Guest Post: The RJs Aggregator – The Ryan Plan
House Republicans Propose $4 Trillion in Cuts Over Decade – “House Republicans plan this week to propose more than $4 trillion in federal spending reductions over the next decade by reshaping popular programs like Medicare1, the Budget Committee chairman said Sunday in opening a new front in the intensifying budget wars2. Appearing on “Fox News Sunday,” the chairman, Representative Paul D. Ryan3 of Wisconsin, also said Republicans would call for strict caps on all government spending that would require cuts to take effect whenever Congress exceeded those limits. “We are going to put out a plan that gets our debt on a downward trajectory and gets us to a point of giving our next generation a debt-free nation,””
The Republican budget: Praising Congressman Ryan – The Economist – “BARACK OBAMA, as we unhappily noted when he produced his budget in February, has no credible plan for getting America’s runaway budget deficit under control. Up to now the Republicans have been just as useless; they have confined themselves to provoking a probable government shutdown in pursuit of a fantasy war against the non-security discretionary expenditures that make up only an eighth of the total budget, rather than tackling the long-term problem posed by the escalating costs of entitlements. Now that has changed. On April 5th Paul Ryan, the young chairman of the House Budget Committee, laid out a brave counter-proposal for next year’s budget and beyond (see article)—brave both in identifying the scope of the problem and in proposing the kind of deeply unpopular medicine that will be needed to cope with it. It is far from perfect; but it is the first sign of courage from someone with actual power over the budget.”
Paul Ryan To Boldly Take On Big Poor – “You know how you have been reading for weeks and weeks about how the bold Republican budget, crafted by Prince of Boldness Paul Ryan, will boldly address the deficit problem that President Obama refuses to address? . First, reports the Hill, Ryan will not touch Social Security, which is immensely popular with the middle class. Second, reports Politico, he will take a huge whack out of Medicaid, which primarily benefits the poor: Budget Committee Chairman Paul Ryan has made clear to POLITICO in February that he intends to target Medicaid and Medicare for savings. While Medicaid is easiest to win consensus on, Medicare is the biggest debt driver. I love the part about how Medicaid the the “easiest to win consensus on.” Why is that? Because it’s wasteful? No, Medicaid is super-cheap — so cheap the program routinely has trouble finding doctors willing to accept it. It’s easiest to win consensus on because its beneficiaries have the least political power.”
What Paul Ryan’s budget actually does – “Paul Ryan’s plan for Medicare and Paul Ryan’s plan for Medicaid rely on the same bait-and-switch: They use a reform to disguise a cut. In Medicare’s case, the reform is privatization. The current Medicare program would be dissolved and the next generation of seniors would choose from Medicare-certified private plans on an exchange. But that wouldn’t save money. In fact, it would cost money. As the Congressional Budget Office has said (pdf), since Medicare is cheaper than private insurance, beneficiaries will see “higher premiums in the private market for a package of benefits similar to that currently provided by Medicare.” In Medicaid’s case, the reform is block-granting. Right now, the federal government shares Medicaid costs with the states. That means their payments increase or decrease with Medicaid’s actual rate of spending. Under a block grant system, that’d stop. They’d simply give states a lump sum at the beginning of the year and that’d have to suffice. And if a recession hits and more people need Medicaid or a nasty flu descends and lots of disabled beneficiaries end up in the hospital with pneumonia? Too bad.”
Moment of Blather – “David Brooks’s commentary on Paul Ryan’s “budget proposal” is entitled “Moment of Truth.” Brooks falls over himself gushing about his new man-crush, calling it “the most comprehensive and most courageous budget reform proposal any of us have seen in our lifetimes.” “Ryan is expected to leap into the vacuum left by the president’s passivity,” he continues. Gag me. First of all, Ryan’s plan is not “comprehensive” by any stretch of the imagination. Ryan’s plan does limit taxes to 19 percent of GDP and outlays to 14.75 percent of GDP by by 2050, producing a huge surplus. How does he achieve this budgetary miracle? In part, he does it by waving his magic wand. This is what the CBO has to say (emphasis added):“The proposal specifies a path for all other spending [other than Medicare, Medicaid, and Social Security] (excluding interest) that would cause such spending to decline sharply as a share of GDP—from 12 percent in 2010 to 6 percent in 2022 and 3½ percent by 2050; the proposal does not specify the changes to government programs that might be made in order to produce that path.”“
Rivlin: ‘I don’t support the version of Medicare premium support in the the Ryan plan’ – Ezra Klein – ““Alice Rivlin and I designed these Medicare and Medicaid reforms,” Paul Ryan said on “Morning Joe” yesterday. “Alice Rivlin was Clinton’s OMB director… she’s a proud Democrat at the Brookings institution. These entitlement reforms are based off of those models that she and I worked on together.” But Rivlin — who is all that Ryan says she is, in addition to a former vice chair of the Federal Reserve — is not supporting the reforms as written in Ryan’s budget. I spoke with her this morning to ask why. A lightly edited transcript of our conversation follows.”
