is to radically cut tax expenditures too. But Ryan doesn't name a single expenditure he wants to cut. Instead, he bridges the gap with a magic tax reform asterisk.
This isn't a new magic trick for Ryan. It's just a bigger one. His tax plan hasn't changed from its previous iteration, but his revenue goal has. Ryan wants to keep the higher revenue level from Obamacare and the fiscal cliff deal without keeping those tax rates. That means his magic asterisk needs to be even more magic.
How much more magic? About a trillion dollars more.
Ryan's tax cuts would reduce revenue to a very low 15.5 percent of GDP over the next decade, according to the Tax Policy Center. But his revenue target for last year was 18.3 percent of GDP. Ryan said he would make up the difference by killing $5.6 trillion or so in tax breaks that he couldn't name. That was magical enough. But now he says he wants the same tax cuts and an extra 0.5 percent of GDP in revenue. That's about a $6.7 trillion hole. And remember, Ryan says his total budget -- tax reform and spending cuts -- will save $4.6 trillion the next 10 years. In other words, Ryan's magical savings are 146 percent of his overall savings.
This isn't a good trick. As Michael Linden of the Center for American Progress points out, there are only about $2 trillion worth of itemized deductions over the next decade. Ryan would also have to cut the big exclusions and preferences that litter the tax code to make his numbers add up.
[Glossary interlude: Itemized deductions for certain expenses, like home mortgage interest, reduce your taxable income according to your tax bracket; exclusions, like employer health care, exempt certain income from any tax at all; and preferences, like the like capital-gains rate, lower taxes for certain kinds of income.]
This is mathematically possible. But that doesn't make it politically possible.
The chart below from the Congressional Budget Office looks at the biggest loopholes, as a percent of GDP, over the next 10 years. Not surprisingly, the biggest ones are also the most popular. Ryan has to come up with $6.7 trillion in savings -- equal to 3.3 percent of GDP -- to make this work. And he's already ruled out ending the preference for capital gains (and probably, though not certainly, their exclusion at death).
This game of choose-your-own-tax-reform-adventure is quite difficult, impossible even, unless you get rid of the biggest loophole out there: the exclusion for employer-provided health care. But even if Ryan tax people's health care benefits, he isn't exactly left with easy choices. Would Ryan end the home mortgage interest deduction (just when the housing market is, barely, rebounding)? Or would he start taxing pension contributions -- think 401(k)s? Or maybe he'd eliminate the charitable deduction? Just about the only certainty here is he'd ditch the state and local tax deduction, since Republicans view that as a subsidy for high-tax, high-service blue states. But no matter what choices Ryan makes, he will almost certainly have to increase taxes on some middle-class households. It's just math.
You're not alone if you think magic is more fun than math. Paul Ryan certainly agrees.
The newly discovered worlds are now the most promising targets in the search for life among the stars—and the race to take a closer look at them has begun.
The robot telescope settles on its target, a star that sits closer than all but a tiny fraction of the tens of billions of stellar systems that make up the Milky Way. Its mirror grabs light for 55 seconds, again and again. The robot telescope—called TRAPPIST—will observe the star for 245 hours across sixty-two nights, making 12,295 measurements. Eleven times, it will see the star dim, ever so slightly. This dip in luminosity, called a transit, has a straightforward astronomical explanation: It’s a planet passing in front of the star, blocking just a bit of its light. In this case, the transits tell us that 3 planets orbit the star.
“So what?” you might think.
Astronomers have been spotting planets around distant stars for years now, using the transit method, among others. Not a month goes by without a headline, touting the discovery of new “exoplanets.” But these planets are different, and not only because they’re near. Like the Earth these planets could potentially permit liquid water to persist on their surfaces—which is thought to be a key pre-condition for the emergence of life. Today, when their discovery is published in Nature, they will instantly become the most promising planets yet found in the search for life among the stars.
For some, abandoning expensive urban centers would be a huge financial relief.
Neal Gabler has been a formative writer for me: His Winchell: Gossip, Power, and the Culture of Celebrity was one of the books that led me to think about leaving scholarship behind and write nonfiction instead, and Walt Disney: The Triumph of the American Imagination was the first book I reviewed as a freelance writer. To me, he exemplifies the best mix of intensive archival research and narrative kick.
So reading his recent essay, "The Secret Shame of Middle-Class Americans," was a gut punch: First, I learned about a role model of mine whose talent, in my opinion, should preclude him from financial woes. And, then, I was socked by narcissistic outrage: I, too, struggle with money! I, too, am a failing middle-class American! I, too, am a writer of nonfiction who should be better compensated!
Don’t expect Hillary Clinton to stay above the fray in the general election—her campaign plans “sustained and brutal attacks” on Donald Trump.
