House budget chair Paul Ryan, Republican of Wisconsin, deserves to be congratulated for his courage in putting a concrete deficit reduction proposal on the table. I don’t agree with many features of his plan, but Ryan’s willingness to lay out specifics shames Barack Obama, who stepped back from recommendations of a deficit reduction panel he himself had appointed.
Ryan’s plan also tosses the ball back into the court of benighted Tea Party members who are hot for lower taxes, smaller deficits, reduction of the national debt and reductions in entitlement spending — but don’t want anyone to touch their Medicare or Social Security.
At the same time, Ryan’s courage does not extend far enough. His package claims to reduce deficits by $5.6 trillion dollars over the next decade, compared to current policies. But a significant chunk of those reductions still come from blanket provisions that outlays be limited to match growth in the gross domestic product (or, in the case of Medicare, to GDP growth plus 1 percent) without specifying how that will be accomplished.
This resembles the famous “magic asterisks” that David Stockman, Ronald Reagan’s budget director, used to announce cuts that would be decided on later. It is sort of like an overweight person like me announcing that I will give up one daily snack, walk around the block once a day and then “do some other things” that will make me lose 40 pounds.
Moreover, Ryan talks about “changes” and “reforms” in tax laws to improve economic growth, but is not willing to acknowledge that federal tax revenues as a proportion of GDP in 2009 and 2010 were at their lowest levels in 60 years. Restoring those revenues even to the proportions that prevailed under a Republican icon like Ronald Reagan would bring in an additional $6 trillion over the next decade, more than Ryan’s projected cost savings.
Finally, Ryan may be a political realist in exempting everyone currently over age 55 from any changes to Medicare system. But that will let the bulk of the Baby Boom generation off the hook. This is good politics, but it is unjust to younger people.
The two most concrete proposals in the package are for changes to Medicare and Medicaid. Medicare would basically be converted to a voucher system in which beneficiaries would get a fixed sum from the federal government they could use to purchase a medical plan from private providers.
The words “voucher” and “privatization” are anathema to liberals, but the end result might be very similar to how Switzerland covers its entire population and not that far from how the Dutch administer their supposedly “socialistic’’ health system. Outcomes in these two countries are often admired by progressive critics of the U.S. status quo. Moreover, Ryan’s proposals are based on ones he recently made jointly with Alice Rivlin, a respected Democratic icon.
Would these changes actually limit outlays? Only to the degree to which Congress actually would let increases in voucher amounts lag increases in costs of medical services. Yes, changing to a voucher system would give consumers incentives to look for cost-effective plans and thus motivate providers to cut costs. But even in Switzerland, which has a voucher system that should create similar incentives for efficiency, costs are rising faster than the increases projected when the system was instituted.
Ryan would convert Medicaid into a block grant to states that would have great liberty to design their own programs. This essentially is what we did when welfare “reform” converted the old Aid to Families with Dependent Children program into Temporary Assistance for Needy Families in 1996. The number of beneficiaries of that program has dropped by two-thirds, even as the U.S. population grew by 15 percent. And, adjusted for inflation, average monthly benefits for people on the program also have dropped.
The politics of Medicaid are complicated, however. Spending on medical care for children and healthy working-age adults is a smaller portion of Medicaid outlays than most people think, while spending on nursing homes and on care for the disabled is much more important. In most states, 60 percent of the residents in nursing homes are supported by Medicaid. Even many ardent Tea Party members may object if reining in entitlement spending means they will have to pay more for their parents’ nursing home bills.
There are plenty of problems with Ryan’s proposals. But he has had the guts to put them on the table. There still is a lot of willful self-delusion in the general populace and a lot of demagogy from both sides of the political spectrum. One can only hope that Ryan’s initiative will help us collectively face fiscal reality.