March 23, 2012
By Michelle Crotwell Kirtley
This week, Chairman of the House Budget Committee Congressman Paul Ryan (R-WI) released his FY2013 budget entitled “A Blueprint for Renewal,” a proposal for sweeping tax and entitlement reform. Ryan argues Americans have a moral obligation to address our ballooning national debt before we face a Greek-style debt crisis and austerity measures that really would “end Medicare as we know it.” As he said in a speech unveiling his proposal, “What would you think if your Congressman ignored a completely predictable crisis just because it wasn’t good politics and he was afraid of negative attack ads?”
Political courage such as this is a rare commodity and should be applauded. Ryan’s reforms are bold and commensurate with the scale of our fiscal crisis. Some should be seriously considered; others will require revision in order to meet the demands of justice, particularly for the poor and vulnerable.
Ryan’s budget proposal reduces federal spending by $5.3 trillion over 10 years compared to the President’s FY2013 budget, including $1 trillion in savings from Medicare and Medicaid. His proposal curbs the unsustainable growth of healthcare expenses, a key goal outlined in the Center for Public Justice Call for Intergenerational Justice. Ryan’s budget reduces the debt to 62 percent of Gross Domestic Product (GDP) in 10 years and pays it off entirely by 2050, bringing federal spending—currently at around 24 to 25 percent of GDP—to around 20 percent of GDP. Indeed, throughout the “Blueprint,” Ryan expresses a deep concern for future generations, an important aspect of intergenerational justice.
Ryan’s budget plan cuts agriculture subsidies by $30 billion, which may help limit the food market distortions that impede international development. The defense budget remains intact, however, which means it may not be bearing its share of the financial pain.
Ryan also proposes significant changes and cuts to Medicaid and other safety-net programs. Instead of allocating funds to states based on the number of eligible people enrolled, Ryan gives money to states as block grants. This gives states more freedom to innovate and enables the federal government to more easily control (and cut) spending on these programs; the Congressional Budget Office estimates that at least 14 million Americans could lose access to health care under his proposal. While the effectiveness and efficiency of many safety-net programs have been hotly debated, it is difficult to envision how cuts of this magnitude will adequately provide for the poor, another key goal of the Call.
Ryan’s budget includes the bipartisan Medicare reform proposal he introduced with Senator Ron Wyden (D-OR) late last year. For seniors who are under 55 at the time of enactment, Medicare would shift from a fee-for-service program into a more privatized program, paid for with a federal subsidy or premium support. The premium support would be means-tested, and over time, the eligibility age would increase from 65 to 67. These and other reforms that increase Medicare costs for wealthy seniors, along with increasing the eligibility age to reflect the demographics of the current workforce, help redistribute scarce resources towards those who need it most.
In addition to cutting both the discretionary and entitlement spending, Ryan also proposes a radical restructuring of the tax code. Ryan’s budget consolidates the current six tax brackets into a two and ends many loopholes, among other reforms, likely eliminating most tax credits. Ryan’s tax reforms have the advantage of reducing special-interest carve-outs in the tax code. However, the reforms leave total tax revenues at 18 percent of GDP. Raising additional revenue —even within the flatter model Ryan proposes—could preserve access to critical programs for vulnerable Americans. Raising revenue from policies that promote other aspects of intergenerational justice—such as a carbon tax—could allow for more spending in areas such as infrastructure and education.
While the limited government presented in Ryan’s budget is consistent with his core philosophical principles, some have argued that our government will likely need more than 18 to 20 percent of GDP to justly fulfill its diverse responsibilities. But Ryan’s proposal helps clarify the choices at stake. We can’t escape from our deep, fiscal hole without sacrificing some treasured government program or service.
Ryan has bravely put forward a serious proposal. Now Democrats must respond—not with attack ads showing Ryan pushing an old woman off a cliff—but with a serious counterproposal of their own. Presidential candidates will have the opportunity to contribute ideas, and the American people, who, as Ryan says, “deserve to be talked to as adults,” can be part of deciding which trade-offs they can live with.
—Michelle Crotwell Kirtley is the Editor of Capital Commentary and a Trustee of the Center for Public Justice.