Generational Divide Colors Debate Over Medicare’s Future – “The Republican budget released on Tuesday1 is a daring one in many ways. Above all, it would replace the current Medicare2 with a system of private health insurance plans subsidized by the government. Whether you like3 or loathe that idea4, it would undeniably reduce Medicare’s long-term funding gap — which is by far the biggest source of looming federal deficits. Yet there is at least one big way in which the plan isn’t daring at all. It asks for a whole lot of sacrifice from everyone under the age of 55 and little from everyone 55 and over. Representative Paul Ryan5, the Wisconsin Republican who wrote the plan, calls the budget deficit an “existential threat” to the United States. Then he absolves more than one-third of all adults from responsibility in dealing with that threat.”
The cost of Medicaid savings – “Already Rep. Ryan’s budget plan has received a lot of attention. By now you well know that one way it aims to save money is by turning Medicaid into a state block grant program. It is important to recognize that there is a cost to those savings: worse health for low-income individuals. Yet some proponents of Medicaid cuts deny this cost, citing evidence that does not support their case. In a NEJM paper by Harold Pollack, Uwe Reinhardt, and two of us (Austin and Aaron) that published today at 5PM, we emphasize just that. It’s short and ungated, so please read it. In it, we press those who claim Medicaid is worse for health than being uninsured to cough up their causal theory as to how this could be the case.”
Medicaid Savings in Ryan’s Plan Would Come At the Expense of the Poor » “The “Path to Prosperity” budget proposed by House Budget Committee Chairman Paul Ryan (R-WI), includes a plan to revamp Medicaid —which currently provides federal funding to states on an “as-needed” basis to help cover the health care costs of the poor and disabled—into a block grant program. This one initiative alone, according to the budget bill’s supporters, would save $750 billion over ten years. There is little in Ryan’s budget proposal to support just where these savings will come from, but it’s easy to imagine that state caps on Medicaid enrollment, cuts in covered benefits and lowered physician reimbursement, along with an increase in co-pays for beneficiaries will all play an essential role.”
Death Panels are starting to sound awfully good right about now – “Jill – Think about it: How would you rather check out of this God-forsaken level of reality? Would you rather be in a warm bed somewhere, perhaps lying on sheets nice and warm out of the dryer, with the sun streaming in your window and soft music playing into your room, perhaps with the aroma of peppermint, or fresh bread, or whatever your favorite aroma might be, while a doctor slips a needle into your arm and you wooze into a delightful drowsiness and then unconsciousness, and then another needle containing the drug that stops your heart is administered…or would you prefer to die out in the street, old, sick, and alone, huddling from a bitter wind, because you have no home, no shelter, no food, and no medical care? I know which one I’d take. But it’s hard to imagine that the GOP will be kind and compassionate enough to offer the elderly the first one, not if the current House majority gets its way: House Republicans are preparing to introduce a 10-year budget Tuesday that will eliminate Medicare and replace it with a private insurance system that closely resembles the new health care law, and end Medicaid as an entitlement program all together.”