As they look ahead to the general election, some commentators envision a campaign in which Donald Trump attacks viciously and Hillary Clinton makes a virtue of her refusal to stoop to his level. “I think Trump’s method will be to turn on the insult comedy against Hillary Clinton,” declared GOP consultant Mike Murphy earlier this week. “Her big judo move is playing the victim.” Vox’s Ezra Klein speculated earlier this year that “Trump sets up Clinton for a much softer and unifying message than she’d be able to get away with against a candidate like [Marco] Rubio.”
I doubt it will play out that way. Rope-a-dope isn’t Clinton’s style. When facing political threats, her pattern has been to strike first—and with great force.
Three Atlantic staffers discuss “Home,” the second episode of the sixth season.
Every week for the sixth season of Game of Thrones, Christopher Orr, Spencer Kornhaber, and Lenika Cruz will be discussing new episodes of the HBO drama. Because no screeners are being made available to critics in advance this year, we'll be posting our thoughts in installments.
Nearly half of Americans would have trouble finding $400 to pay for an emergency. I’m one of them.
Since 2013,the Federal Reserve Board has conducted a survey to “monitor the financial and economic status of American consumers.” Most of the data in the latest survey, frankly, are less than earth-shattering: 49 percent of part-time workers would prefer to work more hours at their current wage; 29 percent of Americans expect to earn a higher income in the coming year; 43 percent of homeowners who have owned their home for at least a year believe its value has increased. But the answer to one question was astonishing. The Fed asked respondents how they would pay for a $400 emergency. The answer: 47 percent of respondents said that either they would cover the expense by borrowing or selling something, or they would not be able to come up with the $400 at all. Four hundred dollars! Who knew?
It’s a paradox: Shouldn’t the most accomplished be well equipped to make choices that maximize life satisfaction?
There are three things, once one’s basic needs are satisfied, that academic literature points to as the ingredients for happiness: having meaningful social relationships, being good at whatever it is one spends one’s days doing, and having the freedom to make life decisions independently.
But research into happiness has also yielded something a little less obvious: Being better educated, richer, or more accomplished doesn’t do much to predict whether someone will be happy. In fact, it might mean someone is less likely to be satisfied with life.
That second finding is the puzzle that Raj Raghunathan, a professor of marketing at The University of Texas at Austin’s McCombs School of Business, tries to make sense of in his recent book, If You’re So Smart, Why Aren’t You Happy?Raghunathan’s writing does fall under the category of self-help (with all of the pep talks and progress worksheets that that entails), but his commitment to scientific research serves as ballast for the genre’s more glib tendencies.
A professor of cognitive science argues that the world is nothing like the one we experience through our senses.
As we go about our daily lives, we tend to assume that our perceptions—sights, sounds, textures, tastes—are an accurate portrayal of the real world. Sure, when we stop and think about it—or when we find ourselves fooled by a perceptual illusion—we realize with a jolt that what we perceive is never the world directly, but rather our brain’s best guess at what that world is like, a kind of internal simulation of an external reality. Still, we bank on the fact that our simulation is a reasonably decent one. If it wasn’t, wouldn’t evolution have weeded us out by now? The true reality might be forever beyond our reach, but surely our senses give us at least an inkling of what it’s really like.
Even as the militant group loses ground in Iraq, many Sunnis say they have no hope for peace. One family’s story shows why.
Falah Sabar heard a knock at the door. It was just before midnight in western Baghdad last April and Falah was already in bed, so he sent his son Wissam to answer. Standing in the doorway was a tall young man in jeans who neither shook Wissam’s hand nor offered a greeting. “We don’t want you here,” he said. “Your family should be gone by noon tomorrow.” For weeks, Wissam, who was 23, had been expecting something like this, as he’d noticed a dark mood taking hold of the neighborhood. He went to get his father, but when they returned, the stranger was gone.
Falah is tall and broad-shouldered, with salt-and-pepper hair. At 48, he was the patriarch of a brood of sons, daughters-in-law, and grandchildren. He sat down with Wissam to talk things through. They had been in Baghdad for just three months, but that was long enough for the abiding principle of refugee life to imprint itself on Falah’s psyche: Avoid trouble. When Wissam had managed to find a job at a construction firm, Falah had told him to be courteous, not to mix with strangers, and not to ask too many questions. If providence had granted them a new life in this unfamiliar city, it could snatch that life away just as easily.
The problem with Americans’ household budgets isn’t that people are too dumb to save, but that the system asks too much of them.
From taking out loans to pay for higher education to investing for retirement, Americans are shouldering enormous levels of personal financial responsibility—more so than ever before. At the same time, financial products have both proliferated and become much more complex. Americans now face an Alphabet (and Numbers) soup of saving and investment options (401(k)s, 529s) and a head spinning array of credit options (credit cards, mortgages, home-equity loans).
While Americans are not expected to manage their own legal cases or medical conditions, they are expected to manage their own finances. To be sure, the rise of the independent and empowered consumer rests on the belief that they have the requisite knowledge to be up to the task. But is it reasonable in such a system to expect people to succeed? Economists examining financial literacy would say no.