Tag: paul ryan

Federal Spending: Ryan vs. Obama

House Budget Committee Chairman, Paul Ryan, introduced his budget resolution for fiscal 2012 and beyond today entitled “The Path to Prosperity.” The plan would cut some spending programs, reduce top income tax rates, and reform Medicare and Medicaid. The following two charts compare spending levels under Chairman Ryan’s plan and President Obama’s recent budget (as scored by the Congressional Budget Office).

Figure 1 shows that spending rises more slowly over the next decade under Ryan’s plan than Obama’s plan. But spending rises substantially under both plans—between 2012 and 2021, spending rises 34 percent under Ryan and 55 percent under Obama.

Figure 2 compares Ryan’s and Obama’s proposed spending levels at the end of the 10-year budget window in 2021. The figure indicates where Ryan finds his budget savings. Going from the largest spending category to the smallest:

  • Ryan doesn’t provide specific Social Security cuts, instead proposing a budget mechanism to force Congress to take action on the program. It is disappointing that his plan doesn’t include common sense reforms such raising the retirement age.
  • Ryan finds modest Medicare savings in the short term, but the big savings occur beyond 10 years when his “premium support” reform is fully implemented. I would rather see Ryan’s Medicare reforms kick in sooner, which after all are designed to improve quality and efficiency in the health care system.
  • Ryan adopts Obama’s proposed defense (security) savings, but larger cuts are called for. After all, defense spending has doubled over the last decade, even excluding the costs of wars in Iraq and Afghanistan.
  • Ryan includes modest cuts to nonsecurity discretionary spending. Larger cuts are needed, including termination of entire agencies. See DownsizingGovernment.org.
  • Ryan makes substantial cuts to other entitlements, such as farm subsidies. Bravo!
  • Ryan would turn Medicaid and food stamps into block grants. That is an excellent direction for reform, and it would allow Congress to steadily reduce spending and ultimately devolve these programs to the states.
  • Ryan would repeal the costly 2010 health care law. Bravo!

To summarize, Ryan’s budget plan would make crucial reforms to federal health care programs, and it would limit the size of the federal government over the long term. However, his plan would be improved by adopting more cuts and eliminations of agencies in short term, such as those proposed by Senator Rand Paul.

Tuesday Links

  • Republicans have a big opportunity to undo Obamacare and reform Medicaid and Medicare all at once.
  • It’s a good thing, too, because we’re facing a big debt crisis and if we don’t change course, federal spending will crest 42% of GDP by 2050.
  • There’s also a big elephant in the room in an excessively complicated tax code.
  • One has to wonder if the Republicans intend to put the big sacred cow of defense spending on the table.
  • Unrelated to the budget, education choice proponents scored a big victory in the U.S. Supreme Court yesterday in ACSTO v. Winn, a decision that upheld education tax credits:

Paul Ryan and Political Discipline

Today POLITICO Arena asks:

Paul Ryan’s budget – hard-headed fiscal sanity or inhumane?

My response:

Either we discipline ourselves, painfully, or soon enough the Chinese and other lenders will do it for us, more painfully still, by refusing to loan to us any longer at currently low interest rates. And in that event, the debt service will be all consuming. Neither individuals nor nations can go down the road we’re on without paying the price.

Margaret Thatcher put it plainly: “The trouble with socialism” – let’s be honest, we’re socializing the costs of our appetites by imposing them on our children and grandchildren – ”is that eventually you run out of other people’s money.”

Inhumane? The inhumanity is among those demagogues who put us on this path, promising something for nothing year in and year out. Paul Ryan deserves our gratitude for biting the bullet at last. The ball is now in the court of the demagogues.

Congressman Ryan’s Budget Is a Big Step in the Right Direction

The chairman of the House Budget Committee, Rep. Paul Ryan of Wisconsin, will unveil his FY2012 budget tomorrow. Not all the details are public yet, but what we do know is very encouraging.

Ryan’s plan is a broad reform package, including limits on so-called discretionary spending, limits on excessive pay for federal bureaucrats, and steep reductions in corporate welfare.

But the two most exciting parts are entitlement reform and tax reform. Ryan’s proposals would simultaneously address the long-run threat of bloated government and put in place tax policies that will boost growth and improve competitiveness.

