Ryanomics: Radical, Otherworldly

Ryanomics: Radical, Otherworldly

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Just after the Republican electoral blow-out last November, I asked one of my colleagues, a former Republican member of Congress, what he thought the new House majority would do with its power. His answer was: “Overreach. The Democrats did it. So will we.” The budget plan introduced by Republican Paul Ryan has confirmed the prescience of that answer. It is hard to overstate how radical, almost otherworldly, this plan is.

• Spending on everything the government does, other than Social Security, Medicare, and Medicaid—national defense, housing, education, agriculture, the environment, veterans, and all else— would be reduced by 2050 to a smaller share of output than in any year since the administration of Herbert Hoover, a time when the federal government spent little on the military, education, housing, or other domestic functions.

• The share of health care spending for which Medicare enrollees would be responsible would more than double by 2030. This added burden would not be in the name of cost reducing cost, as the plan would move people into private plans that the Congressional Budget Office estimates would cost from 44 to 67 percent more than the traditional Medicare program. After 2022, people turning age 65 would be barred from traditional Medicare.

• Medicaid grants to the states would be cut by roughly half by 2035, relative to projections under current law. Furthermore, the grants would not be increased however much enrollments might rise during recessions or health emergencies.

• The 32 million Americans currently without health insurance who are slated to become insured under the Affordable Care Act in 2014 would remain uninsured, boosting the total number of people without health insurance to an all-time high estimated be well in excess of 50 million.

Were all of the savings from these remarkably large spending cuts devoted to reducing the deficit, one might still criticize the plan. Most members—Republican and Democrat—of all the commissions that have recently put forward plans to close the deficit have relied on both spending cuts and tax increases, so as to minimize the damage to vulnerable members of society from cuts in spending that provides them with health care, food, housing, and other essentials. These would-be deficit-cutters have agreed that while deficit reduction is vital and that spending should be lowered, taxes need to be part of the plan.

Not so with Ryan. His plan actually cuts tax cuts, thereby requiring even larger spending reductions than would otherwise be necessary. Except for one telling detail, Ryan did not reveal just whose taxes should be cut or by how much. His reticence probably expressed deference to the tax writing Ways and Means committee with which responsibility for tax legislation resides. But he was explicit on one provision—the marginal tax rate that applies to America’s highest income families, those with incomes, after deductions and exemptions, of at least $375,000, should be cut from the current 39.6 percent to a maximum of 25 percent.

Ryan’s budget plan promises to play a large part not only in this year’s Congressional debate, but also to influence the terms of the 2012 Congressional campaigns. House Republicans this year will have to indicate where they stand on the specific provisions of the Ryan plan. If they back away from them, they may well face primary challenges in 2012 from members of the Tea Party faction or from other conservatives who believe on principle in repealing or shrinking progressive legislation enacted during the New Deal, the Great Society, and more recently. If they embrace the Ryan plan, President Obama and Democratic candidates for lower office will be in a position to offer voters the clearest choices on domestic policy that they have faced in decades.

Henry J. Aaron is the Bruce and Virginia MacLaury Senior Fellow at The Brookings Institution.  The views expressed are his own. 

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