Ryan's Budget Plan

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The Committee for a Responsible Federal Budget has done a quick analysis of Paul Ryan's budget, and says the main things that need to be said about it. This article by Alan Simpson and Erskine Bowles is along similar lines.

First, give Ryan some credit for setting out concrete proposals. That was brave. He can hardly be accused--unlike the Obama administration--of evading the hard questions. And he has a suitably ambitious goal for long-term debt reduction, as well: his plan fails to get debt back below 70 per cent of GDP as quickly the Bowles-Simpson proposal, but it does achieve this goal before the end of the decade. Under Obama's budget, the debt approaches 90 per cent of GDP by 2020 and is on track to keep rising.

Unfortunately, however, it is hard to see Ryan's plan as a good-faith effort to come to terms with Democrats over what should be done. His proposal cuts spending to just under 20 per cent of GDP by the end of the decade--less than the historical average of around 21 percent, and much less than the 24 per cent in the White House plan. Revenues do rise under the Ryan proposal, from 16 per cent in 2012 to about their historic average of 18 per cent by 2020. (He cuts tax rates but aims to balance that by simplifying the system and narrowing exemptions, a good basic strategy.) So by 2020 Ryan is collecting 1 per cent of GDP less in revenue than Obama's budget, and spending 4 per cent of GDP less. In the abstract, that does not look too wild, yet by tilting the adjustment so heavily toward lower spending, he has to do some things that Democrats--and, more important, most of the public--will be unable to accept.

In effect, Ryan not only repeals Obama's health-care reform (by refusing to fund subsidies and other outlays), he also proposes to convert Medicare into a defined-contribution program and Medicaid into a system of block grants to the states. From the point of view of guaranteeing universal access to health insurance, this goes beyond merely nullifying Obamacare, and further weakens the guarantees, such as they are, in the present system. In my book, that is two steps back.

I think it is fair to criticize Obamacare for failing to take cost control in health seriously. But Ryan's plan has the same defect. It holds out no more hope of controlling costs than Obama's. And under Ryan's proposal, an ongoing failure to economize would simply be passed through to the retired as reduced coverage and/or higher premiums. This is not something that the retired--or people who one day expect to be retired--are likely to embrace. Politically, this plan to privatize Medicare, which is how it will be characterized, is surely suicidal.

The Ryan budget as a whole is a frontal assault on the administration's priorities. You might say: Mission accomplished. A frontal assault is what the GOP promised. But what, exactly, does this achieve? What hope of compromise does a plan like this allow? The US system of government divides power between the parties, an obvious fact, but one that the contending forces on Capitol Hill lately find hard to take in. How do you get from unyielding, no-surrender proposals like this to workable commonsense reforms that actually confront the problem? In short, how do you get from a posture to a policy? The ongoing shambles over the continuing resolution and the immediate budget impasse suggests one rather disturbing answer. You don't.


Drop-down thumbnail image credit: AP Photo/J. Scott Applewhite

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Clive Crook is a senior editor of The Atlantic and a columnist for Bloomberg View. He was the Washington columnist for the Financial Times, and before that worked at The Economist for more than 20 years, including 11 years as deputy editor. Crook writes about the intersection of politics and economics. More

Crook writes about the intersection of politics and economics.

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