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Paul Ryan’s Dilemma

March 14th, 2011 . by economistmom

ryan-and-budget

Today the Concord Coalition released this issue brief on the challenges confronting House Budget Committee chairman Paul Ryan.  The bind that Republicans are now in is that, despite having complained about the fiscally-irresponsible Democrats’ health reform bill which they claimed was a “jobs killing” and “deficit increasing” one, now few if any of them–now that they’re in charge–seem willing to come up with their own specific proposals to actually cut Medicare spending.  (Another “bind” they’re in relates to the No New Taxes pledge–also inconsistent with deficit reduction despite what Grover Norquist likes to rant about.)

The Republicans’ bind over health reform reminds me of the bind that the Obama Administration and congressional Democrats got themselves into over the “fiscally-irresponsible” Bush tax cuts that they argued were responsible for the huge deterioration in the budget outlook. Once those Democrats were put in charge, we quickly realized that even they weren’t actually willing to let go of those fiscally-irresponsible (then-)Bush(-now-Obama) tax cuts.

So what kind of budget would Ryan need to write that would honor his stated commitment to deficit reduction?  As the Concord issue brief concludes (emphasis added):

So the dilemma is plain. A budget that uses honest numbers and reflects Republicans’ current policy preferences will result in large continuing deficits with growing debt and growing interest costs. On the other hand, a budget that shows greater progress on reducing the deficit will, of necessity, require an openness to changes that Republicans have been reluctant to put in play such as defense cuts, revenue increases and entitlement reforms that could affect current beneficiaries.

Ideally, the Republicans will take this second route — acknowledging the unpleasant realities of the federal budget and presenting the serious and specific fiscal reform plan that they have promised the American public.

A good place to start would be to give closer consideration to the recommendations of the bipartisan Bowles-Simpson and Rivlin-Domenici commissions. They put everything on the table, including defense cuts and tax reforms that increase revenues by limiting tax “entitlements” — federal subsidies administered through the tax code. The commissions also include savings from Social Security and Medicare reform, but for those programs the focus must be on cumulative savings stretching beyond the 10-year window.

Republicans have criticized the President for failing to incorporate more of the policy recommendations of his own fiscal commission in his proposed budget. The question now is whether they will do any better.

In fact, the greatest area of overlap between the Obama Administration’s budget and the Republican budget is likely to be their common lack of any of the most fundamental and significant solutions as recommended by any of the fiscal commissions/task forces/study groups.

7 Responses to “Paul Ryan’s Dilemma”

  1. comment number 1 by: Gipper

    Simpson-Bowles would represent a short-term tax rate increase, but a long-term tax-rate decrease compared to the rates that would be in place once the current extension expires.

    I wish Ryan would make that case to his base. Adopt Simpson-Bowles, increase revenue, while coupling that with massive spending cuts and wholesale elimination of Departments of HUD, HHS, Agriculture, Labor, Commerce, Education, and Energy. Devolve those programs to the states and clean up the federal budget.

    Left behind would be Defense, State, Justice, Courts, Medicare, Social Security, FAA and other health and safety functions.

    Entitlements will have to be cut, but if there isn’t the will to eliminate programs that have no compelling reason to moved from state to federal level, then we won’t be able to do the really, really hard task of cutting entitlements.

    Even with all those departments eliminated, it’s going to be really difficult to balance the federal budget in 20 years. We should place as many programs at the state level where fiscal responsibility must reign in the absence of the Federal Reserve lifeline.

  2. comment number 2 by: AMTbuff

    Bowles-Simpson and Rivlin-Domenici did not put health care spending on the table in any meaningful way. Ryan put it on the table but hid it under the tablecloth. Major cuts in Medicare are not optional, and Bowles-Simpson and Rivlin-Domenici perpetuate the belief that such cuts can be avoided.

    Health care spending on seniors needs to be reduced. The choices are severe rationing by government, severe rationing by insurance companies, or rationing by price with patients paying directly. These are all distasteful, but there are no other viable options.

    Until the health care spending issue is addressed, it’s all just a waste of time and effort.

  3. comment number 3 by: Gipper

    AMTbuff:
    Agreed that in the long-run you are correct. But over the next 10 years, a lot of things can be done to trim federal spending.

    Social Security and Medicare cannot be shifted to the state level. However, Medicaid, and almost all departments except Defense, State, and Justice can be moved to the state level where budgets have to be balanced.

    There is a fourth way on healthcare. Make Medicare tax rates contingent upon results of annual testing of health indicators like body fat pct., blood pressure, cholesterol, and nicotine. If people could pay less taxes if they were more healthy, then we could significantly bend the cost curve. Short of huge changes in nutritional and exercise practices by the population, costs will not decrease much. Rationing by waiting in line (ala the UK) only hide the accounting costs, not the economic costs of poor health.

  4. comment number 4 by: AMTbuff

    Benefit promises need to be broken now, not 10 years from now. To break these promises dramatically with zero warning, as will occur during a crisis, is cruel. That outcome would serve only those who wish to discredit the concept of the welfare state regardless of the human cost.

    Of all the welfare state benefits, Obamacare and Medicare are the most recent and the least essential to the truly poor. That’s where promises need to be broken right now. Timid steps that avoid the root of the problem are useless, and I include Bowles-Simpson and Rivlin-Domenici in that category.

  5. comment number 5 by: Jesse

    Paul Ryan is a hypocrite, another career politician. Now he cares about fiscal discipline but under Bush he voted to increase spending and approved of all the budget deficits. He’s just another Republican hypocrite.

  6. comment number 6 by: Gipper

    Jesse,
    And Obama’s a hypocrite because while he was a Senator he opposed raising the debt ceiling. But now as President, he’s threatening an unnecessary government shutdown if the debt ceiling isn’t increased.
    So we’re left with a town full of hypocrites. What do you suggest we do, now?

  7. comment number 7 by: Jesse

    Gipper,

    I suggest we start limiting the size and role of Government. We don’t need a huge Federal Government that imposes all kinds of rules and regulation. There’s so much waste and no reason that States shouldn’t be able to set their own laws (without having the Fed overturn them by enforcing Federal laws). I believe that the US would be much better off if we’d have limited Constitutional Government at the Federal level and allow people to vote for their policies at the Fed level. There are people in Congress that warned of the housing demise, warned for having various big Government policies in place, warned about the military industrial complex with its record war hungry spending, etc. etc. But those people are ignored as everybody wants more of the Federal Government. And so we’ve reached a couple trillion dollars of yearly deficit spending…I suggest that people no longer support hypocrites and those that love to deficit spend, so let’s remove 99% of politicians from office.