Ryan Vs Murray: Which Would You Choose?

On Wednesday when all the hoopla from the FOMC meeting died down, it was announced that the Senate had passed a bill to fund the US government until September of this year. Without this bill the US government would have effectively had to shut down on March 27th. The question yesterday was will the GOP-dominated House of Representatives pass this bill or will they stick to extreme right wing ideology.

On Thursday shortly before 11 AM EST, it was announced that the House did pass this bill. At around the same time it was also announced that the House passed Representative Paul Ryan’s budget for this upcoming fiscal year. Interestingly enough the Senate passed Senator Patty Murray’s budget. The differences between these two budgets couldn’t be more extreme.

The Ryan budget effectively repeals the Affordable Care Act aka Obamacare and turns Medicare into a voucher program which in effect means senior citizens in the United States will be forced to purchase their own health insurance and if they can’t afford to do so will be put on a voucher program. This means that they must fall within a certain scale income wise to receive any funds. In essence this budget destroys Medicare as we know it. The GOP keeps calling these programs “entitlements”. I take a different view. Given that every working American has had to pay into these programs for their entire working life, it isn’t an entitlement. It’s a return on premium. This is the same language used in the insurance industry in the United States and it seems to fit this bill quite nicely. The Ryan budget is also committed to balancing the budget within a ten year time horizon.

The Murray budget on the other hand doesn’t touch Social Security or Medicare. It seeks to balance the budget via the combination of budget cuts and elimination of tax loopholes for both the wealthiest Americans as well as large corporations. It doesn’t commit to balancing the budget within a ten year time horizon but falls short by roughly 1 Trillion dollars. It is considered the balanced approach.

What I find interesting about all of this is no one is saying what will happen with the sequester cuts and no one is saying what will happen come April 15th. April 15th is the day that Congress is supposed to come up with a budget and if they don’t they will forgo their pay. This I would have to see. The Ryan Budget has almost no chance of success as it must go thru the Democratic controlled Senate and even if it does, must pass President Obama’s muster. I don’t believe he’s going to be too keen to sign. The Murray Budget on the other hand has already passed the Senate and will have the President’s support if the Democrats can muster enough votes in the House or Representatives.

What I find curious about this is the folks in DC seem to think that GDP is some finite number that never changes. In the Reagan years the GDP in the United States was 11-12 Trillion dollars. If the US operated with that kind of GDP today, it would be considered a depression. What they should be focused on is growing the economy as opposed to think that it’s a finite number. The same phenomena occurred during the Clinton years and if I remember correctly, they weren’t too bad. Enough said.

Nick Mastrandrea is the author of Market Tea Leaves. Market Tea Leaves is a free, daily newsletter that discuses and teaches market correlation. Market Tea Leaves is published daily, pre-market in the United States and can be viewed at www.markettealeaves.com.