A spending goal too small for aging America
The Washington Post, August 19, 2010
Dear Paul Ryan:
In recent days Ryan-mania has reached a wonky fever pitch. Paul Krugman says you're "the flimflam man." The Wall Street Journal
's editorial page fired back that your "Roadmap for the Future" features "radical honesty." The Times
says you'll be at the center of events if Republicans win big this fall. And The Post
even featured you on Page One.
Which is why it's important to be clear that your vaunted plan to get our fiscal house in order, and to restore a culture of self-reliance rather than dependency on government, isn't a "plan" at allat least not in the way most people think of one. Your road map is a set of assumptionsa kind of rigged forecasting exercise, reallythat shows how a certain underlying philosophy could play out fiscally in an aging America.
But it doesn't balance the budget, lower national health costs or assure faster economic growth. It's not fiscally conservative enough for my taste, if anyone in Washington still thinks "fiscally conservative" means advocating that government pay for what it chooses to spend.
Let me say before offering a good-faith critique that I'm someone who has taken lashes from fellow Democrats for proposing to tie initial Social Security benefits to an index based on prices, not wages (too dull to detail, but this means bigger trims in future benefits than you've proposed). I've also urged my party not to demagogue needed reductions in Medicare's growth rates when Republicans propose them. So this is not a pan from a liberal defending the status quo.
Here are my biggest problems with your "plan":
- Taxes. Most people don't know that your road map assumes that taxes would rise from today's recessionary low to their recent historical average of 19 percent of gross domestic product and then remain there for decades. (The Congressional Budget Office hasn't "scored" your various tax cut proposals, but the nonpartisan Tax Policy Center says they would leave taxes at about 16 percent of GDP). But how can we double the number of Americans on Social Security and Medicare as baby boomers retire and keep taxes at the same level they were when America's population was much younger? Why isn't an increase in taxes as a share of GDP unavoidable as we accommodate an aging populationmaking the real question how to finance the boomers' retirement via a reformed tax system that does the least harm to growth? Unless your answer is that we can double the number of seniors who are covered by halving their benefits, your 19 percent assumption can't possibly add up.
- Debt. The CBO says your road map would put spending at 22.2 percent of GDP in 2020 and 23.5 percent in 2040. With revenue capped at 19 percent, that means Paul Ryan stands for deficits that would be 3 percent to 4 percent of GDP for at least the next 30 years, which would balloon the debt by trillions, to 100 percent of GDP from 53 percent in 2009. If you're supposedly willing to make "the hard choices," why wouldn't you balance the budget as soon as the economy is back on track? What kind of "fiscal conservative" has a half-century plan to balance the budget?
- Health care. Your road map would turn the federal contribution to health care into a voucher (which I don't view as a dirty word). But the vouchers it would offer, both via tax credits for younger Americans, and for seniors in a revamped Medicare, are at levels so far below current insurance premiums as to make it likely you'd be shifting costs to millions who can't afford them. Your health tax credit of $5,700 per family, for example, won't go far for average Americans when the most popular preferred provider organization family plan enjoyed by Congress today runs about $14,000. Ditto for Medicare (which may be why you omitted the voucher amounts in your Post op-ed on the subject last week). Will you acknowledge that the road map doesn't reduce national health costs, but just limits Uncle Sam's exposure? And that even if this step were sensible, it has little to do with the real challenge of re-engineering America's radically inefficient health sector?
There's more in the road map than one can treat in a single columnand some ideas, such as moving past the employer-based health care system, are dead onbut the points I've raised make your current thinking a nonstarter even to reform-minded Democrats. For now, the Ryan "plan" racks up far too much debt even as it poses a false choice between a return to "rugged individualism" and a slide toward a European-style welfare statewhen in fact there's a way to responsibly chart an American-style course that blends liberty, growth and justice in an aging America.