GOP's Ryan Avoids The Rail

by Steve

It would be easy for me to summarily dismiss GOP budget czar Paul Ryan's updated recipe for fiscal health that he put forward this morning. Sure, he's pushing entitlement reform and discretionary domestic spending cuts and caps, and also talking about tax cuts and never mentioning defense spending, so we can be sure it's the usual GOP dogma of hurting Main Street to help Wall Street. But allow me the chance to actually consider what he's going to propose this week in a stated effort to cut $4 trillion in spending over the next ten years.

Medicare - Unlike his previous proposal to push seniors into vouchers and let them fend for themselves, Ryan has updated his proposal to now allow current and soon-to-be-eligible beneficiaries to stay in the current program. His biggest change would require future beneficiaries to move into managed care programs to get their benefits, with a means-tested premium support program based on income that would presumably be fully paid for those at the lower end, and then increasingly place more and more responsibility upon recipients as you move up the income range. You can rant and rave all you want about managed care and HMOs, but allowing Medicare to continue on a fee-for-service autopilot isn't an option either. The moment Obama abandoned any effort to seriously consider a single payer system, this outcome was inevitable.

Medicaid - Ryan is still calling for Medicaid to be converted to a block grant program, allowing each governor the flexibility to determine how best to meet basic federal benefit and eligibility requirements. Ryan says that funding would go up every year, to counter critics' assertions that this is nothing more than a recipe for a cut. Keep in mind that a Democratic governor, Andrew Cuomo, has successfully dealt with his Medicaid problem by capping expenditures and making stakeholders responsible for figuring out the best way to redesign the delivery system. Again, you can rant and rave about a "race to the bottom", but we already have that with Medicaid, where some states do the minimum. Any program based on a state/federal cost sharing model has to allow states significant input into how it should work. One of the biggest failings of Obama's health reform package was its reliance upon moving millions to coverage under Medicaid, thereby placing a huge state general fund burden upon the states in the outyears. The federal government can't be writing checks on the states' checkbooks.

Discretionary domestic spending caps - Ryan's proposal would roll domestic spending back to 2008 levels and cap total spending as a percentage of GDP to its "historic size". He didn't define what that level would be, other than to say that our current 25% of GDP isn't it. Economists like Krugman and others have pointed out that we operated quite well with spending in the range of 22-23% of GDP, and at the Clinton-era tax rates, whereas we can count on the Tea Party and GOP to claim that we need to cut down to the extremists' desire in the 17% range. No one argues that the spending orgy committed by the outgoing Bush administration to Wall Street and Obama's flawed continuation of those wretched policies and transfers of wealth to bail out people who should be behind bars have piled up a lot of pathetic debt upon the government. But with Ryan's proposal, Democrats have room to argue about the correct size of our overall spending as a percentage of GDP, and perhaps reopen who should really share that burden.

Defense Spending - So far, Ryan is silent on defense, which seriously undercuts his credibility. There is no justification for an annual $700-800 billion Pentagon budget in an era of allegedly shared sacrifice and the lack of a worldwide, imminent danger threat to our national security.

Taxes - As expected, Ryan's opening proposal talks about tax cuts, no tax increases, but does talk about widening the tax base, which was contained in the Bowles/Simpson Commission report. The GOP prescription will not be taken seriously until revenue increases from the high earners, the elite, and corporations are part of the mix. Again, this is Ryan's opening proposal, so there is no reason to expect him to offer up new taxes or tax increases, but Democrats must insist that if we really are in a period of shared sacrifice, then there will be no further extension of the Bush tax cuts, and that Corporate America must be paying much more than they do now. Loopholes and tax shelters are to be ended, and if sacrifice is on the table for individuals, then corporate free rides and non-means tested tax breaks are kaput. Ryan doesn't want any tax overhaul to raise more revenue, but this is a nonstarter. Even Bowles/Simpson called for reform that would yield more revenue, and Democrats should insist that more corporate tax revenue is a basic condition of any tax reform package, especially from entities that have enjoyed their highest profits in history without paying taxes and bringing any jobs back.

The elephant in the room is that Ryan left Social Security alone, thereby helping Democrats' argument that there is no debt-related reason to seriously tinker with Social Security.

Ryan's recipe contains no obvious fix for the 53 million Americans who have no consistent health insurance, and his Medicaid proposal undoes health care reform. Until he tackles the cost of uninsured Americans, he isn't being serious. Having said that, Democrats should engage on the issues and not summarily reject Ryan's efforts. His proposals allow for Democrats to launch a real debate about our national values, and what shared sacrifice really means to each political party.