Tuesday, March 22, 2011

More Extremism from Rep. Paul Ryan on the Total Crash of the U.S. Economy.

I have my criticisms of Politifact from time to time, but when their research does get it right, I will use it.

Here’s a doom and gloom warning, again, from Rep. Paul Ryan:
"The Congressional Budget Office has this economic model where they measure the economy going forward, and they are now telling us that the entire economy crashes in the year 2037 because their computer simulation can't conceive of any way in which the U.S. economy can continue."
Paul Ryan on Friday, March 18th, 2011 in a private briefing to Members of Congress
Keep in mind that Ryan’s own plan, according to one economic model, creates trillions of dollars in deficits through 2058. Not only that, his model shifts the tax burden downward, and redistributes wealth upward. It requires dramatic out of pocket costs to the poor and middle class, because the government in no longer involved in keeping those costs down, or covering items the free market refuses to cover.

The bottom line; Taking the government out of the loop doesn’t change the cost equation; it just shifts it to the individual under the guise of balancing the budget. It’s like only making people with children pay for education, instead of everyone in society; the costs would be unaffordable.  Extrapolate that out over fire, police, health care, energy…you name it. Buying power diminishes when fewer people pay collectively to save money.
Politifact: So where does this leave us? We’ll start by listing the exaggerations in Ryan’s statement. 
First, he implies that there’s only one CBO model, glossing over the fact that the agency uses multiple models that have produced varying results. Second, Ryan predicts a collapse in 2037, but there’s considerable variation in the doomsday year depending on the model the CBO uses and the data it plugs into its calculations. 
Third, Ryan’s statement assumes that no change will be made from current policies before a collapse -- an assumption that’s unlikely. And fourth, his claim that the CBO’s "computer simulation can't conceive of any way in which the U.S. economy can continue" strikes us as an overstatement. In fact, the CBO finds lots of unpalatable scenarios if things get bad enough, but the agency doesn’t go so far as to suggest that the economy will simply cease functioning. Economies are far more complex than any single model, so just because a model stops working, it doesn’t necessarily mean that the economy will bring us back to hunter-gatherer days when the model stops working. 
What saves Ryan’s comment is that, despite his exaggerations, his general point is valid. The economists we spoke to agreed that that the nation’s current path of deficits and debt, if not altered, will become unsustainable. 
"The issue is simply that under current law, the debt-to-GDP ratio soars so high that economic models break down," said J.D. Foster, a senior fellow at the conservative Heritage Foundation. "The truth is that nobody really knows what would happen as the debt-to-GDP ratio pushes through 100 percent on the way to 200 or 300 percent. The models certainly are not capable of anticipating the effects. 

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