  1. The long-run fiscal threat to America is entitlement spending. Ryan’s plan will address this crisis by block-granting Medicaid to the states (repeating the success of the welfare reform legislation of the 1990s) and transforming Medicare for future retirees into a “premium-support” plan (similar to what was proposed as part of the bipartisan Domenici-Rivlin Debt Reduction Task Force).
  2. America’s tax system is a complicated disgrace that manages to both undermine growth and promote corruption. The answer is a simple and fair flat tax, and Ryan’s plan will take an important step in that direction with lower tax rates, less double taxation of saving and investment, and fewer distorting loopholes.

One potential criticism is that the plan reportedly will not balance the budget within 10 years, at least based on the antiquated and inaccurate scoring systems used by the Congressional Budget Office and Joint Committee on Taxation. While I would prefer more spending reductions, I’m not overly fixated on getting to balance with 10 years.

What matters most is “bending the cost curve” of government. Obama’s budget leaves government on auto-pilot and leaves America on a path to becoming a decrepit European-style welfare state. Ryan’s budget, by contrast, would shrink the burden of federal spending relative to the productive sector of the economy.

Along with other Cato colleagues, I’ll have more analysis of the plan when it is officially released.

Why Ryan-Rivlin Beats ObamaCare on Costs — and Spending

Washington Post blogger Ezra Klein asks of Rep. Paul Ryan’s (R-Wisc.) Medicare voucher proposal (co-authored with former Congressional Budget Office director Alice Rivlin):

Why are the cost savings in his bill possible, while the cost savings in the Affordable Care Act aren’t?…when it comes to the ACA, Ryan firmly believes that seniors will quickly and successfully force Congress to reverse any reforms that degrade their Medicare experience. That’s a fair enough concern, of course. What’s confusing is why it isn’t doubly devastating when applied to Ryan-Rivlin.

Set aside that Klein violates Cannon’s First Rule of Economic Literacy: Never say costs when you mean spending.  And that he uses the word “affordable” to describe ObamaCare.

There are two reasons why the Medicare spending restraints in the Ryan-Rivlin proposal are more likely to hold than those in ObamaCare.

First, ObamaCare’s restraints amount to nothing more than ratcheting down the price controls that traditional Medicare uses to pay health care providers.  Structuring Medicare subsidies in this way – setting the prices that Medicare pays specific providers – makes it very difficult to lower those prices, because the system itself creates huge incentives for providers to organize and lobby to undo those restraints.  As I explain more fully in this op-ed from September 2010, Medicare vouchers would change that lobbying game by reducing the incentives for provider groups to expend resources in the pursuit of higher Medicare spending.  That gives the Ryan-Rivlin restraints a much better shot at surviving.  (Seriously, it’s a pretty cool feature.)

Second, Klein predicts a backlash against Medicare vouchers because he says it amounts to “giving seniors less money to purchase more expensive private insurance.”  The notion that Medicare is less costly than private insurance is pure, uninformed nonsense.  Medicare and a “public option” are attractive to the Left precisely because such programs hide the full cost of their operations from enrollees and taxpayers.  It is a virtue of vouchers that they would reveal to Medicare enrollees the actual prices of the coverage and services they demand, because that information will spur enrollees to be more cost-conscious when selecting a health plan and consuming medical services.  That, in turn, will force insurers and providers to compete on the basis of cost to a degree never before seen in this nation, competition that will generate the sort of cost-saving innovations that Jim Capretta discusses here.

Both of these reasons boil down to the truism that nobody spends other people’s money as carefully as they spend their own.  We’ll make a lot of progress in this country when the Left realizes how much damage they’ve done by ignoring that truism.

Cato Live Blog of President Obama’s 2011 State of the Union Address and GOP Response

Please join us at 9:00pm Eastern on Tuesday, January 25, 2011 for live commentary during President Obama’s State of the Union address and the response given by House Budget Chairman Paul Ryan (R-Wisc.). Here is our panel of expert bloggers (click each name for their respective Cato@Liberty archives):

Other Cato scholars may also be contributing.

Come back to this page at 9:00pm Eastern on Tuesday, January 25, 2011 to join us–we look forward to having you, and to sharing our insights with you.

Also, don’t forget to tune into our Facebook page immediately following this live blogging event for live video reaction to the speeches from Vice President Gene Healy and Research Fellow Julian Sanchez.