What's Paul Ryan's Best Idea?

Since Paul Ryan was named to Mitt Romney's presidential ticket, we've been critical of his famous roadmap, which -- in its latest draft -- called for tax reform, the transformation of Medicare, and deep cuts to non-defense spending. We stress-tested some of our complaints with Alan Viard, a tax and entitlement expert with the conservative American Enterprise Institute, who agreed that "the short-run impact of this plan is to target lower-income people to a degree that is greater than preferable."

But Ryan's plan is a wide-ranging re-imagination of government responsibilities, and there are surely ideas that, even liberals could agree, could form the foundation of a positive and bipartisan deal to reform Washington. So let's talk about those, now. We'll take three: One from his spending cuts, one from his tax proposal, and one from his entitlement plan.*

On spending, people I spoke with said that even if Ryan's cuts are egregious, his unbridled enthusiasm for slashing and burning government spending might take out quite a lot of bad with the good -- and some of his theories for cutting government could be joined to attack our most wasteful programs.

"Most of Ryan's spending cuts are either vague, unrealistic, or flat out damaging, but he does call for a sensible reform of federal agriculture subsidies," said Michael Linden, director for tax and budget policy at the left-of-center Center for American Progress. "He proposes a reduction in the direct, fixed payments that go to certain agricultural producers regardless of prices. We've made similar recommendations, and in fact Ryan's proposed savings are almost identical in magnitude to ours." On page 34 of his budget report, Ryan writes that "taxpayers should not finance payments for a business sector that is more than capable of thriving on its own."

"I agree," Linden said. "And I wish he would apply the same logic to, say, the fossil fuel industry."

On taxes, Ryan's budget simplifies the marginal rates and promises to strip out tax spending to raise 18 to 19 percent of GDP in revenue for Washington. This strikes me as good form in pursuit of a bad goal. Across the economic community, there is a wide consensus that lower marginal tax rates combined with fewer tax expenditures is the right way to reform the tax code. But rather than seek to raise the amount of revenue we needed in 1980, we should seek to raise the amount of revenue we need in 2020. And we will need more. Unless Republicans are willing to settle for lower marginal tax rate cuts, or else are willing to allow investment taxes to rise so that those rates inch closer to income tax rates, any reform will almost certainly cut the richest families' taxes (since they pay such a disproportionate share of today's federal income tax total) and ask somebody else to pick up the slack.

On entitlements, I reached the Brookings Institution's Center of Children and Families, where co-director Ron Haskins spoke positively about Ryan's ambition and his willingness to put a big ambitious plan on paper and stand ready to defend it. "Paul Ryan has two important ideas," he said. "First, that the federal government should greatly reduce its annual debt and he has a plan, controversial to be sure, but a plan nonetheless, for doing so. Second, premium support may be a way to get some control of the nation's relentlessly increasing health care costs. Equally important, he can defend these ideas and make a reasonable case against the very smartest people the other side has to offer (i.e., Henry Aaron)."

Nervous, gentle praise for Ryan's Medicare plans has been shared among other centrists, including Bill Galston, who wrote that "a number of Democrats once believed--and some still do--that a well-crafted version of premium support is part of a balanced and sustainable long-term fix for Medicare." The big idea behind premium support is that if government cannot afford to provide health care for seniors, the next best thing it could do is to support a big chunk of the premium that seniors would have to pay to buy health care from the private insurance company.

Not all moderates and liberals share the same optimism for premium support, which would effectively replace Medicare with something very much like Obama's health care plan, but for the elderly. On the one hand, such a plan would reduce federal health care spending by, very simply, having government spend less on health care. On the other hand, the plan would ask seniors to pay more -- or stay in a government-run program that could see per-person costs escalate as richer, healthier seniors left the program.

In an email, Brookings senior fellow Henry Aaron responded to his colleague this way: "I think it verges on the dishonest to claim that [Ryan's] plan will achieve all of the savings that would be achieved under the health reform legislation (the Affordable Care Act) while simultaneously pledging to repeal the law that achieves those savings. And it is not candid to claim that people over age 55 will be unaffected by his plan when a clear implication of the plan is that it would cause their premiums to increase, probably by a very large amount."


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