Rep. Paul Ryan (R-WI), the architect of the Republican’s new budget proposal, is courageous in one sense. By proposing to privatize Medicare and reduce Medicare benefits, he is risking his political career. But while he may be serious about cutting Medicare, that doesn’t mean his proposal represents an even vaguely serious attempt to reduce the budget deficit.
Ryan’s program doesn’t actually address the rising costs of providing health care. It simply reduces the amount of health care the government will help provide through the program. Ryan suggests that painful cuts like this are necessary because the country’s rising debt burden means it can no longer afford to spend as much money on health care for older Americans.
That sounds plausible enough. But Ryan thinks at the same time that the country can afford to lower the top individual and corporate tax rates from 35% to 25%. In other words, Ryan wants to eliminate benefits to people who have spent their lives paying into the Medicare system while lowering the tax rate on the rich to its lowest level since 1931—even though what we pay in taxes is already both historically low and low compared to the rest of the developed world, and even though the rich have been getting a steadily larger share of our national income for the last thirty years.
In fact, according to a Center on Budget and Policy Priorities analysis, two-thirds of the cost savings in Ryan’s plan from cutting programs for lower-income Americans. And instead of using those savings to pay down the deficit, Ryan passes much of the money on to wealthy Americans in the form of various tax breaks. In other words, instead of using the money he cuts to reduce the deficit, Ryan's plan simply transfers it from the poor to the rich.
So how can Ryan claim that his plan would reduce the deficit $4 trillion? Ryan assures us that, even though he plans to cut taxes on the rich, overall tax revenues will somehow stay the same. That presumably implies either that he will raise taxes for the rest of us or that lowering taxes on the rich will improve the economy so much that it will actually increase revenues by billions of dollars. That supply-side idea that lowering the tax rate would increase tax revenue, of course, is the same one that wrongly suggested that an economic boom would follow the Bush tax cuts.
Ryan’s plan is built in any case on wildly implausible projections that lowering taxes will bring about unprecedented prosperity, with unemployment quickly falling well below what economists call its “natural rate” to levels not seen since we drafted men to fight in the Korean War. At the same the Ryan plan would somehow—he doesn’t say how—reduce spending on defense and all discretionary programs to just 3.5% of GDP. As Paul Krugman points out, that’s a level not seen since the Coolidge administration, before the National Security Act had created a permanent military establishment. It’s less than half what we’ve spent on that category every year since WWII, and less than what we currently spend on defense alone. In other words, unless we essentially dismantle the military, Ryan’s plan would essentially mean the end of discretionary federal spending entirely.
The reason Ryan has to gut the budget, of course, is that he insists on continuing to lower taxes even on the wealthy. As Steve Benen says, that—and not deficit reduction—is the real point of the plan. In fact, as Ezra Klein has pointed out, the truth is that we could cut the deficit almost in half simply by repealing the Bush tax cuts that were extended in December—simply by paying, in other words, the same reasonable amount of taxes that we did during the Clinton administration.
Photo credit: Gage Skidmore