Expect Rep. Paul Ryan’s proposal that cuts federal spending by $6 trillion over 10 years to get shredded by his political opponents. Some aspects of it deserve to be shredded.
But first, Americans should commend the Republican from Wisconsin for having the guts to do what almost every politician from both parties has failed to do: Offer a serious and specific proposal that tackles the country’s unsustainable and skyrocketing debt.
With Democrats controlling the Senate and the White House, Ryan’s plan will not become law. But as chairman of the House Budget Committee, Ryan has the stature to force a desperately needed national debate over what kind of pain we as a country are willing to tolerate to get our fiscal house in order.
That it is out of order is beyond argument. The federal debt is north of $14 trillion and is climbing by more than a trillion a year. We borrow 37 cents of every dollar we spend. More importantly, the U.S. debt as a percent of GDP is the highest it has been since the country was founded, except during and immediately after World War II. With retiring baby boomers poised to nearly double the number served by Medicare over the next 20 years, the problem will move from ominous to debilitating.
In response, President Barack Obama in February offered a 10-year plan that accomplishes almost nothing on entitlement reform. Democrats and Republicans alike ignored real solutions offered by a bipartisan panel co-chaired by Charlotte’s Erskine Bowles. They are all afraid of voters, who overwhelmingly tell pollsters they want government spending cut but won’t tolerate anyone touching their Medicare or Social Security.
So Ryan has done the country a service, even if his plan is flawed. If critics don’t like Ryan’s approach, they must do more than tear it down; they must spell out how they would do it better.
A few key potential improvements:
Ryan closes tax loopholes and eliminates many tax breaks. But he uses all of the resulting money to cut tax rates, and none of it to reduce the deficit. That should be reversed.
Ryan keeps the Bush tax cuts in place in perpetuity, for the wealthy and the middle class alike. Considering we’re borrowing that money from China to give it to taxpayers, those cuts aren’t affordable and should be rescinded in 2012.
Ryan doesn’t cut the Pentagon’s budget and doesn’t touch Social Security. Both must be on the table. While Social Security isn’t the problem Medicare is, it spent $37 billion more than it took in last year.
The biggest components of Ryan’s plan are replacing Medicare with a voucher system, starting when today’s 54-year-olds turn 65, and overhauling the way Medicaid is paid for. Spiraling health-care costs are the biggest driver of the country’s long-term debt. But Ryan’s plan doesn’t control those costs, it just shifts them from the government to the elderly. And Ryan’s plan to give block grants to states to pay for Medicaid seems certain to result in dramatic cuts in health care for society’s truly destitute.
So Ryan’s plan is far from perfect. But at least it’s a starting point. Let the discussion begin.
As the saying goes, desperate times call for desperate measures. And in these difficult economic times, many are finding themselves falling further and further into debt, desperate for some relief. Unfortunately, the very companies that they turn to for help often turn out to be a scam, taking payment without proving any debt relief. For many, desperate measures turn out to be deceptive measures.
A new set of debt relief laws were launched last year to protect consumers from such unscrupulous practices. Beginning on October 27, 2010, Debt Relief Companies were prohibited from collecting a fee until a set of criteria towards debt relief has been achieved. Fees may not be collected until:
- At least one of the consumer’s debts is settled or has its terms altered
- A settlement agreement, debt management plan or other agreement between the consumer and the creditor is in place; and
- At least one payment to the creditor has been made within the terms of the agreement negotiated by the debt relief company.
Unfortunately, the new law only applies to consumers who enroll in a debt relief service after the law is in effect. No relief has been offered to consumers who may have been victim to the abusive practices prior to October 27, 2010. The laws have also been badly received by many debt relief companies who claim the practices are ‘bad for long term retention’.
The new law includes additional provisions, including restrictions on debt relief companies that require consumers to set aside funds in a dedicated account. The account may only be required if the consumer controls and owns the funds, including the interest, the right to withdraw and the account is maintained at an insured institution. Additionally, the debt relief company may not own, control, receive referral fees from or have any affiliation with the financial institution administering the account.
Bank Indonesia Governor Darmin Nasution told a hearing with the House of Representative’s finance commission on Tuesday evening that the country needed a law regulating banks’ debt collecting methods.
”There needs to be a basis; game rules for debt collecting practices. We need authorization in the form of a law similar to the ones used in the US and Australia,” he said before members of the commission.
Darmin also said banks needed to specify debt-collecting methods in their working agreements with companies that provided such services.
The central bank, he added, was currently intensively studying the recent two Citibank cases, in which three Citibank debt collectors allegedly killed the National Unity Party secretary general after he complained about an inflated credit card bill and Citibank employee Malinda Dee allegedly stole Rp 90 billion (US$10.35 million) from her clients.