Ryan plan to slash Medicaid will cost the economy nearly two million private sector jobs – “Currently, Medicaid provides comprehensive health coverage to the elderly, disabled, children, and low-income adults. The cost of providing health care coverage is split between the federal government and the states. House Budget Committee Chairman Paul Ryan (R.-Wisc.) released a budget resolution this week that would “block grant” Medicaid, meaning that it would give states a fixed amount of money rather than provide a fixed share of the total costs. Because these grants would grow more slowly than the expected inflation rate for health care costs, this proposal would have the federal government shift an increasing amount of the coverage costs onto states, who will be in turn forced to cut health benefits and other services, cut public investments such as education and transportation, or raise taxes. Using a standard macroeconomic model that is consistent with private- and public-sector forecasters, we find that a $207 billion cut would result in a loss of 2.1 million jobs over the next five years, or 2.9 million full-time equivalent jobs.“
Challenge to the Heritage Foundation; Preposterous Unemployment Estimate Revisited – Mish – “In No Path to Prosperity: Ryan’s Incredulous Budget-Balancing Proposal, Preposterous Unemployment Estimate I blasted the Heritage Foundation’s estimate of 4% unemployment rate by 2015. In the above referenced article, I did unemployment math two different ways to show just how silly a 4% unemployment projection is. In an effort to be as fair to the Heritage Foundation as possible, I will do the math a third time factoring in a few more variables. Before doing so, please note that Bernanke estimates it takes 125,000 jobs a month to hold the unemployment rate steady. Thus, in a Bernanke scenario we would need 1.5 million workers a year to break even. I find that number reasonable.”
Long-Term Analysis of a Budget Proposal by Chairman Ryan – “CBO Director’s Blog – In response to a request from House Budget Committee Chairman Paul Ryan, CBO has conducted a long-term analysis of a proposal to substantially change federal payments under the Medicare and Medicaid programs, eliminate the subsidies to be provided through new insurance exchanges under last year’s major health care legislation, leave Social Security as it would be under current law, and set paths for all other federal spending (excluding interest) and federal tax revenues at specified growth rates or percentages of gross domestic product (GDP). CBO analyzed major provisions of the proposal as they were described by the Chairman’s staff. CBO has not reviewed legislative language for the proposal, so this analysis does not represent a cost estimate for legislation that might implement the proposal.”
CBO: GOP Budget Would Increase Debt, Then Stick It To Medicare Patients – “The nonpartisan Congressional Budget Office’s initial analysis of the House GOP budget released today by Rep. Paul Ryan (R-WI) is filled with nuggets of bad news for Republicans. In addition to acknowledging that seniors, disabled and elderly people would be hit with much higher out-of-pocket health care costs, the CBO finds that by the end of the 10-year budget window, public debt will actually be higher than it would be if the GOP just did nothing. Under the so-called “extended baseline scenario” — a.k.a. projections based on current law — debt held by the public will grow to 67 percent of GDP by 2022. Under the GOP plan, public debt would reach 70 percent of GDP in the same window. In other words, the spending cuts Republicans would realize in the first 10 years would be outpaced by deficit increasing tax-cuts, which Ryan also proposes. After that, debt projections under the plan improve decade-by-decade relative to current law. That’s because 2022 would mark the beginning of the Medicare privatization plan. 04 05 Ryan Letter (scribd)”
Ryan’s Budget Plan Is Ridiculous, But It Could Shift the Debate – “Ezra Klein has helpfully assembled a summary of the Ryan GOP budget. As you can see, while everyone’s talking about the privatization of Medicare and block-grant of Medicaid, there are plenty of other pieces worth discussing here even without any of that. Ryan would reduce discretionary spending to pre-2008 levels and freeze it for five years. He would repeal the Affordable Care Act and Dodd-Frank entirely. He would block grant the food stamp program, giving a set amount of money indexed to inflation, regardless of economic conditions. He would eliminate all changes to Pell Grants, kicking them back to 2008 levels. And he would use the savings from all that to make the Bush tax cuts effectively permanent, but actually do worse than that, by changing the tax code to lower the top individual and corporate tax rates to 25% and making up the revenue on the poor. So this is a pretty pathetic budget. And it also happens to be a complete fiction. The numbers are not to be trusted at all. Ryan assumes $1.4 trillion in savings from health care repeal when the Congressional Budget Office scores repeal as increasing the deficit. He uses “dynamic scoring” to perpetuate a fiction that tax cuts will increase tax revenue. He sets unrealistic spending caps without determining how to get there or how future Congresses not bound by his budget will abide by them. Worst, he assumes a world-historical low unemployment rate based on a Heritage Foundation study that claimed the Bush tax cuts would lead to the same kind of prosperity (hint: they didn’t). Indeed, by 2021, Ryan assumes a 2.8% unemployment rate, which is how he achieves the revenue needed to make the numbers work. Included with this projection is an implausible housing boom.”
