Tag: paul ryan

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.


Bending the Cost Curve: Ryan’s Roadmap Would Succeed Where ObamaCare Fails

From my oped in today’s Investors Business Daily:

Rep. Paul Ryan’s (R-Wis.) “Roadmap for America’s Future” proposes even tighter limits on Medicare’s growth, leading columnist Bruce Bartlett to opine, “the Medicare actuaries have shown the absurdity of the Ryan plan by denying that Medicare cuts already enacted into law are even worthy of projecting into the future.”

On the contrary, experience and public choice theory suggest that the Ryan plan has a better shot at reducing future Medicare outlays than past efforts, because the Roadmap would change the lobbying game that fuels Medicare’s growth.

For more on Ryan’s Roadmap, click here.  For more on Medicare, read David Hyman’s Medicare Meets Mephistopheles.  For more on public choice economics, click here.

Economics 101

Today POLITICO Arena asks:

In his speech in Ohio yesterday, did President Obama draw a stark enough contrast with House Minority Leader John Boehner, whom he attacked by name eight times, to help his party in November?

My response:

The contrast the president drew was clear enough. His problem is that the people aren’t buying what he’s selling – and for good reason. His ideas, far from being new, have been tried countless times, both here and abroad. They don’t work. And they undermine basic American principles about individual liberty and free choice.

So when Obama says that Boehner and the Republicans have no new ideas, he’s partly right. (They have new ideas about how to address unsustainable entitlement programs – ask Rep. Paul Ryan.) At least in their rhetoric – their behavior in office, alas, is too often another matter – Republicans stand in substantial part for old ideas that work and conform more closely to the nation’s first principles, starting with lower taxes, less regulation, and less government management of the economy. That contrasts sharply with Obama’s countless “programs” to “stimulate” the economy, his targeted tax and spending schemes to create “green jobs,” to sell cars, and on and on. Listening to him, you’d think the economy would collapse were it not for Washington’s management of it.

The truth is quite the opposite, of course, as Americans are coming increasingly to appreciate. Economies prosper when entrepreneurs with ideas and capital are able to employ both for profit. But they won’t do that when conditions are uncertain, as they are when government meddles recklessly and uncertainly at every turn. How often have we heard entrepreneurs in recent months saying that they’d like to hire more people, but with the uncertainty of ObamaCare and so much else coming out of Washington, they’re sitting on their capital? And who can blame them?

So the answer is, get out of their way and let them do what they do best. But that’s not the Obama way. This “community organizer” – who organized people to demand more from government – seems to have no grasp of how economies work, beyond the failed command-and-control model. Even Fidel Castro has just now admitted that a government run economy doesn’t work. So either Obama smells the coffee coming now even from Cuba, or elections will take care of the matter.

Paul Ryan’s Roadmap, and the Difference between Costs and Spending

Rep. Paul Ryan (R-WI) ably defends his “Roadmap for America’s Future” in today’s Washington Post.  He doesn’t mention Paul Krugman’s attacks thereon, nor should he.  (To read why, consult The Atlantic’s Megan McArdle and Ted Gayer of the Tax Policy Center.)

I haven’t officially weighed in on the health-care aspects of the Roadmap, but hope to do so in the near future.  For the moment, I’ll use Ryan’s oped to stress a distinction that is crucial to thinking clearly about health care costs.

Ryan writes of the dangers of an un-reformed Medicare program (emphasis added):

Under an ever-expansive, all-consuming central government, costs will be contained with Washington’s heavy hand imposing price controls, slashing benefits and arbitrarily rationing seniors’ care.

While those forms of government rationing may reduce spending, that’s not the same as reducing costs.  On the contrary, those rationing measures may increase health care costs.

Suppose Medicare set its prices for hip and knee replacements so low that no medical-device manufacturer would provide the hardware and no surgeon would perform the procedures.  Medicare spending on hip and knee replacements would fall.  But costs may rise: more seniors would be walking around — or not walking around — in severe pain.  Pain and reduced mobility are costs, even if they don’t show up in the federal budget or household budgets.  (Indeed, those costs would be so severe that overall Medicare spending could rise as seniors bought more wheelchairs, sought treatment for pressure sores, etc.).  This is the main reason conservatives criticize Canada’s Medicare system and the British National Health Service: reducing health care spending often increases costs.

