Today POLITICO Arena asks:
Paul Ryan’s budget — hard‐headed fiscal sanity or inhumane?
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.
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.
- 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).
- 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.
Speaking to some 500 libertarian students at the International Students for Liberty Conference last weekend, Cato adjunct scholar Tyler Cowen noted:
Rep. Paul Ryan gave an alternative State of the Union address without mentioning Social Security or Medicare. That’s like discussing the Miami Heat without mentioning LeBron James, Dwayne Wade, or Chris Bosh.
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.
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):
- Director of Information Policy Studies Jim Harper
- Trade Policy Analyst Sallie James
- Director of Health Policy Studies Michael F. Cannon
- Senior Fellow Daniel J. Mitchell
- Director of the Center for Educational Freedom Andrew J. Coulson
- Research Fellow in Defense and Homeland Security Studies Benjamin H. Friedman
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.
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.
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?
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.