Magical thinking won’t create jobs: Heritage forecasts for Ryan plan are fantasy – “Rep. Paul Ryan (R-Wisc.) has produced a magical budget that “strengthens the safety net” by slashing trillions of dollars from Medicaid and Medicare. He also proposes to “strengthen” Social Security by dismissing the $2.4 trillion Social Security trust fund as valueless, based on “dubious accounting.” It is no surprise, therefore, that the economic analysis Ryan holds up to support his plan is pure fantasy. According to Ryan: “A study just released by the Heritage Center for Data Analysis projects that The Path to Prosperity will help create nearly one million new private-sector jobs next year, bring the unemployment rate down to 4% by 2015, and result in 2.5 million additional private-sector jobs in the last year of the decade.” The Heritage Center’s forecasts for the Ryan plan are even bolder in the out years: It predicts unemployment will fall to an unprecedented 2.8% by 2021.”
Memory Hole Alert – Krugman – “Wow. Yesterday afternoon I downloaded the tables from that Heritage report that’s the basis for the Ryan plan. The first page looked like this: You can see the unemployment forecast, with the amazing 2.8 percent prediction, in the fourth set of figures. But go to the same place right now, and you get this: Yep — they took the offending number out. I mean, really, guys — this is all over the blogosphere; did you really think you could get away with pretending it was never there? Anyway, you now know what kind of people we’re dealing with. Update: For reference, here they are (pdf files): As of yesterday. As of today.”
Paul Ryan Does Wall Street’s Bidding In Budget – “House Republicans — led by House Budget Committee Chairman Paul Ryan (R-WI) — released their 2012 budget today. The plan includes a giant tax cut for the wealthy, as well as a complete dismantling of Medicare and Medicaid. But it also includes a gift for Wall Street, in the form of a repeal of the provisions of the Dodd-Frank financial reform law that protect taxpayers from having to bail out failed financial institutions.The provisions in question — which Ryan dubbed “permanent bailout authority” in a Wall Street Journal op-ed today, reviving a key GOP talking point from the financial reform debate — are actually two distinct parts of the financial reform law.”
Why is Paul Ryan’s Budget Trying to Dismantle Financial Reform? – “It’s not enough to gut programs for low-income Americans. Paul Ryan wants to roll the clock back on Wall Street to 2008. The budget Paul Ryan released yesterday has huge cuts that are likely to fall on the poorest Americans while offering all kinds of bonuses to the top 1%. Others will be talking about how it eliminates Medicare and Medicaid. I want to talk about how it dismantles one of the few regulations put on Wall Street post-crisis. Let’s back up with a high-level overview.”
Taking Note: Congressman Ryan’s Doublethink – “One of the main reasons that the conservative movement continues to dictate the terms of domestic policy debates is its mastery at applying language that resonates favorably with the public to deeply unpopular ideas. Representative Paul Ryan’s “Path to Prosperity,” starting with the title, is full of more instances of “holding two contradictory beliefs in one’s mind simultaneously” than George Orwell himself could have conjured. Some examples of doublespeak (a term Orwell did not coin) in Ryan’s plan, along with translations into plain English that would more accurately inform the public:”
Representative Ryan’s Roadmap: Interesting Implied Macro Impacts – “I’ve read and re-read the Heritage Foundation’s analysis of how the projections for the Ryan plan were developed. I’m sure it’s my own failing, but I still don’t quite understand what is going on. And this is after Heritage took down their original documentation that indicated unemployment would eventually hit 2.8%. (Here is National Journal’s take on the original Heritage analysis.) Even ignoring the unemployment number (which seems to have moved a bit, although not reported in the document), I thought it worthwhile to mention the other oddities of the report. First, it is important to note that the simulation forecasts relative to the CBO alternative fiscal scenario, rather than extended baseline, as would typically be the case. Obviously, this makes the Ryan plan “look better” in terms of budget deficits and (given Heritage’s modeling approach incorporating substantial supply side effects) in terms of growth. Second, it is very interesting to take a look at the forecasts. For GDP (Figure 1), the forecasts imply a noticeable increase, amounting to a 2.4% higher GDP (in log terms, relative to baseline) by 2021. Perhaps reflecting the assumptions built into the model, despite reduced effective personal tax rates (see Appendix 3 tables), personal tax receipts are higher (Figure 2).”
