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Friday, February 12, 2010  

The Ryan Roadmap, A Little Late

More than a few liberals were surprised when last year's comical House Republican shadow "budget" emerged from its cocoon looking like a fully-fledged alternative to the Democratic version. At first glance it was exactly the sort of thing the right needs to offer: restructuring the tax code to be less progressive, massive real-term cuts in domestic spending, partial privatization of Social Security for people under 55, and changing Medicare from a system of guaranteed care into a system of vouchers to buy private insurance.

I won't bother explaining why I think all of these things are wrong. At some level these are philosophical questions. Either there are legitimate and necessary functions that the federal government must undertake (and thus be funded to undertake) or there aren't. Either you think poor people should pay a larger share of their income as taxes than rich people, or you think the opposite. We went through Social Security privatization in 2005 and there are no new arguments, after a historic stock-market decline, in its favor. Paul Ryan and not a few Republicans have pretty decided views on these things that I don't share and there is no prospect for agreement between someone with my views and someone with theirs.

Where the proposal caught people's eye most dramatically was in its Medicare proposal. What Ryan is proposing is leaving the current program in place for everyone 55 and older (a cynic would point out that this is the cohort likeliest to vote Republican, and people love them their Medicare) but turning it into a system of vouchers for everyone else. The vouchers would start at an average of $11,000, adjustable, apparently, for risk factors and income ($11,000 being the per-patient cost of Medicare right now). These vouchers would grow at a rate pegged to a point between the Consumer Price Index and the health care inflation index (which is always substantially higher).

A retiree can then take that voucher and pay it to a private insurance company in order to secure their care. The slow rate of voucher growth, the argument goes, would create an incentive to hold the line on costs. The Medicare eligibility age would also gradually rise to 69.5 years.

Critics have pointed out that private insurers 1) take a profit, 2) have higher administrative costs than Medicare, and 3) pay higher reimbursements to providers. This means that what $11,000 buys you as a Medicare recipient is much more than what it buys you as a person on the individual insurance market. Moreover, the whole reason we have Medicare as a guaranteed single-payer program is that the individual insurance market doesn't work that well for a lot of groups and it works terribly for the elderly. I gather that Ryan proposes to regulate the insurers so that all conditions will be covered and there will be no cherry-picking of clients--which is precisely what Democrats have proposed doing with the private insurance market generally, as it happens--but that vitiates any efficiencies private insurers are supposed to provide.

Still further, the plan does not seem to have a backstop for vouchers that get exhausted. Personal savings would next be on the block, and then Medicaid. But ultimately the logic of privatizing a program like Medicare presumes that either charity care will cover the costs of the worst-off or that society will just allow people to suffer and die for lack of adequate treatment.

This is what some people have insisted on seeing as courage in the Ryan plan: Paul Ryan is so courageous that he is willing to let the elderly poor go without care in order to save the long-term budget. Ross Douthat has his doubts about the politics of it, but he tells liberals they have to step up to the plate of political manliness and tell America what they're willing to do to fix the budget. Then it turns out that the CBO projections Ryan requested for his plan assumed no reduction in revenue from his tax cuts! And it also isn't a budget. So we are asked to take all this tough grown-up David Broder medicine without a reasonable assurance that it will meet the plan's own fiscal goals.

It should be pretty clear at this point just how such a plan would fare were the GOP ever in a position to implement it. We've seen it before.

1) Tax cuts for corporations and wealthy individuals are implemented first
2) Benefit cuts are implemented never
3) Ballot initiatives on cloning and bestiality
4) Victory!
5) ???
6) Defeat!
7) Complain about Democratic deficits.

Any program of conservative governance seems doomed to swirl down a Bush-era drain of short-term political expediency until some acceptance that tax cuts are a bad idea for a country with ballooning fiscal obligations takes hold. Tax reform--broadening the tax base in order to lower rates--is a good idea, but cutting actual revenue is a bad one for the simple reason that the needed spending cuts don't seem to materialize. When evaluating a comprehensive policy, it's important to key your expectations to its easiest, rather than its hardest, components. Mandating coverage of pre-existing conditions polls well and has a lot of notional support in Congress, but it has the unfortunate effect of accelerating already high premium increases. So it needs to be paired with some kind of mandate to cram more healthy people onto the insurance rolls. And so on. Handing out goodies is politically easy; paying for them is hard.

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posted by Benjamin Dueholm | 10:33 AM
Comments:
On one day you tell me that reducing the deficit isn't really important as long as we increase GDP faster than we increase the deficit...the next day you argue that we need to raise taxes (or at least not cut taxes) to handle our "ballooning fiscal obligations."

So should we care about the deficit or not? You need to make up your mind, and either spend into oblivion or start standing up with fiscal conservatives and take a hard line against deficit spending.

Obviously raising taxes would be near-impossible, and not-cutting-taxes very often makes a career politician into a retired politician. So consider that Ryan may in fact be doing what he can to help Republicans get reelected...its not like every campaign promise Mr. Obama made was plausible or achievable. But I voted for him based on the character he had. The same may go for many Republican voters come November...they may know deep down that health care is an unsolvable quagmire and that Ryan's plan is not especially plausible, but they'll admire Ryan's character, and/or that of some of his colleagues, and vote for them.
 
I must not have been clear on my thinking about deficits:

1) Short-term deficits do not matter. This is just true. A one-year spike in the deficit because of a revenue shock or a war or something is not in itself a problem

2) Public debt that grows more slowly than the economy as a whole is not really a problem, because what keeps a country, like a household, solvent is its ratio of debt to assets.

3) Public debt that grows faster than GDP over the long term is a very bad thing. This is what the current policy has in store for us.

So we need more revenue and we need to reduce the rate of increase in our expenditures. This will require raising taxes, by hook or by crook, and it will require modifying our entitlement programs (as both HCR bills start doing). Simply gutting the safety net will not get the job done, especially if Paul Ryan and his co-partisans want to grease the wheels by cutting taxes for the wealthy.
 
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