I therefore request universal compliance with Cannon’s First Rule of Economic Literacy: Never say costs when you mean spending.

‘YouCut’ Spending by 0.017%

House Republicans unveiled a bold strategy to cut 0.017 percent from the $3.7 trillion federal budget this week. Republican Whip Eric Cantor unveiled the GOP’s “YouCut” website, which includes five possible spending cuts for citizens to vote on. Mr. Cantor promised to take the favored cut to the House floor next week for members to consider.

The basic idea of YouCut is a good one — getting citizens actively involved in solving the government’s giant deficit problem and focusing congressional attention on cutting the bloated budget.

But the GOP leadership make themselves look silly by offering such small cuts. The suggested cuts on the new website average just $638 million in annual savings, which is just 0.017 percent of total federal spending. Put another way, it is just $1 of cuts for every $5,800 of federal spending. The average YouCut savings idea is just 0.04 percent of this year’s federal deficit of $1.6 trillion. So we would need 2,500 cuts of this size to balance the budget.

It’s a mystery why the Republican leadership can’t offer more than tiny spending reforms. They’ve got lots of sharp staffers who know how wasteful many large programs are and understand the need to terminate whole agencies. It’s true that YouCut will offer new cuts every week, but so far the cuts are very timid.

The second-largest YouCut idea this week is to refocus “community development” spending on those cities that are the most needy. But the whole idea of the federal government spending money on local projects such as parking lots is both economically absurd and an obvious violation of the Tenth Amendment.

Come on Republicans, you can do better. Terminating all of HUD’s $13 billion in annual community development spending, for example, ought to be an easy vote for any member claiming to be a fiscal conservative.  

Some Republicans do understand the nation’s fiscal emergency and the need for bold action. Paul Ryan, for example, has his excellent roadmap proposal. But thus far with YouCut, we have the Empire State Building engulfed in flames and Mr. Cantor sending in a toddler with a squirt gun to solve the problem.

Still, the House Republicans have created a tool that citizens can use to get the message across about the need for much larger reforms. The YouCut website encourages people to send in their own budget-cutting ideas. I’ll be sending some in, and folks, feel free to borrow ideas from the “Spending Cut” tables on www.downsizinggovernment.org.  

I don’t think conservative voters, tea party activists, and other citizens concerned about the nation’s economic future want to cut 0.017 percent from the budget. I think they want to cut 10 percent, 20 percent, 30 percent, or more. So send your suggestions into YouCut, and we will see whether the GOP puts away the squirt guns and pulls out the fire hoses.

The Four Congressmen of the Cotton Subsidy Apocalypse?

Yet another show of that rare commodity, bipartisan efforts to reduce the size of government today. Four members of the House—two Republican and two Democrat—have sent a letter to President Obama, calling on him to reverse the insane policy of bribing Brazilian farmers with subsidies in an attempt to correct, in accordance with the perverse two-wrongs-make-a-right school of logic, for  illegal U.S. subsidies. (There were other questionable parts of the deal with Brazil).

Barney Frank (D, MA), Ron Kind (D, WI), Paul Ryan (R, WI) and Jeff Flake (R, AZ) make compelling arguments for finding a better and more permanent  solution to the dispute than the current (dodgy) deal with Brazil, including arguments about fiscal responsibility, the adverse effects of distorting markets in this way, and the implications for the U.S. economy of continuing to operate the cotton program in its current form.

They also cleverly allude to President Obama’s emphasis on enforcement in his trade policy, pointing out that enforcement runs two ways:

Should we fail to effectively reform [the cotton] program now, American businesses and workers wil pay the price because we refused to write a law that complies with our international obligations. We cannot expect our trading partners to play by the rules if we are not willing to do the same. [emphasis added]

The press release from Rep. Flake’s office contains some great quotes, too. Flake, for example, says, “This proposal takes our federal farm subsidy policy from the impractical to the absurd.” 

But I’ll give the last word to Rep. Frank, who has this gem to offer:

[T]he Obama administration apparently feels compelled to preserve our right to subsidize American cotton farmers by extending that subsidy to Brazilian cotton farmers.  People looking for an illustration of the meaning of the phrase, ‘from bad to worse,’ need look no further.