• First thoughts on Rep Ryan’s budget proposal

    Well, I still haven’t seen the proposal, but at least now I’ve seen Rep. Ryan’s op-ed talking about it.

    Let me say this first: kudos to Rep. Ryan for producing a (forthcoming) document with details. Throughout the health care debate, that was something I asked for repeatedly, and this is a real budget that can be analyzed and debated.

    That’s necessary, but not sufficient, however. And I have a number of concerns just from the op-ed alone. Let’s begin.

    Our budget, which we call The Path to Prosperity, is very different. For starters, it cuts $6.2 trillion in spending from the president’s budget over the next 10 years, reduces the debt as a percentage of the economy, and puts the nation on a path to actually pay off our national debt. Our proposal brings federal spending to below 20% of gross domestic product (GDP), consistent with the postwar average, and reduces deficits by $4.4 trillion.

    A study just released by the Heritage Center for Data Analysis projects that The Path to Prosperity will help create nearly one million new private-sector jobs next year, bring the unemployment rate down to 4% by 2015, and result in 2.5 million additional private-sector jobs in the last year of the decade. It spurs economic growth, with $1.5 trillion in additional real GDP over the decade. According to Heritage’s analysis, it would result in $1.1 trillion in higher wages and an average of $1,000 in additional family income each year.

    Does the budget also defeat the third law of thermodymanics and involve unicorns? I mean, really – it’s going to cut over $6 trillion in spending and simultaneously reduce unemployment to 4%? It’s this kind of rhetoric that makes me skeptical of the whole thing. It’s the whole “I’m going to cover everyone, improve quality, and reduce costs at the same time” meme. It’s not going to happen. Perhaps the Heritage Center for Data Analysis is right on the money, but I need to see that analysis first.

    Other thoughts in no particular order:

    1) If you’re going to reduce spending to 2008 levels for five years, you have to give details. No hand waving. Those will be very, very deep cuts.

    2) I’m skeptical of anyone who thinks we can spend less on Medicaid and simultaneously offer recipients “access to better care“.

    3) Delaying Medicare reform to 2022 isn’t politically feasible. There will be 5 Congressional and 3 Presidential elections before then. There’s no way a plan made today that doesn’t go into effect until then will survive unchanged. Moreover, this feels like a play where you try not to anger current Medicare recipients too much while asking future recipients to continue to pay for current recipients, and accept less in the future. It’s odd, and I have yet to hear an explanation for this that isn’t political in nature.

    4) Turning Medicare or Medicaid from defined benefit programs into defined contribution programs are major changes, full stop. This isn’t minor reform, and it shouldn’t be treated as such. Should Rep. Ryan convince the majority of Americans that major reform is needed, so be it, but we should have that honest debate.

    5) I am still not convinced that you can just spend less on these programs and believe that access and or quality will not suffer without actually creating active programs to contain costs. I’m not seeing that yet, just a hope that “empowered” seniors will somehow manage to drive costs down in a manner not seen yet. Moreover, Rep. Ryan seem to believe that seniors will be able to contain costs in this manner, but that non-seniors won’t in exchanges through the PPACA.

    6) Along those lines, I’m not clear why exchanges and subsidies are perfectly acceptable for those over the age of 65, but repellant if you’re under 65 under the PPACA. Of course, I’ve also been unclear why, right now, a single payer system is American-as-apple pie if you’re over 65, but the end-of-freedom-as-we-know-it if you’re under 65.

    7) I still have a hard time imagining solving the deficit problem without increasing revenue through taxes at all, even if it’s just to return tax levels to those seen under President Clinton.

    All of this may be answered by the full proposal; I’ll be happy to be proven wrong. Austin’s almost got me convinced that throwing competitive bidding in there could be the answer. But those are my first thoughts.

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    • The 4% unemployment number jumped out at me also. Have not seen the report, but am betting it is hard on Medicaid and discretionary spending while delaying Medicare until the future.

      Big question. Has anyone even asked insurance companies what they would charge to insure a 70 y/o with CAD, DM or COPD? I could not get my insurance broker to quote me rates for a healthy 65 y/o. For a healthy 64 y/o it was about twice, IIRC, what it would be for someone in their 40s.

      Steve

    • I think it is also clear why Ryan is using Heritage’s numbers- because he is not going to like how CBO scores his “plan.” (From here on out I am going to use scare quotes around plan much like Ryan uses them around experts when referring to IPAB.)