The Ryan Plan Is “Fundamentally Immoral” – “Even people not particularly enamored with government involvement in health insurance hate the Ryan plan for Medicare: You put the load right on me, Democracy in America: Paul Ryan’s plan to replace Medicare with a system of vouchers for seniors to buy health care on the private market … ends the guarantee that all American seniors will have health insurance. The Medicare system we’ve had in place for the past 45 years promises that once you reach 65, you will be covered by a government-financed health-insurance plan. Mr. Ryan’s plan promises that once you reach 65, you will receive a voucher for an amount that he thinks ought to be enough for individuals to purchase a private health-insurance plan. … If that voucher isn’t worth enough for some particular senior to buy insurance, and that particular senior isn’t wealthy enough to top off the coverage, or is a bit forgetful and neglects to purchase insurance, there’s no guarantee that that person will be insured. It’s up to you; you carry the risk.”
Ryan Plan Unconstitutional Under Senate GOP Balanced Budget Amendment – “Under the balanced budget amendment proposal unveiled last Thursday with all 47 GOP senators on board, the blueprint presented by House Budget Committee Chairman Paul Ryan on Tuesday would be unconstitutional until sometime after 2030. It’s not that Ryan’s budget plan doesn’t balance; excluding interest payments, it would balance starting 2015, which does clear the bar set by the balanced budget amendment. But primary (or noninterest) spending, though down sharply from close to 23% of GDP this year, would remain at 17% of GDP or higher beyond 2030. Never mind that Ryan and his GOP cohorts have just taken on tremendous political risk by proposing to turn Medicare into a fixed-payment voucher for buying private health coverage or that he would cut $750 billion in Medicaid costs this decade while providing flexibility — and shifting responsibility — to the states.”
Ryan Plan’s “Path to Prosperity” Is Just for the Wealthy, CBPP: “House Budget Committee Chairman Paul Ryan’s name for his budget — “The Path to Prosperity” — is a cruel joke. For the last three decades, nearly all the gains of economic growth have gone to the tiny sliver of people at the top of the income scale. The challenge for policymakers is how to restore opportunity for middle- and lower-income Americans by once again widening the path of prosperity. Unfortunately, Chairman Ryan’s plan would narrow it further.For the wealthy, Ryan’s proposals are pure gold:
- A typical hedge fund manager would benefit from Ryan’s extension of the Bush tax cuts for high-income people; the average person making at least $1 million a year would get $125,000 a year in tax breaks.
- Heirs to multi-million-dollar estates would benefit from Ryan’s estate tax proposal, which would let them inherit the first $10 million in estate value entirely tax-free.
- High-income investors would benefit from Ryan’s elimination of Medicare taxes on their investment income.
- And large numbers of high earners would benefit from Ryan’s call to cut the top rate to 25 percent, the lowest in 80 years.”
$3 Trillion Here, $3 Trillion There – “Krugman OK, $2.9 trillion. Anyway, pretty soon you’ll be talking about real money. Richard Rubin and Stephen Sloan direct us to a new Tax Policy Center assessment of the tax cuts in the Ryan plan (all, repeat all, of which go to top incomes and corporations) The people at TPC are careful to say that this is not a full assessment of the Ryan plan, because The proposed resolution includes measures to broaden the individual and corporate tax bases, but lacks sufficient detail for an estimate including those provisions. I’ll say. In fact, the proposal says it will broaden the tax base, but says nothing whatsoever about how. And it would take an awful lot of broadening to make up for the revenue losses, which are estimated at $2.9 trillion. As Rubin and Sloan point out, even completely eliminating the mortgage interest deduction wouldn’t be enough to close more than a fraction of the gap.And what does the chairman of the Ways and Means Committee have to say? His spokesperson says, The pro-growth tax reform proposal included in Chairman Ryan’s budget proposal is both revenue neutral and holds revenue at historical norms. I believe that translates as, “We believe in voodoo. Also, arithmetic has a well-known liberal bias.””
RJ: In all, Paul Krugman has 18 blog posts on the Ryan plan in addition to his regular column, which for the most part I haven’t included here; for his complete analysis, drill back through his blog to the Apr 5th post titled Groundhog Day on the Budget.